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Wow,
b....
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<FONT face=Arial color=#0000ff
size=2>Granted, I just got up, but I'm overwhelmed by your reply. I
haven't even had my first cuppa yet!!
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There
are no "penny" stocks, unless you call a stock that traded above $1 a penny
stock.
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I
would have thought that the trade listing that I posted for DT answered all of
your questions, but I will endeavour to explain.
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The
equity curve is actually a "profit" curve. I used the word "equity"
because everyone else does. It shows the cummulative profit/loss for
each trade.
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I
generate this profit curve by:
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<FONT face=Arial color=#0000ff
size=2>1. Setting the initial capital in the account for each
stock to 500,000 (an inflated figure that doesn't come into
play).
<FONT face=Arial color=#0000ff
size=2>2. The system trades 50,000 per trade and doesn't worry about
running out of money.
<FONT face=Arial color=#0000ff
size=2>3. The syntax for my composite is: AddToComposite
(Equity()-500000, "~Composite", "X", 7);
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There
is no cummulative effect of thousands of stocks being in the basket.
The profit/loss from each trade is added/subtracted and then the stock is
forgotten.
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The
system uses the VLIC for timing only. It does not trade the
VLIC. The system certainly does not just buy all stocks when the
trend is up. There is system logic that I have not
supplied. I have said that it uses an "oversold" indicator for each
stock. A stock must at least $1 (actual price) on the day, can't be
above $15 and must have a reasonable average turnover in order to be
considered. Then, it must also be "oversold". You
may see prices in the trade listing that are outside of the $1 to $15
range. Remember, that the filter is based on the actual price on the day
and the trade is being calculated based on the backadjusted
price.
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There
is additional logic that decides that the signal is only valid for a few
days. It has a "use by date".
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When
the market timing signal reverses (goes down), individual stocks are sold if
they are going down. If an individual stock continues to
go up, it is held until it starts to go down.
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This
is why yoiu will see stocks being bought a few (secret?) days after the trend
turns up and sold a few (secret?) days after the trend turns
down.
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Other
reasons for a stock being sold are the 40% stop loss or if it ceases
trading. Remember, my database has extinct stocks. These
show up in the trade listing with symbols like ~UNIV, ~LAC,
etc.
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The
trade listing shows that the system bought 124 stocks based on the buy signal
that was generated on 26 December, 2000. It started buying on the
27th.
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You
can see that some more stocks were bought over the next few days.
This is part of the logic of my trading system, not the timing
system. Pretty soon, I will have specified the entire system in my
positings.
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The
exit signal was generated on the 8th of February, 2001 and the system started
dumping the entire basket on the 9th. It took a few days to unload
the entire basket, again based on the system logic.
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I hope
that I have covered all of your issues, but I'm happy to delve
further.
<BLOCKQUOTE
>
<FONT face="Times New Roman"
size=2>-----Original Message-----From: b519b
[mailto:b519b@xxxxxxxxx]Sent: Friday, June 20, 2003 7:50
AMTo: amibroker@xxxxxxxxxxxxxxxSubject: [amibroker] Re:
Longterm equity chart (3 possible cuases for Jan 2001
jump)Chuck,Your explanation for the huge
spike in Jan 2001 makes sense - that a there was larger number than normal
of stocks that qualified as being beaten down - likely due to tax loss
selling in Dec 2000. However, this explanation (or my interpretation
of it) raises a question about the equity curve's significance. I
see three possible explanations. I think the third is the most likely, but
I want to mention the other two first so you can confirm whether or not
they are factors.HYPOTHESIS ONEYour system began to trade penny
stocks in late Dec 2000 or early Jan 2001. Penny stocks can have periods
of huge gains of 70% or more (and can have similar
losses!)Although I expect your system has a minimum price that
excludes penny stocks, I thought I better ask just in
case.HYPOTHESIS TWOLet's say by Dec 2000, the system has generated
a cumulative total of 1,000 stocks it had traded. This number is important
if I understand the way the equity curve is generated. Because your
inactive stocks are padded out to the present for the sake of the
equity curve, that implies that once a stock gets added to the equity
curve, it remains part of that curve to the end, even if it never trades
again. So, the jump in the equity curve in Jan 2001 could simply being
the fact that a disporportionate number of new stocks qualified for
being part of the equity curve for the first time. If 700 new stocks
qualified, that would account for the jump of 70% even if those new
stocks were not profitable.Or perhaps (I would guess probably) you
have already compensated for this by subtracting the initial equity give
to a stock before that stock's own equity curve to the cumulative equity
curve, or should I say "profit" curve. Something makes me think that you
probably have done this compensation step. If so, we need to go to
hypothesis three.HYPOTHESIS THREEIn anticipation of a reply
that the chart is a "profit" report, what I think has caused the jump in
January 2001 is that a large number of new stocks has added a large amount
of modest profit all at once. I am up early this morning (about 4
hours of shut eye) so my ideas as well as words may be a bit fuzzy.
Perhaps an illustration will help. Let's suppose that the "profit"
curve is based on the profit of about 1,000 stocks by Dec 2000. Let's also
assume the total accumulated profit is about $4,000,000 by Dec 2000. Let's
also assume that there was a much larger number than normal of new stocks
meeting the beaten down requirement of your system - perhaps due to
tax loss selling in December. Let's say 1,000 new stocks got added to
the stocks already part of the profit curve. Assuming the that Jan 2001
entry (maybe it was a very late 2000 entry - same result), was moderately
profitable with an average gain of $3,000 for each $50,000 position (that
would be same as the average $3,000 you report). Those 1,000 new stocks
times 3,000 would add $3,000,000 to the profit curve. Thus, the
jump in the profit curve of 70% could be caused by the total number of
stocks being traded increasing by 70% even though they only made a modest,
average profit on that trade signal. Is this hypothesis, or a variation of
it, possible?b--- In amibroker@xxxxxxxxxxxxxxx, "Chuck
Rademacher" <chuck_rademacher@x> wrote:> VLIC is the Value
Line Geometric Index. I only came across it by
accident,> but it makes an excellent overall market timing
vehicle. If you care to run> a 4/11 EMA cross on it, you will
see the exact turning points that I used.> Data for it is
commercially available starting in January, 1985. I have>
created my own values for it back to 1970.> > I think that I
explained why the system did so well in January, 2001.
I> believe that many stocks were oversold in December, 2000 and this
system> picked took advantage of that situation. Such
spectacular (unbelievable?)> performance is only by
circumstance. The system was not curve-fit to take>
advantage of that situation. In fact, I wish that the huge spike
wasn't> there.Send
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