James, In an interview you did, you said, "Normally I only like to trade gap downs. Gap ups tend to keep going. And who am I to get in the way of peopleâs passion?" What do you mean by that? In the same interview, I thought you were making the point of short selling not working. So are you going long the gap down? Why not go long the gap up if they tend to keep going? Thanks http://www.realworldtrading.com/index.cfm?section=interviews&id=13
You get more bang for your buck going long the gap down. Gap ups tend to keep going, but not much, and the results are not worth playing. If the market is gapping down, and a volatile stock is gapping down 5% , and was also down the day before, this is usually a good play. In terms of shortselling, its interesting to note that in 2001 (when Nasdaq was down 20%+) the CSFB/Tremont Dedcated Short Bias index , made up of shortselling hedge funds, was down 3% on the year. Not an impressive recommendation of shortselling.
Is there something else you are looking for here when you go long a stock that gapped down 5%? For instance, was the stock trending up? Would it make sense to go long a stock that gapped down and was already trending down? Or are you just looking for a "volatile" stock that gapped down X% to go long? What's your criteria for "volatile"?
I'm not sure what "trend" means. There's no evidence that stocks trend in one direction or the other. Stocks tend to mean revert rather than trend. This is why even the trend-following funds leave stocks alone. I don't mean anything quantitative when I say "volatile". Any Nasdaq stock would do here. If the QQQs are gapping down and one of its components is gapping down even 3% or more then thats a good time to buy. Check out the chapter on "Gaps" in the book, "Trade Like a Hedge Fund".
Andrew Goodwin wrote something like: "While the approach and methods [described in his book] are timeless, the exact formulas are guaranteed to change" Take it as a source of inspiration++
Very few if any systems that are profitable at the time of being published will ever be disseminated at that time. Whille I knew that before buying the book, I still bought the book because it is a source of ideas that can be tested. The source is provided so that you can modify the original ideas with your own. Someone that publishes a book and gives source to it and knows that the systems can be run in realtime isn't trying to pull a fast one on you. Think about it. nitro
With or without modifications, his ideas just weren't very creative to begin with. It's not just changing a few variables here and there. That's easy to do, but his basic ideas were just... crap and not very clever to begin with. Any hedge funds trading with such simple techniques are obviously not around, so I'm not sure why anyone would actually want to emulate them.
I agree with most of whats been said on this board about the book. Another book I bought is Stridsmans book for Tradestation, several of them, but Ive yet to use any for stocks. Anyone have anything to say about them? I found most were written for futures.