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Buying and selling
the whole basket depending on a market signal will work only if your
basket matches the market (however you defined the market). If you use a
market index like the DJ or S&P your basket must closely follow these
indices. If you are concerned about a basket stop an easy way would be to
buy an extraded fund that follows a major index.
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There are times when
some major indices are down and most stocks are up and vice
versa.
The idea of a basket
stop sounds appealing, but unless you have a large number of stocks in your
basket why sell them all unless you think that the market is going to drop
precipitously? With 10 to 20 stocks in your basket, you should be able
to track them with trailing stops.
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However if this idea
works for you, go ahead and use it.
<FONT face=Arial
size=2>Lionel
<FONT face=Tahoma
size=2>-----Original Message-----From: Dave Merrill
[mailto:dmerrill@xxxxxxx] Sent: Friday, August 29, 2003 1:17
PMTo: amibroker@xxxxxxxxxxxxxxxSubject: RE: [amibroker]
detecting "basket" performance in a backtest
<SPAN
class=085511118-29082003>the thing I was wondering about was the notion of a
basket stop: interpreting an overall drop in the basket purchased at one time as
a buy signal error, and selling them all. this is in contrast to stops set on
individual stocks.
<SPAN
class=085511118-29082003>
<SPAN
class=085511118-29082003>dave
<BLOCKQUOTE
>
10% was suggested
by Curtis Dahl when he published his book back around 1960, and Nicholas
Darvas used 10% stops. At that time, before the days of the PC,
markets were much less volatile and the trader had more time to make a
decision. More recently some people have told me numbers between 3% and
5%.
My own feeling is
that if any of your stocks are down 10% sell them, or if you can't bear
to give a sell order put in stop-loss orders.
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I don't think that
you need to do a formal back test to verify this
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<FONT face=Arial
size=2>Lionel
when using an overall
market timing signal plus some strategy to pickspecific stocks, someone on
another list proposed that if the overallperformance of all stocks
purchased at that time dropped by some amount (10%say), the whole basket
should be dumped. the theory is that the overallmarket signal was
"wrong".is there any way to backtest this kind of behavior in AB? how
can I accessthe value of all stocks currently
held?thanks,Dave MerrillSend
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