Buy signal for Rural Cellular Corporation (RCCC)

RCCC got a buy signal in the end of last week according to the system. I'm planning to buy it during today's trading session.

Technorati Tags: Buy signal,Nasdaq,Computerized system

Open positions for December 23

Here is the status of my current holdings:

Symbol	Entry Date	Entry Price	Current Price	Profit %
ARTG	24/09/2007	3.00	4.37	45.67
IDEV	24/09/2007	6.62	7.09	7.10
INFA	28/09/2007	15.72	17.79	13.17
LWSN	16/10/2007	10.15	10.30	1.48
ANDW	19/10/2007	14.36	15.04	4.74
TYL	19/10/2007	14.08	13.24	-5.97
AMSG	26/10/2007	26.68	27.26	2.17
VGR	05/11/2007	21.55	20.20	-6.26
SDIX	13/11/2007	5.24	5.22	-0.31
CTCH	19/11/2007	2.13	2.06	-3.29
TQNT	26/11/2007	5.90	6.85	16.10
CTGX	26/11/2007	4.93	6.61	13.79
PEGA	03/12/2006	12.46	11.67	-6.34

Technorati Tags: Computerized System,Stock Market,Weekly status,Nasdaq

The system's performance for 2007

As we reach the end of 2007, I've decided to run a simulation for the current year and see how well the system performed had I used it throughout the year.

AS always I start with 100,000 and my position sizing is based on maximum risk of 1% per trade.

The simulation shows a profit of 27% achieved by 7 profitable trades out of 28 in total. The Nasdaq gained around 10.7% in the same period.

Performance:

List of trades:

Technorati Tags: Stock Market,Computerized System,Nasdaq,Technical Analysis

Is Fridays behavior an indicator to Mondays behavior?

As I mentioned in my previous post, I'm currently reading a book titled "How I Trade For A Living". In his book, the author reveal some of his trading methods and even going through some of his past trading positions. According to the author, a bullish Friday has influence on Monday behavior meaning bullish Friday will usually result in a bullish Monday.

I've decided to conduct a small research on the Nasdaq. I went back to January 1985 and counted the number of days where a bullish Friday ended up in a bullish Monday. Out of 627 bullish Fridays, 357 Mondays ended up bullish as well which is ~59%.

Trying to improve the ratio between winning and losing Mondays I decided to check Monday only if Friday gain was above 0.5%. Out of 310 bullish Fridays, 195 Mondays (approximately 69%) ended up bullish as well. The average gain for Monday was 1.02% and the average loss 0.13% as opposed to the previous test were the average gain was 0.84% and the average loss was 0.07%.

Looking back at the results it seems the author has a valid point and one can use this knowledge to increase the probability of a short-term profit by examining Friday's momentum.

Technorati Tags: Knowledge,Stock Market,Nasdaq

The usage of seasonality

Technorati Tags: Seasonality,Bullish,Stock Market

I'm currently reading a book titled "How I Trade For A Living" written by Gary Smith. The book expose you to many of the author's insights in the stock market.

One of the chapters in the book deals with seasonality and how to take advantage of it. The author write about a research conducted by Norman Fosback which shows that the market has bullish bias during the last trading day and first four trading days of each month. Further more, this bias is evident in the two days before each holiday. These days sum up to 28% of all trading days a year. Fosback run a simulation which traded only during these days from 1928 to 1994. The hypothetical account grew from 10,000 to 4.6 million dollar.

In his book, Gary note that even though this research is old he uses this knowledge and it still works for him. What puzzles him (and me) is that patterns like this are usually evaporate in the course of time as people take advantage of them, however the seasonality pattern seems to be still valid. If we examine yesterday's behavior we can see that it is exactly what happened. Lets wait till the end of the month and see if it will work as well.

Open positions for December 23

Technorati Tags: portfolio,system,computerized system

Here is the status of my current holdings:

Symbol	Entry Date	Entry Price	Current Price	Profit %
ARTG	24/09/2007	3.00	4.60	53.33
INTV	24/09/2007	9.34	8.38	-10.28
IDEV	24/09/2007	6.62	7.15	8.01
INFA	28/09/2007	15.72	17.80	13.23
LWSN	16/10/2007	10.15	10.24	0.89
ANDW	19/10/2007	14.36	14.93	3.97
TYL	19/10/2007	14.08	13.69	-2.77
AMSG	26/10/2007	26.68	27.51	3.11
VGR	05/11/2007	21.55	20.52	-4.78
SDIX	13/11/2007	5.24	5.30	1.22
CTCH	19/11/2007	2.13	2.12	-0.47
TQNT	26/11/2007	5.90	6.70	13.56
CTGX	26/11/2007	4.93	5.73	16.23
PEGA	03/12/2006	12.46	11.97	-3.93

Open position for December 16

Technorati Tags: portfolio,system,computerized system

Here is the status of my current holdings:

Symbol	Entry Date	Entry Price	Current Price	Profit %
ARTG	24/09/2007	3.00	4.60	53.33
INTV	24/09/2007	9.34	8.69	-6.96
IDEV	24/09/2007	6.62	7.34	10.88
INFA	28/09/2007	15.72	17.25	9.73
LWSN	16/10/2007	10.15	9.79	-3.55
ANDW	19/10/2007	14.36	14.82	3.20
TYL	19/10/2007	14.08	14.93	6.04
AMSG	26/10/2007	26.68	25.37	-4.91
VGR	05/11/2007	21.55	22.25	3.25
SDIX	13/11/2007	5.24	5.39	2.94
CTCH	19/11/2007	2.13	2.20	3.29
TQNT	26/11/2007	5.90	6.43	8.98
CTGX	26/11/2007	4.93	5.36	8.72
PEGA	03/12/2006	12.46	11.58	-7.06

Diversification - is it really essential?

