The float analysis article referenced in Babak's post is very dated. It was published in 1996 when day trading was much less than it is today. Then, one float turnover probably represented a much higher proportion of stock actually moving in the "weak hands" to "strong hands" sense than it does now. These days the float can turn over in just a day or two in some stocks. As one example, I remember this happening with Corel during the Linux craze. Has he updated his thinking to take into account the effects of heavy day trading?
Still have not seen anyone who is familiar with this guy Steve Woods post how they have done trading this method. Has anyone been practicing his trading method on this message board and if so, please post your personal experiece from trading it, it would be interesting to see if anyone else besides the guru has been able to get some decent returns. Post any info you have like percent return, wins vs. losers, overall opinion of method, etc.
The question I have is this, was this 2400% return that was made in a 17 months period during the bull market or is this the last 17 months of trading. If this return was made during the bull market we had, how is this strategy performing during this bear market? Some strategies work great during bull markets, but perform horribly during bear markets. Anyone know if you can use this strategy effectively in the market climate we currently have and if so what type of returns are being generated currently? If no one has the answers here, then this is something I'll ask on the PalTalk chat this Saturday when they take questions from the online audience to see what he says and post what I find out here on this thread. They say this presentation is to go from 9:00 AM to 3:00 PM Eastern Time, do they take any breaks during this time or do they go straight through with one continuous presentation?
I would not get hung up over the number 2400%. If the quote in this thread is accurate, he took say $3000 and turned it into $30000 over a period of a two years ending January 2000. The Nasdaq almost tripled in that period. I am sure many people were able to achieve 10x returns in that period starting from a small stake, particularly if they used aggressive instruments like options. Doing an additional 140% during 2000 would not have been that extraordinary either - I did 68% in my trading account. Of course, many more didn't achieve these returns, but the results quoted do not prove that his method is enduringly superior. His results are not to be sneered at. They are great, but are they repeatable? I remember when I was trading in the early 80's with a small stake of about $6k, I tripled my money in a few months, but I recognized it was a small numbers effect. I would never expect to do it now with the size of portfolio I run. You simply tend to trade differently with a small account unless you have nerves of steel and a true gambler's mentality. I have extracted this quote from his web-site: ".....if a large percentage of a stock's ownership changes hands while the stock's price is moving sideways then a big move in price will probably soon occur. These ideas once understood make such common sense as to make one wonder how they were overlooked for so many years." Well I have not read the book and don't intend to, but it does not make much common sense to me. In the types of volatile markets we have been having over the past several years it has been very common for stocks that have been trading sideways to make explosive moves when they have broken out of the range they have been trading in. These moves tend to be more explosive for stocks with a thin float, which are precisely the type of stocks more likely to turn over their floats while trading in the range. For larger cap stocks, it will take longer to turn over their float so only those that have established a trading range over a long period of time would likely qualify. Stocks that break out of long, clear bottoms, tops and consolidation ranges also tend to attract attention. The float turnover concept sounds like an artificial construct to me, rather than a revolutionary technical analysis breakthrough. I would much sooner define the limits of the trading range on the basis of support and resistance rather than top and bottom defined by the time required to turn over the float, particularly when, as I remarked in a previous post, the volume traded may not be representative of the float really changing hands in these days of frenetic daytrading.
mjt, We have full database capabilities of back-testing any stocks for its perfromance. I would like to see his past year stock picks from newsletters (if you dont mind sharing). I am skeptical of the method and cannot really understand (although book is well written, the method is vague). demi
I wrote to Steve and pointed out that all the examples that he provides in his article (TA of S&C 1996) would generate the same signal not based on his technique but simply because it presented a very clear channel breakout. Any student of TA would be able to see this and take either long or short positions. I then asked him what further value his system provides above and beyond (this seeming Donchian breakout system). His reply was for me to read his book.
contacting and bugging people. If you have concrete evidence of something, then state it. Stop being a nag to others. If this man is not straightforward, produce evidence. Your constant "I contacted XYZ, and I didn't get a response I wanted, waaaah", is really quite irritating to the good people here. Sam Contari
I think it is fair to question someone who proclaims he has come up with something new to ask him exactly how it improves on older but similar techniques. Most people who think they have discovered something new are very proud of their achievement and are happy to defend their work. I was a scientific research manager and in that field, if you thought you had come up with a new discovery, you would publish the information. However, before it was published it would be reviewed by referees who were experts in the field appointed by the publishing journal to check the validity and defensibility of the claims. Then after publication, the editor would be only to willing to publish letters from other scientists challenging the methods, results or conclusions. It is only through rigorous peer review that claims can be made credible. If only we had something similar in trading methods publishing.