Boris
5 posts
msg #31446
- Ignore Boris |
3/18/2004 12:17:42 PM
Invitation to collaboration
Hi fetchers. I am a ‘silver surfer’, based in the UK
I am relatively new to trading, though not a complete novice, but I recognise my limitations. I have considerable respect for the experience and knowledge to be found in the Fetcher community. I hope I can harness just a little of this to advance me on developing my strategy.
I find it extremely interesting that almost everybody contributing seems to have their own particular preferences for TA tools. Given the number of indicators available, and the differing approaches to trading, there is obviously room for everybody to have their own approach.
My particular approach to trading is one based on spread-betting on the price of stocks, rather than one of buying and selling the stocks themselves. The advantages of this approach are that all profits are tax-free, and it gives me tremendous leverage (i.e. I don’t need much capital). There are no dealing costs per transaction (but of course the spread between buying price and selling price represents my dealing cost).
I use www.igindex.co.uk, but there are others.
Using spread betting, I am limited to the stocks for which prices are quoted. Prices are quoted on all the S&P 500 stocks, so I limit myself to these.
I have tested a primitive stock selection strategy which on the face of it (in paper trading) has provided quite a remarkable success rate. In a period of about 2 months, I selected 28 stocks, of which 21 were ‘winners’, and 7 ‘stopped out’. On the basis of a $1 per point, this generated a profit of 4304 points. (Bear in mind that one can ‘bet’ any amount per point). However, these are not particularly accurate figures – they are based on the closing prices, and paper trading is not real life, but it is enough to look promising.
My stock selection strategy is :-
First, I only look for buying opportunities in a rising market. I checked the SP500 index Weekly chart, and in the recent past the MACD histogram shows that the SP500 index was in a rising market from about the start of December 03 to the end of January 04.
I figure that if I can develop a strategy that identifies buying opportunities in a rising market, I can later go on to build filters that will identify selling (shorting) opportunities in a bearish market. Also perhaps a set of filters that will identify opportunities in a market that is flat.
Second, I developed a very simple filter that looked for opportunities based on MACD, MACD histogram, and EMA(13)
I ran this filter for offset 70 days to offset 32 days, and I ignored any qualifiers that were not in the SP500 list. This gave me the results I quoted above.
The questions I have remaining on my list for attention are :-
What is the best way of identifying a bull market?. On the SP500 index chart, the MACD Histogram tells me that the market is flat from August to December 2003, but in this period the chart went from 1000 to 1050.
What improvements can I make to my filter?, and how do I find the time to back test it?
Would I make more if I ‘loosened’ the criteria?
Should I check the weekly chart for each selection before deciding to invest?
What is the filter I should be using to identify selling opportunities in a Bear market?
Ditto a flat market?
Getting the answers to these questions will take me a lot of midnight oil, and if there are a few fetchers out there who think I might be on the right track, and who can provide a contribution that benefits everybody, that’s a good thing. Thanks for your time.
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gscott66
7 posts
msg #31451
- Ignore gscott66 |
3/18/2004 3:43:41 PM
Silver Surfer,
Thanks for the question...let me look at your filter for a couple of days...comparing it to my systems for consistency...please look at my request (Triple Screen) and provide some input, since we both are looking for MACD entries....if you're not familiar with A. Elder's Force Index, visit http://www.investopedia.com/articles/trading/ and read the 8 articles on Triple Screen...it will save you the cost of purchasing Elder's books....I would highly advise you to buy the books anyway...if you are new to trading these books will shave years off of your learning curve.
Scott
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Boris
5 posts
msg #31455
- Ignore Boris |
3/18/2004 5:36:31 PM
Thanks for your input Scott
I have in fact read the Triple screen information, and I agree with the basis of it.
I have not bothered to use SF foe the initial screen, as this is easy enough to do 'manually' (i.e. to take a look at the SP500 index weekly chart)
I have used MACD for the second screen, whereas the Triple-screen I think proposes Force Index, Elder-Ray or Stochastics. I will re-read the articles and take another look at this.
By all means apply my filter and back-test the period 25th Nov 03 to 28th Jan 04.
I am thinking about 'loosening" this filter in order to offer more candidates.
For the purposes of calculation I have assumed an exit based on the next MACD crossover, but this needs much refinement, and would be a filter in itself.
I have assumed a trailing stop of 100 points (for most stocks a point equates to a cent).
I am not in a position to give any time to the intraday position, so I only use end-of-day trading.
If I get anywhere with a reasonable second-screen filter based on Force-index or something else I will post it.
Good luck with your endeavours
Boris
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