Portfolio diversification means one should hold assets from different markets or sectors in order to reduce the risk.

I believe that in all the books I have red, no one question the necessity of diversification in a portfolio. Further more, the sample portfolio constantly contains equities along with commodities and I find this very confusing.  Even in a bear market there are a few stocks which rise. So, instead of looking at other markets I try to improve my stock picking in a specific market.  Building a mechanical system which perform well in different markets is very hard. I have tested my system in different markets like the FTSE, DAX, VSE and The Shanghai stock market and it worked well but since I concentrate on the Nasdaq I made several changes which showed great results on this market in particular.

So, is using one market acceptable? Let me know what you think of diversification.

Open positions for December 9

As in the previous week, the first days didn't look too good but as days were passing by the decline turned its way to rise which continued until the end of the week. Last week helped to minimize the portfolio drawdown which occurred during the last couple of months.

If anyone is interested, I keep a demo portfolio built on signals produced by my system. You can follow my progress in my Invetopedia account.

Here is the status of my current holdings:

Symbol	Entry Date	Entry Price	Current Price	Profit %
ARTG	24/09/2007	3.00	4.49	49.67
INTV	24/09/2007	9.34	9.09	-2.68
IDEV	24/09/2007	6.62	7.42	12.08
INFA	28/09/2007	15.72	17.82	13.36
LWSN	16/10/2007	10.15	10.17	0.20
ANDW	19/10/2007	14.36	14.85	3.41
TYL	19/10/2007	14.08	15.62	10.94
AMSG	26/10/2007	26.68	26.08	-2.25
VGR	05/11/2007	21.55	22.23	3.16
SDIX	13/11/2007	5.24	5.32	1.60
CTCH	19/11/2007	2.13	2.25	5.63
TQNT	26/11/2007	5.90	6.24	5.75
CTGX	26/11/2007	4.93	5.02	1.83
PEGA	03/12/2006	12.46	12.31	-1.20

Test results for the system

After reading the research mentioned in my previous entry, I thought I might be able to improve the system by checking the  the Nasdaq Composite Index (^IXIC) performance as another measure before getting into a position. So now system checks whether the Nasdaq is positioned above its moving average. This tells me that we're in a bullish trend which is the only market the system trade.

Simulation results revealed big improvements. I thought I might check and see if I can improve the results even more, so I checked the same concept but rather than using the Nasdaq Composite Index to use the QQQQ. The Results were even better and here are a few screenshots from the Monte Carlo simulation.

Simulation period: November 11, 2002 - November 12, 2007
Starting capital: 100,000
Maximum risk percent: 1%
Commission: 0.01$ per share
Slippage: 2% of the base price
Number of raw trades: 547
Number of simulation: 2000

	Average profit: 623%
	Average yearly profit:48%
	Average Drawdown: -12.5%
	Average yearly drawdown: -7.61%
	Chance of achieving Profit Level
	Chance of achieving Profit Level - Yearly

Expand your knowledge

I came across an interesting research which examined whether profit can be improved using moving averages crossover as a replacement for BAH (Buy and Hold). The research examined the QQQQ in the years between 1991 and 2001. At this point some of you may say of "course SM is better than BAH", which is also true according to the research, but the interesting part is by how much.

The research shows using MA crossover resulted in up to twice the profit for the same period.

This gave me an idea how I can try and improve the system. I will publish the results in the following week.

Reference: SUPERIOR RETURNS FROM AVERAGE INDICATORS

Buy signal for Pegasystems Inc (PEGA)

PEGA triggered buy signal in the end of last week. looking in the weekly chart I believe the stock is on the verge of setting a new high.

Open positions for December 1st

Last week started bad and the portfolio suffered 2% loss. Nevertheless, with Tuesday and Wednesday rally the loss was covered and my portfolio ended up with a small profit.

My insight for this week is believe in the system and stay strong during bad days. If the results of the simulation are correct (which I believe are), the system had overcome events like we saw in the last week and at the end came out very profitable. To be honest, I am very pleased with the way I dealt with last week: I didn't panic during Monday and knew this is part of the game. If I need to credit someone for this mental strength it's Brett Steenbarger who's profound blog entries accompanies me each day.

Here is the status of my current holdings:

Symbol	Entry Date	Entry Price	Current Price	Profit %
ARTG	24/09/2007	3.00	4.18	39.33
INTV	24/09/2007	9.34	9.78	4.71
IDEV	24/09/2007	6.62	7.49	13.14
INFA	28/09/2007	15.72	17.15	9.10
LWSN	16/10/2007	10.15	9.72	-4.24
ANDW	19/10/2007	14.36	14.66	2.09
TYL	19/10/2007	14.08	15.06	6.96
AMSG	26/10/2007	26.68	25.86	-3.07
VGR	05/11/2007	21.55	22.02	2.18
SDIX	13/11/2007	5.24	5.38	2.75
CTCH	19/11/2007	2.13	2.05	-3.76
TQNT	26/11/2007	5.90	5.93	0.51
CTGX	26/11/2007	4.93	5.20	5.48