Hello ET, I wanted to get some feedback from the community. I have a strategy that I have developed and am in the process of automating. Basically, it spits out 4 potential closing prices for a stock that meets certain criteria. For example, XYZ is at 50.00. I may have possible closing prices of 50.20, 50.25, 49.80, and 49.75. Depending on where the market is when the numbers are calculated, I would make trades based on trend and other indicators, and use those numbers as my targets. If XYZ was determined to be a long set-up, I would buy at 50 and look to exit at 50.20 or 50.25. Stop is based on ATR and a couple of other things. I have found that roughly 60% of the time, the market closes on one of the numbers that my algo calculates. Usually there are 3-5 stocks per day that I trade this way. My questions for you are: 1.) What do you think in general about predicting closing prices? 2.) What do you think about a 60% accuracy rate? 3.) If you think this isn't completely idiotic, would you trade it yourself or try to sell it? I have traded it myself with success for roughly a year, but I am looking to take the next step
The issue is what happens to the 40% that lose. If the average loss is close to or greater than your average win, then your 60% isn't worth the risk.
Do you have an actual, verifiable track record of this? Lots and lots of people "feel like" their methods are successful - at least until they actually record all the results. Nearly 100% of the time, the harsh bright light of reality turns those successes into failures. If you find that you have a method that actually has positive returns and is scalable, I can't imagine why you'd want to sell it. If it sounds like it would be successful, but is not for a variety of more or less subtle reasons - well, there's a lot of guys on YouTube selling lots of variations of those.
1) How much do you generally gain? 2) What is holding period? 3) How do you currently manage losses? 4) What’s your biggest loss?
Kinda like a one day ATM option. Should define the range with a 1 sigma(about 66%) accuracy. It will frequently be correct, often a little wrong and infrequently very wrong. I can create the range from the ATM implied. I can simulate it for pretty much any timeframe and there are lot of option evaluation programs that will pretty much do it pretty easily. The important question is can I make money from this alone or as part of a larger strategy. Generally not alone because of friction - what would really be of some value is if your calculation drew from factors/variables not reflected in the implied and is the difference material after friction? You are kind of asking the question - if I could forecast volatility would it be a profitable trade? The answer would be dependent on how wrong is the implied - what instrument are available to me - do I have enough capital to make a difference - would my deployment of the capital impact the liquidity - how much is the friction? Beat that and you have a very valuable idea to someone making markets and possibly customers. As you describe it the stock has a 0 return and that is pretty much what most people have found in the very short run.
Does this mean these have shown to be more predictable or your algo picks the stocks to trade that day?