$1/$.50 bulls or bears

Discussion in 'Trading' started by honus, Sep 25, 2001.

  1. honus


    travisdu's discussion of the opening price principle prompts me to inquire about the screening feature which sorts out those stocks which have historically either gone up or down at least $1 or $.50 or 2.5% from their opening price over 80% of the time over the past 20 trading days. Big Easy has such a screen. I was using it with over 80% success trading $1 bulls back in the spring, but this market gives no hits for $1 (still plenty of $.50) and I got the feeling that's it's too good to be true. Also, anyone can do it, the only premise is purely statistical probability. Has anyone used it? Would appreciated your thoughts, opinions.
  2. I saw this screen too and also thought it was too good to be true as well. I never actually traded it, but I back tested it to see what the risk reward would have been. IN other words, when I first saw that screen on Bigeasy, it dawned on me that sure I could buy a stock at the open and put a limit to sell $.95 above the entry price and according to the screen I would be filled by the end of the day 80% of the time, but how far would the stock go against me (with my head in the sand) in the meantime?

    THe results were a little scary....taking 2-3 points of "heat" consistantly while waiting for the $1.00 pop. SO my choices were to set a stop, or let it ride. I decided if I were to let it ride, all it would take is for one horrendous trade to wipe out a lot of profits....and in retrospect, how many of the stocks that appeared consistently on that screen at triple digit share prices are now under $10? No doubt a lot of them.

    So I decided the stop loss route would be more prudent, however when I applied a liberal $1.00 stop loss to my back testing...liberal in that it was basically a one to one risk/reward....I was stopped out on more than 50% of the trades so I was a net loser on paper. So I decided not to mess with this strategy. I have to say that I only back tested for one month so maybe that was inconclusive. And perhaps now with the market at these lows there is less imbedded risk in the $.50 bull play, but who knows.
  3. It's called a negative expectancy system.

    Very small winners about 80% of the time. 10% of the time some much bigger losers. 5% bigger than you can imagine.

    and another 5% reallly, REALLY huge losers.

    imagine bad news hits the stock so it drops to half it's value in a matter of minutes.