Stock Market Student

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:

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

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Last post I ended up with a screener backtest of short term industry strength defined by

The results were as shown below holding all stocks meeting the screen criteria with weekly rebalance:



After playing around with different ranking systems I ended up settling on one called "Fourth Generation with Unfollowed Smallcaps".  The ranking system is shown below:



For those people that have not been reading past posts, My universe is defined as follows:



The ranking system consists of fundamental and technical formulae combined with user-assigned weightings.  The system applies a ranking from 0 to 100 for each stock in the universe with 100 being the best stock choice and  0 being the worst.  Using the screen backtest I can now select how many stocks I want to hold based on the ranking system.  Below is a consolidation of the backtest results for different numbers of stocks plotted in EXCEL.

This is the magic of Portfolio123 ranking systems.  300% return was turned into several thousand percent returns, not including commissions or slippage, but does include a full dose of 20-20 hindsight.  So you can't expect similar results going forward.  But it does give a nice positive bias to one's trading.  This screen may be useful for short term traders wanting to identify a small number of stocks for further analysis on a weekly basis.

The following can be found on Portfolio123:

Screen:  http://www.portfolio123.com/screen_summary.jsp?mt=1&screenid=20956

Stock Universe:  http://www.portfolio123.com/screen_summary.jsp?mt=7&screenid=20173

Ranking System:  http://www.portfolio123.com/app/ranking-system/59261

Unfortunately this doesn't help me on my quest for a long term trading system... but it was a fun exercise anyways.

Now back to the grind.