This trend following trading system buys stocks that are reaching
new highs and have other characteristics that, according to
our statistical analyses, increase the odds the stocks will
increase further. It uses stop losses, and gives the stocks
room for their profit potential to develop. See
the full list of small-cap stocks we follow in this system.
Back-tested results summary:**
Sample: Random sample of 200 small cap stocks in the Russell
2000 Index, from the period 5/98 to 7/03.
Number of trades 714
Avg days held 33.0
Avg profit per trade (% gross) 7.8
Avg winning trade (% gross) 46.0
Avg losing trade (% gross) -8.6
Profitable trades (% gross) 30.0
Profitable trades (% net)* 26.9
Avg drawdown (%) 2.0
Max drawdown (%) 54.6
Avg profit/avg drawdown 4.0
* Assumes 1% charge for commission and slippage per transaction
View back-tested
system trading log for the "Buy the Best" system
Notice that there are more unprofitable trades in this system
than profitable trades. This is typical of trend following
systems. The key is that when it wins, it wins BIG, offsetting
the more frequent (and more modest) losers.
This contrarian trading system buys into panic sell-offs, seeking
to exploit fear in the market. Stop-losses are used for risk
control. Positions are closed once a reasonable profit materializes
or a time criterion is reached. This system focuses on large
cap stocks. See the full list
of large-cap stocks we follow in this system.
Back-tested results summary:**
Sample: All stocks comprising the S&P100 Index, from the period
5/98 to 7/03.
Number of trades 211
Avg days held 20.2
Avg profit per trade (% gross) 5.2
Avg winning trade (% gross) 23.2
Avg losing trade (% gross) -8.8
Profitable trades (% gross) 43.6
Profitable trades (% net)* 43.6
Avg drawdown (%) 2.1
Max drawdown (%) 20.1
Avg profit/avg drawdown 2.4
* Assumes 1% charge for commission and slippage per transaction
View back-tested
system trading log for the "Recovery Plays" system
The econometrics of finance
literature has produced substantial evidence on the profitability
of short-term contrarian trading strategies. Our system has
several refinements, but is basically a member of a broad class
of such contrarian trading strategies.
This is a short-selling system. Short selling involves additional
risk considerations, and should only be applied by those who
understand and are willing to assume these risks. This system
sells short stocks that our statistical analysis suggests are
likely to decline in price. They tend to be experiencing some
short-term price appreciation which the analysis suggests may
soon falter. It employs stop-losses (buy stops) to cover positions
that are moving against our expectation, and closes positions
once a decent profit emerges or a time criterion is reached. See
the full list of large-cap stocks we follow in this system.
Back-tested results summary:**
Sample: All stocks comprising the S&P100 index, from the
period 5/98 to 7/03.
Number of trades 129
Avg days held 20.4
Avg profit per trade (% gross) 3.6
Avg winning trade (% gross) 14.8
Avg losing trade (% gross) -8.4
Profitable trades (% gross) 51.9
Profitable trades (% net)* 51.2
Avg drawdown (%) 2.6
Max drawdown (%) 17.4
Avg profit/avg drawdown 1.4
* Assumes 1% charge for commission and slippage per transaction
View back-tested
system trading log for the "Faltering Stocks" system
About half of the trades in this system are profitable, but
the winners tend to be bigger winners than the losers are losers
(thus the positive average profit).
Trading signals from each of the three systems described above
are sent to subscribers in daily e-mails.
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