Could somebody post a proven strategy that BREAKS EVEN (vs buy-and-hold)? It has to have a large number of trades in various markets and time periods. To me this type of the validated strategy would disprove the random walk, because I can imagine that a strategy just a notch better than that must also exist. If somebody is aware of the above strategy, they may be more willing to share it as opposed to a strategy that actually makes real $$.
Its has been proven- and accepted even in academic circles- that "markets are not completely random after all, and that predictable components do exist in recent stock and bond returns" Why is this discussion still going on? http://press.princeton.edu/titles/6558.html
There are several Market Timing Models that have been around for years that beat BUY & HOLD. Many are quite simple. The biggest problem today is the investor. Compounding and Patience go hand in hand. It does not require speed trading as much as it does Patience as with many Market Timing Models. Not one I use, yet it serves the purpose for a simple plan. Here is a very conservative system. NASDAQ 25-WMA Strategy ( NO LEVERAGE ) 32 Years Plan Buy LONG Signal when the Nasdaq weekly price crosses the 25-WMA UP. SHORT Position Signal when the Nasdaq weekly price crosses the 25-WMA DOWN. From 1971 to 2003 Starting with $100,000 Buy and hold = $975,000 25-WMA = $4,375,000 If the 20-WMA was used in lieu of the 25-WMA ( besides more Trades) You would have $46,575,000 Yes I know, There are much better ways. Many simple plans can be found in several books. Risk VS Reward is a big factor also. That was only one example of a very simple plan. The BIGGEST problem is sticking to the plan. year after year after year. That is the real secret to generational wealth building. Jeff @ EOD Traders http://www.eodtraders.com/
Sorry I made a typing ERROR. The 20 is DMA in lieu of WMA. The 25 is correct which is WMA. What I find interesting is the 20-DMA strategy only had 40% of its trades showing a profit. Yet it beat BUY & HOLD by 46 to 1 ratio. Very slow system. Jeff @ EOD Traders
Very interesting! But tt is not clear to me that this strategy beats the index after the commissions: "So where's the catch? If it's as simple as looking up how stocks performed last year (information which is freely available on any number of websites) and placing a few trades, why is everyone not doing it? The answer lies in the methodology behind the study, which involves buying the top 20pc of a performance-ranked list of stocks and selling short the bottom 20pc. Even restricting yourself to the FTSE 100 that means 40 trades. What's worse, to match the LBS results you have to do that every month." How about an example of a high-frequency strategy, with several trades per day, that just breaks even?
IB commish on LSE stocks: 6 pounds per trade of up to 50000 quid value = 12 pounds round trip Twenty round trips per month 20 x 12 per month = 240 pm ie 2880 PA ~ 2.9% PA on 100000 pound account, and insignificant on large accounts. Presumably the testing was done on closing prices and slippage on those in real trading might be more of a problem. Ooops - forgot stamp duty on purchases: 6% PA. Maybe you could use CFDs to get around that.
Oh! Great. I believe you, Mark Brown. But if you would like other ETers to believe you too, you should show some proof. No, you don't have to reveal your trade secrets. Just tell us what the Market will do in 7 consecutive time frame; Monay UP/Down; by x % (February, 2008, every 1 hour, or every 10 minutes will be OK). Tuesday UP/Down; by x % Wednesday UP/Down; by x % Thursday UP/Down; by x % Friday UP/Down; by x % Monday UP/Down; by x % If you get 7 out of 7 correct then you can predict sp for sure. If you get 6/7 excellent. If 5/7 very good. If 4/7 you still have an edge. If you get the % change to the .1% of the sp, all fund manages will be looking for you. If .2% that is excellent. If .3% very good. If .5% you still have an edge. If 1% that is the normal daily range now.
Sorry for the late respond. It takes time to do more calculation. This chart shows some random 10% jump up and down. BTW, my point today is today price action cannot be predict by the supercomputer that has all the previous price actions as input. But the Market is bias, you can predict what the Market will do after a series of price actions, be it daily, weekly, monthly, hourly or minute by minute. Everyone would be happy if the story ends here. What scare traders, scalpers and inverstors most is the random attack by up or down move 10 - 20 times the normal range. This can wipe out many sound positions. No theory would suggest that 9/11 won't affect stock price. None would propose that a "file for bankruptcy protection" won't affect stock price either.