Maximize Gains and Minimize Losses

[LuckyWon]

Stop losses can be a good way to minimize losses, but as every one here already knows, it can be tricky finding the optimum stop loss, so that you don't loose out on future gains.

I am just getting started here and think that the momentum portfolios with delays offers a great method to maximize gains and minimize losses.

Starting with the Price Momentum Weekly portfolio a buy is issued on a qualifying stock.  A week later, if there has been no sell order, this stock is listed as buy for the Ultimate Price Momentum V1, an so on until Ultimate Price Momentum V5, five weeks later.  So obviously if a stock makes it all the way to V5 is a has been a winner.  Conversely, if a stock doesn't make it to V2 it is a looser.

So if you place your buys, when recommended, each time for each portfolio, you should be heavily weighted in the winning stocks and not so heavy with the losing stocks.  Essentially maximizing the profitable purchases and minimizing the loosing purchases.

For example, you would hold five units of a stock that makes it all the way to V5.  For a stock that only makes it to V1 or V2 before being sold, you would only be holding 1 or 2 units.  I guess you could buy equal number of shares, or buy equal dollar value each time.

I have yet to back test this with the posted trading history of each portfolio.  I will post the result when I do.

Cheers

[dlanor]

Hi,
I think that this job cannot be done with the only data found on this site. The reality is that you cannot often on this market buy at the closed prise.  many of those stock have no liquidity. Not enough traders. Taking the mediane of the next day coud be an appoach more realistic for a simulation. The same should be done on the sale price. And another thing that must be include in the simulation are the up and down of each day (micosoft and many other stoques sites gave them ). Those data must be include in the model to developpe a way to calibrate a systematic selling strategy against loss of profit and false ejection, base on the bracket of shares prices and volatity, and
minimising this way, important losses and be able to change orders at the right time to  put your 2 parts on the rocket one.

Dlanor

[mac47]

I am a newbie to SSP so please pardon my ignorance on how the Momentum system works.  Looking at the current  open orders and following SMTC from the Price Momentum Weekly I see it is recommended as a Buy each week from July 9 at a price of $8.87 through to July 30 @ $5.53 and is today at $4.75 with only 4,100 shares traded.  What has to happen to have the Price Momentum Weekly isse a sell indicator?

Other wise the idea of buying each week to average gains and reduce the losses sounds like a winner.

Stop losses can be a good way to minimize losses, but as every one here already knows, it can be tricky finding the optimum stop loss, so that you don't loose out on future gains.

I am just getting started here and think that the momentum portfolios with delays offers a great method to maximize gains and minimize losses.

Starting with the Price Momentum Weekly portfolio a buy is issued on a qualifying stock.  A week later, if there has been no sell order, this stock is listed as buy for the Ultimate Price Momentum V1, an so on until Ultimate Price Momentum V5, five weeks later.  So obviously if a stock makes it all the way to V5 is a has been a winner.  Conversely, if a stock doesn't make it to V2 it is a looser.

So if you place your buys, when recommended, each time for each portfolio, you should be heavily weighted in the winning stocks and not so heavy with the losing stocks.  Essentially maximizing the profitable purchases and minimizing the loosing purchases.

For example, you would hold five units of a stock that makes it all the way to V5.  For a stock that only makes it to V1 or V2 before being sold, you would only be holding 1 or 2 units.  I guess you could buy equal number of shares, or buy equal dollar value each time.

I have yet to back test this with the posted trading history of each portfolio.  I will post the result when I do.

Cheers

http://

[tuzo]

reality is that you cannot often on this market buy at the closed prise.  many of those stock have no liquidity. Not enough traders. Taking the mediane of the next day coud be an appoach more realistic for a simulation. The same should be

I agree about using the close -- it's not that realistic in terms of simulating the real world.  Even if you used the open that would theoretically be an easier price to actually get filled at (not that I would put a market order in at the open).

Another unrealistic aspect to the portfolios is the re-balancing into equal capital in every stock.  Maybe this makes sense if a few positions are open but if there is only 1 open position then I don't think it is realistic to put all of your capital into one stock. 

Also in the last few months, it seemed to me that SSP picks were getting boosted when buys were issued.  Since some of the issues are fairly illiquid, I think people following the SSP were affecting the pricing.  e.g. price up in morning and then after buying is done the price fades during the day.  Just a theory and membership has doubled over the last while.

That said, the picks on the whole have done really well.

[Maxpowers]

you are dead wrong, that was a common thought on this board.  SSP has proven it with the $50,000 example portfolio- check it out.  As for buying at the close or open, that's your choice, I always buy between 2-3 pm as the market is more settled in one direction or the other, on the day before or after the trigger, if the market is down i've waited until the wed or thurs.  SSP using the close is the fairest way possible.

[tuzo]

you are dead wrong, that was a common thought on this board.  SSP has proven it with the $50,000 example portfolio- check it out.

I understand how it works and that you can do it.  What I'm saying is that in higher delay portfolios they tend to hold fewer stocks; recently as few as 1 stock.  IMO, this is not a realistic portfolio.  It is not inconceivable by chance to have a back to back LPX, IEX meltdown (which has occurred in the portfolio previously).  This would represent about an 88% drawdown which is probably not acceptable to most people.

