Also Mav I'm curious what your data is saying for oil stocks. I started picking up some divergence between a bullish OIH vs bearish XOP/XLE about a week ago and I was just wondering if you are seeing the same thing since I know you specialize in energy.
I'm long a bunch of energy stuff, mostly in the nat gas space. Most of it is just because they are so beat up. Good long term holds.
Mav, If you have time could you please provide a brief overview of why you went automated, what the process involved and how your trading looks now compared to when you used to trade ACD discretionarily.
What I noticed was that the more I automate, the more time I have left over. Which brings the risk that out of boredom you start to fiddle with the system. Or start to take on other trades/bets which you otherwise would not have done. Staying disciplined, and not doing things outside your strategy, becomes extra important. Automation has made life easier, but comes at a risk.
I keep two running strategies. One is completely discretionary. One is completely automated. Both are profitable. But the automated one is miles better on a risk adjusted basis. When you automate it make the statistical analysis much easier. If you have rules and models, you can test your parameters. You can optimize your parameters. When you trade wily nily you really can't do that. Every single trade is an independent decision that can't be replicated. Hell it may have been affected by what you had for dinner last night or the argument you had with your wife. How can you test that? The irony of course is I spend way more time with automation. And the reason is because there is actually more work. You are constantly trying to improve your models, learn more about them, get better data, test your data, etc. To be fair, I have two partners that helped with the actual automation. There is virtually zero stress with the automated systems. Either that have been proven statistically or they haven't. If they have, then it's just a matter of optimization. My trading over the years has become more and more data dependent. It's really about collecting large amounts of data and finding edge. It's either there or it's not. It should NOT be a grey area. You should be able to prove it and the results should be able to be replicated. I should add that this is actually a lot of really really hard work. I have put years and thousands of hours of work into this. So I'm not going to pass this off as something that is easy to accomplish. But the difference is night and day. This is what I think, if you are willing to do this kind of hard work, then by all means, do it. If not, give your money to someone who will. It's that simple. Anything in the middle will probably lead to disappointment.
Told ya, he fell in with these code heads and has never been the same since. Good on you Mav, you've always been an inspiration here.
I'm not anywhere near having the capability to automate but I am working on building harder rules to guide my manual trading that would eventually be the rules for an auto system. I've been exploring many options and keep coming back to just two: one NL derived, and one based on instrument price vs my price levels. Have you have found value in trade inputs outside of ACD? I'm just about to the point of discarding everything else, at least in the TA family. One that I would like to test in the future is a fundamental input. I'm helping a family member create an excel sheet that pulls fundamental data via API to help him perform his value investing calculations in a more efficient manner. Once I'm done I'm going to try that as an input, something simple like the current growth rate being priced in to a security by the market according to standard value formulas. I know this may be asking a bit much so feel free to ignore the question.
You might want to check out The Value and Momentum Trader by Grant Henning. He combines momentum with some of O'Neil's ideas from How to Make Money in Stocks. I'm not suggesting following wholesale, but he has useful ideas that would give you the seed of building a system around ACD and fundamentals. I tried some of his ideas when I was trading Thai Stocks years back but I gave up because many companies publish financial statements only in Thai and I can't read the language. I am familiar with Financial Statements so I could figure out which were the metrics but some companies had shoddy reporting and it was painfully slow so I gave up on that and only used the momentum side. Alas no FinViz for Thai stocks, things just aren't as sophisticated here as they are in The States. If you can automate collection of financial data, tracking the metrics he uses would be a breeze. If memory serves he only wrote about the long side but it would be easy enough to take the opposite end of the metrics for shorting. If you want to get deeper into it, I would suggest O'Neil's book also. It's an interesting idea you have, if I were to actively trade US stocks, I'd certainly look to incorporate some of that stuff with ACD.
I agree. If I were going to build a model for stocks, I would certainly look at the CANSLIM method of O'Neils. His books are outstanding.