Low-Risk investment strategy ?

coastline

If I've got this correct you buy when a share is trending higher..so I've loaded a stock filter in the link below..

http://www.iii.co.uk/markets/?type=stockfilter

Select basic settings on the FT100

Select Share Data and Performance

Under Criteria select 1 month change...set it at more than 10%

This should give you 17 stocks which have gained 10% in 1 month.
I've now loaded a chart with 1 year(daily ticks) and lower indicators..RSI(14 tick) and Slow Stochastics.
Here is the chart for the first of 17 stocks ..AAL.L...Anglo American. If you look the lower indicators were hinting at a buy around mid November...so thats a winner .
This system is predicting a rise before the event whereas your system waits until shares are trending much higher.
Infact this chart is now giving a sell signal as the stock hits the higher horizintal line.
Now try the same with the other stocks in the list.

http://www.iii.co.uk/investment/detail?type=chart&display=chart&code=cotn%3AAAL.L&it=li&timeframe=1y&index=&versus=&linetype=line&overlay=&overlay2=&overlay3=&overlay4=&indicator=RSI&indicator2=slowstoch&indicator3=&indicator4=&chartwidth=500&buylines=on&triggers=on&Go=Plot

srcandas

aliciathyme wrote: »

If you read my previous posts you will understand that all the holdings have the same initial value (£10,500/3=£3,500) i.e there is no weighting differential.

Alicia I'm trying as you suggested to model my stock picks against your approach but I guess I'm missing something - yeah no great shock

Looking at the banking sector figures you made a loss of £864 based on £3500 chunks. Apart from a short recent time the investment was very rarely £7000 and for the majority of the time was £3500.

So the level of loss based on investment is approximately 28%. (appreciating we are missing the standard life trade).

From this model clearly the system consistantly failed to help with this sector. Therefore it must have been very successful in other sectors.

Now I focus on mining/NR shares and thus my question as to where you had found your system works best is relevant. Or does the system require a broad sector spread?

:beer:

aliciathyme

coastline wrote: »

If I've got this correct you buy when a share is trending higher..so I've loaded a stock filter in the link below..

Great! Thanks for looking into the trend function.
You need to be using a 20% per month trend though, AND look for the last day stock price lower than the previous day.
Have a look at FRES, I had 4 potential acquisitions:
27 Jan 2009, 24 March 09, 5 May 09 and 10 Sep 09 (none since).
There were others, but they had a higher price on the decision day.

Let me know ?

Alicia

Jegersmart

aliciathyme wrote: »

I now hope someone will take me seriously, try the scheme on their own holdings, and let me know their conclusion.

Alicia

Hi Alicia

You will find on these forums that some people are more interested in "disproving" certain thoughts or points of discussion rather than openmindedly considering different views. I don't mean any offence with this statement, nor is it aimed at anyone in particular, just an observation on my part.

It seems to me that the key part of your "system" or method is actually the stock picking part - i.e. which stocks are picked, not the "buy to sell" element that you also incorporate. I therefore think that it would not be possible to try your system in any meaningful way without using your particular system, because one cannot randomly pick shares in an uptrend and achieve the results that you mention, regardless of the exit strategy. At least it would be extremely unlikely.

I like the fact that you use stop losses, that you have a set method in terms of selection and a certain discipline in what you do. Your system also ensures that you take profits which I personally think is important, I don't see how anyone could say that it is definitely worse to "sell to buy" than always buy to hold or variations of that theme. That depends very much on the stocks held.

When trading rather than investing I am almost exclusively a technical trader, I don't use programs such as the one that you refer to but I have certain tools to flag up possible opportunities in the 160,000 or so equity instruments that I then look at manually from a technical analysis point of view and make a decision on accordingly. I almost always use "tranches" - that is to say that I will decide and allocate a maximum number of tranches to achieve a full position on a a particular instrument. For argument's sake let us assume that I have spotted an opportunity and I want to enter and that I have allocated a maximum of 4 tranches. If my TA analysis allows me to enter I will do so with 1 single tranche initially and depending on the price action may look to add. In these cases I may add even if the stock falls 15-20% as long as a new low is not achieved, however I don't normally add to losers unless I am confident. In some cases a full position may be achieved, in others it does not go past the first tranche and I cannot explain the system for deciding that as it is mainly based on my own analysis on the charts. In addition to tranches, I also decide how much cash I should hold as part of wider macro view of the markets. At the moment my rule states that I should hold 30% in cash, so in this case I cannot open new positions if this would put me below that level. I am therefore forced to close other positions (or not) and I will also generally close in profit positions. In certain cases it may not be always the top performer, it may be parts of multiple positions. For me this system ensures that I am rarely overcommitted and seems to suit my "psyche" or trading style. This is a system which has worked fairly consistently for 20 odd years, but my gains are nothing like yours - for the last 5 years, I would say my performance is more like 120%, so it would seem your system is better than mine. I would be happy to try it, however as I say the selection process is probably key so that is not going to be possible - however I will consider and test some of the elements to see if I can improve what I do.

