Mining your Data (Final Thoughts)
- Breakout
- Trend Line Break
- Short/Intermediate Trade
- Retrace
and in that order (in terms of success). The failures were across all trade setups (as well as the four above) but these four were the patterns that were best identified with winning trade setups that occurred in the >15 yet less than 30 day duration.
This got me to thinking of why these trades. My first thought is that most intermediate term moves play out in 5 to 7 weeks on average. The sweet spot trades lasted between 3 to 6 weeks. That tells me that the sweet spot trades most likely happened to catch the bulk of the move on an intermediate term leg up or down. I have not confirmed that, but it is my suspicion.
The second thought is that if a stock doesn't fail during the first 2 weeks or so, it's probably a keeper. Since I have a tendency to trim winning stocks, I usually don't let them play out much longer than this time period. Over the past couple years this has become even more true than previously as I had no losers greater than 30 days on the books.
Lastly, I've become more adverse to holding stock into earnings. Earnings occur every 3 months. That forces me to reduce size usually if not to outright close positions.
Further Work Needed
An area that I've began to collect data but don't have enough to make any general conclusions is the general trend of the makret (short, intermediate, long term) and it's impact on my trades. By next year I will be able to say more about this as I continue to consider what data I want to collect in order to make my trading more profitable.
posted by Tat | 3:14:00 PM
3 Comments:
"Since I have a tendency to trim winning stocks . . ."
You serious?
I think he means that he scales out of a winning stock on strength. It also looks like he uses a timestop, albeit a flexible one, of about 2 weeks.
Yes, I trim stocks regularly. Honestly, I take the go slow approach when it comes to trading. There are those who believe the way to riches is in a whirlwind ... that is to say practically overnight, while there are others that believe that plodding along will get you there. It's clear that either will work and there are those who have done it both ways.
My methodology is to trim winners when they are stretched. As tv4 says, I usually scale out of them, but sometimes I sale out completely. If a stock is too stretched, I sale out completely as I did in the TRE trade not too long ago. I then put it on my watchlist and monitor for re-entry if it's done nothing wrong. Everything in this world reverts back to the mean in time. The rub is that the time frame is different for different things. Those who make the big money fast(and lose it) usually do one of the two things (or both), they bet big and they let their profits run. I tend to spread my bets and I let my profits run as far as I believe is reasonable. My thought is that there are a world of ideas out there and I need not worry that I didn't "catch all of the move". If I catch a good portion of it and then a good portion of another, what's the difference?
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