1st Quarter 2007 results

I made 3 sells and no buys (I had to pay some tax) I have some cash to make some buys in the next week.

69% gain on HGI

HGI trade closed for a 69% gain. This one lasted 35 weeks. The system used for this trade has turned off for the moment.

SFH trade exit

This one was in my super fund. I exited last week for a 60% profit. The system could do with a little work since I think I found a minor bug in the position sizing approach whilst using Amibroker's Bar Replay feature.

I have 2 portfolios. I trade using a company and I also trade a SMSF with 4 members. In my company I have only made one transaction, the MBP sell below, this year. The super fund has been a little more active lately. I only report on my investment company performance on this blog.

I noticed the media beat-up on the recent "market crash". I have been a little busy lately. Since I have a weekly system don't even need to watch the markets mid week. I find that the best thing to do is not to watch the market more than I need to and ignore the media reports.

Stevo

MBP trade - talk about "lucky"

I bought into MBP on a signal last November. Fortunately an exit was triggered and I got out a week ago with a small gain (4%) It plummetted over 70%! I am glad I follow those stops.

Stevo

SDG weekly chart

Sunland chart - exits are based on the EOW close price. Chart is for the ReefCap forum. You will notice that I am having a bit of fun with cloudcharts.
http://lightning.he.net/cgi-bin/suid/~reefcap/ultimatebb.cgi?ubb=get_topic;f=15;t=000310

Jan 2007 Quarterly update

This is a part quarter update. Obviously the quarter is not over yet.

The market has been quite strong over the last month, although not as good as December.

A $50,000 plus gain for the month is ok by me - see the December quarter chart below for comparison. The portfolio had no buy or sell signals for the month and I am fully invested aside from some dollars I set aside for a tax payment.

I took my first trade on a monthly system I developed. I will see how I go waiting to the end of the month before taking buy and sell signals. The system performs very well in back testing, but I am not entirely convinced that I am ready to trade a monthly timeframe. I am sure that some people would think that I am crazy trying this approach! I find that exiting on stops during the month significantly degrades the results.

One advantage is that the system can handle more capital which should come in useful for my super fund. I have tested on random entry and exit price in the month that the signal is given, as well as on the open and various other strategies. They all make money, but I am usually better off getting in / out towards the beginning of the month.

If everything goes as I expect in terms of the monthly system I will use it for the super fund only.

Steve

Michael Covel trend following videos

I have a lot of time for this guy's approach as outlined in this and a couple of other videos on youtube. I believe that he has written books but I haven't read them.

When it comes to data the only data that I can really trust and understand is the close price and the volume. Fundamental data cannot be trusted in the same way. It can be fiddled or made to look better than it really is. I am not an accountant, although I am not totally ignorant to their methods. But I know my limitations when it comes to understanding a company and it's fundamentals.

If I was buying a company on fundamentals I would want to kick the tyres, talk to key staff, and delve into basic industry characteristics. I would want to independently value assets and look at the past financial records. I would want to understand anything that might impact on the company going forward. Then I could, with the aid of industry experts that would need to be working for me, make a decision on the value of a business.

But with listed companies I can't easily do this without substantial resources.

Using trading systems I can bypass most or all of the fundamental information. A publicly listed company is valued everyday by the "market".

Trend following, combined with exit strategies and position sizing, relies on price and volume data.

Don't look back!

Whatever you do don't look back - always look to the next trade, or the next 1000 trades.

I sold CBH at 63.5 - 64 cents just after the open on Monday. The exit only just triggered, 0.5 cents higher and I wouldn't get the exit. Another trader I know spoke to me after the close; "did you see CBH. It closed at 71 cents!"

Since I trade a weekly system my rules allow me to sell anytime I like in the week, although my strong preference is to get out early. So if I had held them another day I might have made substantially more money. My super fund bought in at 46 cents for a return of around 38%.

I have a rule - once the trade is done I remove the stock from my watch-list and put the chart in the completed trades list. I don't follow the stock after I sell it.

I told him it's past history. It doesn't matter what CBH closed at if I am not holding them. Just move on, make the next trade and don't look back. There are other trades and other opportunities. If I delay the trade next time hoping for a better exit it is just as likely to go against me.

Smart Money in trading

 
These charts show a couple of trades I took (one was in my super fund) late last year some week's prior to takeover offers being announced. Was it the smart money buying that triggered the buys or was it public information that triggered the price and volume information? Or was it something altogether different.

In the case of FLT it is possible that the stock had bottomed out. I am not sure what the fundamentals were saying (if you can trust them) but I suspect they were painting a turnaround story - things were looking rosier in the future. Not a bad reason to launch a takeover!

On a side issue I used PlotText to put the close price on the chart as well as CloudCharts to plot a breakout band.

Stevo

Stochastic on price chart

The monthly chart above shows my adaptation of the stochastic plotted on the price chart.

The code I am using is as follows;

Sp = Param("stoch Period", 2, 1, 55, 1);
Lv = MA(LLV(L,Sp), 3); Hv = MA(HHV(H,Sp), 3);
midpoint = Lv+(Hv-Lv)/2;

I am not saying that it is perfect, but it gives the general idea.

The stochastic uses some averaging for the actual indicator. On the price chart the close price can go above and below the 0% / 100% lines because it isn't averaged. The price becomes the indicator!