I buy and hold

Discussion in 'Strategy Development' started by themickey, Jan 8, 2011.

  1. I believe the form of an intraday trend on equities is not dissimilar in shape to that of daily, weekly or monthly trends.
    That is, if you had a price chart and one didn't know the time scale, it would be difficult or maybe impossible to know what the time scale was.

    I also believe that in order to make money in the market, one must (a) be in as much as possible as often as possible (b) have substantial money committed in the positions.
    I also believe that there is quite a high degree of short term randomness, ie from one moment to the next we can not guarantee what will happen.
    I also believe that in order to make money, it's not about predicting what will happen to direction, but about probabilities on direction.

    I trade equities, long only, and at the moment hold 20 positions. My goal is 40 positions held simultaneously.
    Each position I put on is about $2500, when I get to 40 positions and wish to continue to grow my account, then I'll increase my entry $ amount.
    Forty positions mean that each position will be a position risk of about 2.5% of trading capital.

    I take a long term view and eliminate any stocks which I could trade which don't meet certain criteria, that is I whittle the universe of stocks down to those which have the highest probabilities of performing, past performance becomes a probability for future performance.
    This is not an exact science, there will be some which have not performed in the past which will perform in the future, however I discount those as it's like looking for a needle in a haystack imo.

    Each entry position is carefully scrutinized to meet certain conditions prior, and exit is when the stock appears to be running on high volume.
    I also use a trailing stop loss but it is based on monthly time frame.
    When looking for contenders, I use T/A first and then use F/A for confirmation, ie possibly the P/E ratio and read the annual report for certain info.
    Not all my positions are producers, I will buy into new growth stocks and explorers etc.
    I don't trade gold stocks as I deem gold too much a speculative commodity.
    If a certain sector has been running hard for some while, then I'll look to buy positions in an alternative sector.

    Of all my positions held simultaneously some will and some won't perform.
    The ones not performing I'm not too fussed about as all stocks take breathers and my performers should compensate.

    Some may say "Hey, this guy's an investor, not a trader", well that's open to interpretation, the tax man views my business as trading and I don't care about dividends, I just care about not sitting in a chair day in day out watching a screen, read my first two lines.

    I've been trading about 20 years and this is where I've evolved to, I use Amibroker and have designed numerous formulas.
    Actually 55 stages so far, each stage is a different theme, each theme may have several different formula files.
    Most have been relegated to the dustbin, but my latest and greatest is an exploration which finds high probability positions.
    This took some months to formulate as designing something has a lot of trial and error going into it.

    The bottom line is this, I'm attempting to explain holding long term is another way of doing things, it eliminates using excessive energy and paying for numerous brokerage and slippage.
    Whether one trades short term or long term, it's all the same in terms of what a chart is, the percentage gain or loss is possibly similar, but this way it's easier to commit more money to the market (have it working)at any one time than short term trading in my opinion.
     
  2. Good luck. This is the way to go IMO. I like your style of trading, it makes sense. It appears like this is the direction people follow after many years of experimenting with the markets because it offers high potential. This guy is doing something similar it seems in trying to measure probabilities:

    http://www.priceactionlab.com/Blog/2011/01/a-new-technical-analysis-indicator/

    What market do you trade? Only US stocks?

    Is you allocation based on equal amounts? Have you tried anything else along these lines?

    Which data feed are you using with Amibroker?
     
  3. nLepwa

    nLepwa

    Your approach is sound.

    You definitely have an edge which is all that counts in the end.

    The problem with your approach are the drawdowns. But if you can hold through them you will compound your capital at a healthy rate.
    In order to minimize drawdowns you could look at optimal ways and frequencies to rebalance your portfolio.

    Good luck

    Ninna
     
  4. ugz

    ugz

    sounds like it would work in today's market environment. would be interested in seeing a monthly performance summary posted.
     
  5. very few short term traders can add value over a long term trader/investor right now. of course we are in a bull market right now. this will not go on forever. the test will be how much of the gain you keep if/when the market turns bearish.
     
  6. themickey,

    Interesting thread...

    Will we be able to trade alongside you? Will you be posting yor entries and exits? Or can we learn how you decide and do it ourselves?

    Or is your intention just to cheerlead buy and hold?

    What do you think about VectorVest (an advertiser here at this time)?

    ES

    P.S.

    Trading rules

    • long only
    • each position will be a position risk of about 2.5% of trading capital
    • trailing stop loss but it is based on monthly time frame.
    • If a certain sector has been running hard for some while buy positions in an alternative sector.
    • exit is when the stock appears to be running on high volume.


    The bottom line is this, I'm attempting to explain holding long term is another way of doing things, it eliminates using excessive energy and paying for numerous brokerage and slippage.
    Whether one trades short term or long term, it's all the same in terms of what a chart is, the percentage gain or loss is possibly similar, but this way it's easier to commit more money to the market (have it working)at any one time than short term trading in my opinion.
     
  7. I live in Australia and trade ASX only.
    One of the issues we have here is brokerage is expensive and not very competitive, ie minimum is approx $20 per round.
    InteractiveBrokers are here with cheaper rates but they are the only budget broker I'm aware of, but I'm not fussed with their offerings.
    I've spent much time over the past comparing brokers and decided in the end to use Commsec which is average I suppose but I've also weighed up the security of my money being held by the broker as an important consideration.

    I'm using equal amounts just for simplicity.
    I could for example place size of trades according to risk/reward or on how far my stop is from entry but figured much of these calcs are really probably something better suited for HiFrequencyTrading where fine tuning is more important.

    Data feed is via Norgate Premium Data, extremely reliable and fast downloads, never had an issue, works seamlessly with Amibroker.
    $400 pa fee.
     
  8. Actually I thought I was going to get ripped up on this thread, thought I was entering the lions den, maybe that's yet to come, hehehehe.

    I won't be starting a journal, reason being, I've actually been on trading forums for many years and discovered that a journal becomes extremely time consuming.
    I'm actually reluctant to post any chat for the most part as it can really tie one down, so many of my posts are usually very brief.
    However made an exception this time as I'm interested to hear feedback from other members as this type topic is not often raised, as well, I used the title 'buy and hold' as a bit of a tease, I really was expecting a verbal serve, so I'm kind of being a bit naughty this time.
    But besides that, I try my best to explain in sincerity what I'm about.

    I'm not cheerleading buy and hold, just thought to be a bit controversial and show the other side on trading which I think has merit.

    One thing I've discovered about myself and trading, I can't stop fiddling with a system.
    I design a system or idea or indicator and like a kid drop it after a while for another trading toy.

    One thing I'm attempting to do this time is get myself more grounded, ie stop jumping from pillar to post.

    I've placed plenty of great trades in the past and instead of following up on them, have bailed out and moved onto another shit position.
    I've lacked consistency.

    This time I am sticking to trend trading but taking a very long term view.
    I aim to only buy quality type stocks.
    I wish to avoid being whipped in and out constantly which had been my style.

    Over the years I've come up with many trading ideas/theories and what I've kind of done is grabbed all these ideas which i had previously written down and attempted to mould them into one system.

    I've written quite a large exploration in Amibroker, I'll kind of explain it below.
    I'll make myself a cup of coffee and then start on this new post shortly.
     
  9. Question.

    How did you decide on the number of positions? I understand that one might base this on % of size of account but many say for example, that 5 positions is about all one can manage properly.
     
  10. Also what kind of percentage gains are you targeting annually?

    Interesting topic, this is pretty much what I do with my IRA except only with 10 stocks.
     
    #10     Jan 8, 2011