Learn to Trade / Stock Investing - Stock Market Student

Entries in trading system (11)

Monday

Apr272009

Update on What's Going On

Monday, April 27, 2009 at 10:48PM

I thought I had better make a post since I have been silent for quite some time. I've been busy on my OTHER blog Blog On Smog. It is an environmental blog and I'm restructuring it to have 7 bloggers, one for each day of the week. It has been a lot of work and lots of fun but it is starting to settle down so I have a bit more time for StockMarketStudent. This post won't be as fancy as my previous posts - I thought I would let everyone know what's happening.

I decided today to jump into the port that I developed: Industry Breakout 19DEC08. I bought 13 stocks today and will continue to buy the remainder of the port in the near future. As crazy as it sounds I have decided to make my holdings public. Here is the port for anyone wishing to follow along:

http://www.portfolio123.com/port_summary.jsp?portid=417595

This means that you will know absolutely how I am doing. I won't be telling any little white lies about my performance as you can see the performance for yourself. I have no illusions about how it might perform. We are heading into May - the time when smallcaps start to collapse. And the DJIA is having difficulty rising much above the 8000 (resistance) level. The final strike is that everyone is starting to say the bear market is over. Being a contrarian, I think this means that maybe we are headed downwards again.

In any case, I have some difficulties with my trading account because I am a Canadian holding my money in U.S. securities (money market fund or stocks). As the Canadian dollar edges back up to parity with the greenback, it will result in significant loss of capital if I sit there doing nothing. I also don't want to take the chance that the stock market bear really is over and miss the boat on a significant bull market.

Now there is a very high correlation between the plight of the Canadian Dollar and the U.S. stock markets. They rise and fall together. For all these reasons I am jumping into the stock market, for better or worse. Wish me luck.

By the way, I am not a financial advisor and am in no way advising readers to buy the same stocks I am holding. This blog is for educational purposes (and entertainment especially if I fall flat on my face).

The other event that has occurred is that one of my colleagues, Jerrod Mason, has generated an EXCEL spreadsheet that runs and downloads Portfolio123 screen backtests. Now I have promised not to release the spreadsheet but I will be testing it and posting on what I get out of it. If enough people beg for it then just maybe Jerrod will give the nod but right now it is private. So look forward to a peak under the hood in the next few posts.

Steve

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industry breakout,

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trading system

Monday

Jan262009

Why I Stopped Trading the Stitts Holy Grail

Monday, January 26, 2009 at 11:35PM

StockMarketStudent

There are a few reasons I stopped trading the Stitts Holy Grail stock trading pullback system. Perhaps others will have more success. ______________________________________________________
In the last post I showed the simulation results for the Stitts Holy Grail stock trading system. If you were quick enough and a Portfolio123 member you would have been able to copy the system rules. Although I had some success with the system there were a few turn-offs. (1) A significant number of the stocks were on my broker's "suspicious trading" list. These stocks were barred from being traded online. I had to phone up the broker for each order entry. This is something I didn't want to do considering I have a fairly demanding day job. (2) I got burned on a few trades, enough to make me think twice about continuing. (See below for an example NYSE trade). (3) I like to screen the stocks manually - I subscribe to the Warren Buffet day-trading quote: "If you wouldn't hold a stock long term then don't even think about holding a stock for ten minutes". Before buying a stock I would have a look at the company business. If I really liked what I saw I would put more money into the stock than the system warranted. If I didn't like what I saw I generally didn't participate in the trade. Invariably when I bought a stock, it would experience a substantial drawdown the first day. Greed and fear, the two emotions that fuel the markets, often got the better of me when trading this system. (4) The markets started to act in an uncharacteristic fashion around the beginning of 2007. I found that pullback systems of this type were not working like they did before. I think this was a foretelling of general market conditions to come... As a result I decided to stop trading Stitts Holy Grail. The liquidity level was set too low for me - perhaps a personal thing, I'm not sure. I felt that the market makers were making their lunch off my trading. So now I trade stock systems with much higher liquidity and profit per trade so that I am less affected by unusual slippage and suspicious trading activity. Now when I develop stock trading systems I set the average daily volume to a minimum of $500K averaged over three months, significantly higher than most other system developers at Portfolio123. (Typical at P123 is $100K averaged over 20 days.). I also set a minimum Market Capitalization of $100M. I find $20M too low. Example trade: I got substantially burnt on this stock both on the buy and sell fills. The stock was ATS and unfortunately doesn't seem to exist anymore under this symbol name so I can't go back and check the daily history. But on the buy side I lost approximately 15% in "slippage". For the sell the stock closed the previous day at $2.33 (or thereabouts). This stock traded on the NYSE so I was under the assumption that I would get the opening price when I put in a market order prior to the market open. Well maybe I did get the opening price ($2.16) on the NYSE but according to YAHOO (1 day graph) the stock never went below $2.30. I complained to the broker and got the following response: Your order filled at the NYSE opening price when the NYSE opened ATS for trading at 8:32:35CT. Quote providers will pick up market data beginning at 8:30CT regardless of whether the primary exchange is open or not. However a day order will be active when the primary exchange opens for trading. We cannot direct route orders to the NYSE. Your order will be filled off the best bid and offer when the NYSE is open for trading. Please reply if there is anything else we may assist you with. Seq ID Date Time Exg Price Size Condition Bid Bid Exg Ask Ask Exg Sizes 389994 10/29 08:33:05 2.39 NYSE 2.48 NYSE 1x1 389735 10/29 08:33:05 B(#37), A(#37) 2.34 NYSE 2.50 NYSE 1x8 389726 10/29 08:33:05 2.34 NYSE 2.38 NYSE 1x1 389590 10/29 08:33:04 B(#37), A(#37) 2.33 NYSE 2.50 NYSE 41x9 365299 10/29 08:32:50 2.33 NYSE 2.38 NYSE 41x1 43369 10/29 08:32:50 NYSE 2.33 900 Auto 364652 10/29 08:32:49 2.33 NYSE 2.35 NYSE 41x1 364651 10/29 08:32:49 2.33 NYSE 2.39 NYSE 41x1 41943 10/29 08:32:45 NYSE 2.30 100 355333 10/29 08:32:44 2.25 NYSE 2.33 NYSE 1x9 354601 10/29 08:32:44 B(#37), A(#37) 2.16 NYSE 2.33 NYSE 26x10 354598 10/29 08:32:44 B(#37), A(#37) 2.17 NYSE 2.33 NYSE 5x10 337760 10/29 08:32:35 B(#37), A(#37) 2.17 NYSE 2.33 NYSE 5x10 39044 10/29 08:32:35 NYSE 2.16 25400 336961 10/29 08:32:35 B(#37), A(#37) 2.17 NYSE 2.33 NYSE 2x10 336935 10/29 08:32:35 B(#37), A(#37) 2.15 NYSE 2.33 NYSE 200x10 336516 10/29 08:32:35 B(#37), A(#37) 2.15 NYSE 2.59 NYSE 200x18 336515 10/29 08:32:35 B(OpnQte), A(OpnQte) 2.15 NYSE 2.59 NYSE 200x18 Now that a long time has passed since this trade occurred I am able to re-examine it without the previous emotions. It appears that the sell volume at the opening was substantially larger than the normal trading volume. At the time I felt like I had been "financially raped" by market makers and decided it wasn't worth the anguish. (I had worse slippage on the buy side). Steve, the Stock Market Student