I apologize for the interruption, but those of us over in equities have seen first hand the contributions made by jonnyy40. Helping others seems a foreign concept to him, yet yet he frequently requests or occasionally demands assistance of the same individuals he chooses to ignore. Ironic, isn't it? Anyhow, I plan to provide no additional responses to jonnyy40 (to avoid taking your thread off topic), but thought you all might appreciate knowing the character of the individual in question. Good Trading to you all. - Spydertrader
I tested "rockets" because specific criteria for them were posted and because the concept seems to make a lot of sense... trade stocks with good earnings (EPS) that are leading the pack (RS) and showing recent momentum (Stoch). But the results were unimpressive, perhaps because stocks meeting the criteria were also petering out. This was my methodology. Choose up, down, and sideways market test periods. Rank stocks based on EPS and RS percentiles (80 & 90) just prior to the start of each test period, in other words use the EPS and RS rankings that were available at the time. For the stocks that meet the EPS and RS cut in each test period, look for stochastic crossings (above 80). When there is a stochastic crossing, record how the stock does 1, 2, 3, 4, and 5 days afterwards. Then, for each test period, make "rocket" trade distributions and compare them to distributions of random entry trades of the same duration. I also tested variations -- lots of variations -- on the EPS and RS percentiles (80 & 80, 90 & 90, 80 & 90, 90 & 80, etc.). And stocks whose EPS and RS percentiles met the criteria for the last quarter only, combinations of past quarters and for the whole year. I also added float, price and volume screens, and even tested > 25% inside ownership. Bottom line: no significant edge. I understand time exits are not how one is supposed to exit a "rocket" but the way I look at it, if a "rocket" entry alone doesn't give more of an edge than a random entry, why not just throw darts? Had the entries by themselves shown a significant edge, I would have tested them with other exits. Not saying nobody's making money trading rockets. But in my opinion if they are, they're either lucky or their discretion is doing the heavy lifting. Or both.
Didn't look at equity curves. Looked at distributions of trades. See my reply to easyrider for more details.
Easy, I am surely not the likes of MAK or Jack but anyhow here is my chart and trades for 05/19 Take a look and feel free to comment and critique. Regards, EX
The "rockets' concept implies getting a significant number of wash trades, so time exit testing won't do. Also, using channels and MACD weeds out some fake entries.
Wrong. Time exits measure "rocket" entries in isolation. Which is exactly what I wanted to do. If you use any other type of exit you confound the results and then lose how much of the mileage is from the entry and how much is from the exit. BTW I tested exactly what Jack had written, with the exception of his stoch modification. There was no mention of MACD or channels. Why is it that whenever backtest results don't pan out, people always add other stuff? LOL If anyone here has the capability to backtest "rockets" and does it, they'll come to the EXACT same conclusion. Please spare me the grape koolaid.
Have you read this article linked in another current thread? It points out some of the problems with trying to reduce the market to numbers. I especially liked this one. parentheses mine: DS: How about risk managers? What do you look for in risk managers that you hire? NT: I try to probe their minds to see what makes them tick. And I start quizzing them quite unfairly about market history. I ask them about what happened to the correlation between bonds and mortgages on the day when the stock market crashed. I quiz them about the gold rally in the early 1980s. I test to see if they intuitively understand squeezes. If they don't show any interest in data, in any true market history, I stop the interview and send them home. (To me it is extremely dangerous to have in such positions people who only trust equations.) You can't get the edge if you learn just from your own mistakes. You need to learn from other people's mistakes as well and these are public information. http://www.derivativesstrategy.com/magazine/archive/1997/1296qa.asp
If you want to be helped you have to keep an open mind and have the right attitude. Re-read my post and reply wisely.