A lightbulb goes on

I am taking a (very) brief interlude from ranking system robustness testing to watch the stock markets implode.  As I sit here munching on popcorn and enjoying the fireworks a light bulb turned on in my brain - something I have been begging for going on a couple of  years now is possible using Portfolio123.

It seems that we are in another stock market down leg with the potential to breech previous support levels.  Some experts call for DJIA to sink to 5000.  It certainly seems possible.  In any case I keep plodding along with my development efforts.  I have just made a pleasant discovery.  It is possible to truly hold a portfolio of top 10 ranked stocks (or any number) without having to sell and re-buy every week with the resultant wrong statistics, buy/sell differences, etc...

The buy rule is as follows:

FOrder("Rank",#Universe,#DESC) <= 10

The sell rule is:

FOrder("Rank",#Universe,#DESC) > 10

I tried to design a trading system around these buy/sell rules.  I got what I expected.  The portfolio only holds the top 10 ranked stocks.  The trading results were not as good as I hoped though and the profit per trade was under 3%.  (I was hoping for more).

If I change the sell rule to sell when the stock drops out of the top 50 ranked stocks then the profit per trade goes up to about 10% (much better) but still no spectacular equity graph.

FOrder("Rank",#Universe,#DESC) > 50   (sell when not in top 50 ranked stocks)

Although I didn't obtain brilliant results this is a very powerful new tool to add my trading arsenal, opening up new possibilities.  The problem with the old buy rule (Rank > 99 for example) is that it doesn't really control how many stocks are in the pool allowed to be bought.  This new rule does.

Here are some interesting buy rule possibilities:

FOrder("Rank",#Universe,#DESC) <= 100   (buy only if the stock is ranked in the top 100)

FOrder("Rank",#Industry,#DESC) <= 2 (ranked in the top 2 in the industry)

FOrder("Rank",#Sector,#DESC) <= 10 (ranked in the top 10 in the sector)

Imaginative sell rules can also be developed.  It looks like I am going to have a lot of exploratory work ahead of me to see if any of these rules can be capitalized on.

Steve

Comments

[shaun]

Cool!

[Don]

Hi,
Thanks, this is interesting. Is it possible to have a buy rule where the sector is in the top x sectors?

Don

[StockMarketStudent]

Don - I can't think of a way to give a buy rule where the sector is in the top x sectors. However I believe it is possible to have a buy rule where the median stock within a sector has a high rank, implying that the sector in general has a high ranking compared to others. The rule would be:

FMedian("Rank",#Sector,#DESC) > 70

This rule should pass any stock within a sector whose median stock rank is greater than 70 (use any value you want here).

HOWEVER, I have determined that there is a bug in the FMedian("Rank", ...) . I reported the bug but have gotten no response. I doubt Marco will fix this unless a few people put some pressure on...

Steve