J

Jegersmart

aliciathyme wrote: »

Great! Thanks for looking into the trend function.
You need to be using a 20% per month trend though, AND look for the last day stock price lower than the previous day.
Have a look at FRES, I had 4 potential acquisitions:
27 Jan 2009, 24 March 09, 5 May 09 and 10 Sep 09 (none since).
There were others, but they had a higher price on the decision day.

Let me know ?

Alicia

Alicia

I posted before I read this, which seems to suggest something akin to "momentum trading" although from what I know that is not often used in a situation where you hold the stock for some time - momentum is usually short term holding.

Nevertheless, I will consider this and if I have any further feedback I will get back to you.

J

Linton

The reason there is scepticism is not necessarily internet negativity but rather history. Over the past 100 years there have been any number of guaranteed strategies for beating the FTSE or DOW and none have stood the test of time. Some work appear to work well for a while under some market conditions but after great success they fail disastrously.

So we have to either believe Alicia's impressive results indicate that she has found what all the great investors have failed to do or this is another strategy that will ultimately prove disappointing. The evidence of the former must be extremely strong for most people to drop the latter as the most likely outcome. We need more than 5 years experience in what have been rather unusual market conditions.

JamesU

aliciathyme wrote: »

If anyone else is interested in evaluating my Sell-to-Buy strategy on their portfolios, I would love to hear their results. Then I can get a realistic assessment on how well it works in other stock picking schemes

Why not join us on the MSE trading challenge and see how your strategy performs relative to other MSE posters' strategies? It was started in July and the MSE posters (remaining) have portfolios spread around +/- 25% of the initial investment (£10K), so you would not be at a disadvantage starting right now.

https://forums.moneysavingexpert.com/discussion/4050063

JamesU

aliciathyme

srcandas wrote: »

Now I focus on mining/NR shares and thus my question as to where you had found your system works best is relevant. Or does the system require a broad sector spread?

The system works on share prices of all FTSE 100 companies sequentially (a-z) without having any sector focus.
I could identify the sectors which had the most successful outcome, but that would be irrelevant because the results are all interdependent.

Alicia

aliciathyme

Jegersmart wrote: »

.................I will also generally close in profit positions. In certain cases it may not be always the top performer, it may be parts of multiple positions. For me this system ensures that I am rarely overcommitted and seems to suit my "psyche" or trading style. This is a system which has worked fairly consistently for 20 odd years, but my gains are nothing like yours - for the last 5 years, I would say my performance is more like 120%, so it would seem your system is better than mine. I would be happy to try it, however as I say the selection process is probably key so that is not going to be possible - however I will consider and test some of the elements to see if I can improve what I do.

J

Hi Jegersmart,

Thank you for your comprehensive posting.
I'm not sure I understand it all, but it looks like we are back to the selection process being key.
I have given the bones of the trend function that I use so people can try that fairly easily.

The second function, looking for anomalies, is much more complex and would be impossible to describe at a level which would guide someone else to recreate it.
So I cannot guide you to a position where you would be able to try the whole system.

I had a long interaction in previous posts in this thread with Bowlhead on selling strategy. It has always seemed to me that knowing when to sell is much more difficult than knowing when to buy. It's a while now since I tried variations on selling options, but I was very aware of trying to mitigate against losers and maximise winners if they were running well (which of course was Bowlhead's point). But with my 3:1 investment/lotsize ratio if I sell a loser to buy a new acquisition I would frequently have to sell two losers to recover a full lot size. One way (among many) which I considered was as a compromise by alternately selling the best and then the worst to fund successive purchases. It sounded good logic at the time, but the overall performance was not as good as always selling the best holding.

Out of curiosity I have re-run my model using just the trend function on the same data as previously so you could try to emulate it if you felt inclined.
The overall net profit would have been 226%, with a total of 51 holdings bought and sold of which 44 were profitable (a win ratio of 86%).
There were an additional 11 holdings current at the 5 year period end (today).
In all there were a total of 105 potential acquisitions, but only the 62 could be bought due to insufficient profits in holdings current at the time of the other 43.

It is clear that just using the trend function in isolation still gives great results, and maybe shows that the clue is perhaps not in the buying strategy, but in the selling strategy?

Maybe this will help others to try out the Sell-to-Buy method.

Alicia

aliciathyme

JamesU wrote: »

Why not join us on the MSE trading challenge and see how your strategy performs relative to other MSE posters' strategies?

Good idea, I may do that, but you will have to wait 5 years to get the results.......
The same applies to posting my future acquisition recommendations here (not sure if that would contravene the rules).

Alicia