As for buying at the close or open, [snip]... SSP using the close is the fairest way possible.

It's one way to track it.  Personally, I think the open is more realistic but even better would be the average price (high-low/2).  The point is probably moot because I guess it would be too much work to change the way everything has been tracked in the past.

[bryanmcn]

Hi Tuzo
I agree with you that few individuals would dare to duplicate the SSP virtual portfolio. The volatility is just too great. However if you look at the performance of all of the portfolios except the earnings upgrade, they have a pretty good track record over a year. With that in mind I began (about three months ago) buying most of the stocks in the weekly and the Low Peg to diversify my holdings. I usually hold about 10 stocks. My performance has improved significantly.

[Victor]

I've been trading the portfolios as presented for about a month (the weekly ones).

Some comments on the previous posts:

Just because a trade makes it to the fifth week doesn't mean its a winner.  Whatever the system design, it keeps a number of winners and losers through the fifth week.  Adding to positions each week just magnifies the final outcome.  A strong winner will have been averaged into over that period, a loser will also be averaged into.  There are also examples of the initial position being profitable while add-on positions in later weeks are losers, on the same stock.

I've posted my findings on stops.  The main issue is what to do when:
1) A stop is hit on a trade while the system calls for more buying on the same stock.  Do you ignore the stop?  Do you add to the position anyway?
2) A stop is hit with multiple positions on the same stock.  Do you pare back your overall position or do you dump the whole thing?
3) When using stops, how do you determine if/when you get back in? Particularly if the system continues to recommend a purchase in future weeks.

Cheers,

Victor

[Victor]

As a quick example: the ALS trade currently on hit a stop on the original position.  Positions for week 1 and week 2 versions are down, but haven't hit their stops yet.

[bryanmcn]

Initially I used stops. If it hit, I sold the entire position (automatically done for me in Etrade). I would sometimes buy back if it was just a shakeout. The problem is that there are a lot of shakeouts! Take CUQ as an example (look at the chart). I would have been stopped out at the worst possible time and would have bought back at a much higher price. So because of the volitility of the stocks in SSP I now use mental stops (Which rarely work for me). I also look at the stocks overall 6 month trend before deciding wether or not to buy or sell. For instance, NGX just listed as a buy in the Low PEG is not a convincing buy for me as it is still trending downward. ELD has formed a higher high but now must form a higher low to show a trend reversal and for me to consider it a buy.

[tuzo]

Initially I used stops...I would sometimes buy back if it was just a shakeout. The problem is that there are a lot of shakeouts! ...So because of the volitility of the stocks in SSP I now use mental stops (Which rarely work for me).

That's a dilly of a pickle.  I stopped using actual stop orders because one day they ended up kicking in at the low of the day -- I bet it was the only trade at that level.  I felt totally ripped off.  Of course, once I was shaken out the stock could really start to run.   

Hope everyone is feeling ok after today's wild ride.

[bryanmcn]

Tuzo
Don't worry. You weren't the only trade at the low of the day. I was! With the recent volility it seems like stops would have saved most portfolios. Its almost a relief that SSP has not triggerred a sell. In fact this may be a good buying opportunity. ...maybe....or maybe its the start of an even larger massive selloff!!
This is why they say that the markets are a perfect example of crowd mentality. The best position is against the crowd. Contrarian. When everyone is afraid - very afraid - time to  buy. When everyone is elated and confident - time to sell. Its all psychology and emotion. The SSP eliminates the emotion and, as long as we follow it without jugdment, it seems to do VERY well. It is gut wrenching to experience these drawdowns though. 

No guts, no glory! Right?

[DCA]

bryanmcm,
    Describing it as a gut wrenching experience is a bit like comparing an earthquake to a massage chair!
    Right now the market is doing an imitation of a Rube Goldberg contraption.  The sub-primes lower the value of mortgage backed securities, which causes mutal funds to drop, mutual fund holders panic redeming their shares, mutual fund managers sell the good to get the cash for redemption, solid stocks plumment, this triggers margin calls for other holders causing massive selling cycles...at the end of this sits your portfolio under a massive axe.
    Yesterday, I started getting hit by the margin, so I spent the day selling debris and trying to hold on to all the good stuff.

    I think the market is behaving irrationally but I do realize that the market's ability to be irrational exceeds my ability to stay solvent.

    On the bright side:  after yesterday I will not have to pay taxes this year!

D

[tuzo]

This is why they say that the markets are a perfect example of crowd mentality. The best position is against the crowd. Contrarian. When everyone is afraid - very afraid - time to  buy. When everyone is elated and confident - time to sell.

True.  On the other hand you can also get crushed thinking you are smarter than the market. 

Its all psychology and emotion. The SSP eliminates the emotion and...

I would say that emotion plays a large part -- especially during this volatility.  I think the beauty of a mechanical system is that it eliminates a lot of the emotional issues and mistakes associated with trading.

[bryanmcn]

Its times like these that I am gratefull I can't trade on Margin in my RSP's. Are you buying more of anything in the portfolios? If so what?