Regular readers will have noticed the abrupt pause in my stock trading experiment. This was due to the rather unfortunate demise of my laptop which is essential to my day to day operations (anyone who has seen me with a calculator will understand).
Now the nice people at DigFinNews have kindly donated a brand new laptop so I can restart my experiment (thanks Ed, I owe you one).
So I’m restarting the experiment this week. A recap of the trading rules is probably in order (and slight modifications I am making as a result of my earlier observations).
1. Entry to positions is on the same basis (stop entry on a break of a previous high/low) the position sizing has changed. I have decided to go for a position size that is more meaningful to my portfolio. if you decide to follow a similar approach please remember to size the trades to an amount appropriate for your capital. So if the stock is trading under $50 I will trade 100 stocks, >$50-$100 50 stocks, >$100 to $200 25 stocks, >$200 15 stocks. If any stocks come up over $400 that will be 10 stocks etc. To accommodate this higher level of trading I am depositing 100 BTC in my trading account.
2. Previously I limited the maximum number of opening positions in a day to 2. This was done to allow recommendations to be posted on a daily basis but actually had the effect of skewing the model results unfavorably (the model is based around taking less long exposure after a strong rally, this had the effect of dampening that effect). So the revised rule is we will take all entries in a given day but once we have 10 or more non-trend positions we will open no more until some have either been closed or switched to trend-following positions.
3. Trend Following Positions. If, during our 5 day holding period a stock closes on the 5th day (when we would normally exit the trade) above the recent weekly high then the stock will be held until a following weekly low point is breached 9we will explain more about this the first time it happens). If this doesn’t happen we close out on day 5 taking whatever profit or loss has been made.
All other rules are as before.
I have been running the model for the last few weeks just with no ability to publish easily so I will continue with a few open positions that I have (nothing trending yet) and carry on anew.
Thanks for your patience and Good Luck.