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Thanks for the reply Super. My trading is doing fine. Both my 401K
system and dynamic hedging stock system are doing fine. Lately I
have been thinking that the two areas I can do better are
1) Putting all my money to work vs a part of it only.
2} Using position sizing using tools such as volatility based sizing
and increasing the position as the stock starts trending in the
expected direction. I like the idea of using Velez' momentum trading
method with position sizing technique.
Let me know any references there that you would suggest. Reading
Tharp Ch 12 right now.. Trading your Way to Financial Freedom.
Agree with you on the stock universe you are defining to trade long
from and then using quants and TA to tune entry exit decisions. I
beat SPY in my 401K returns last year using a similar method.
I upgraded to MS10 and have begun looking at RMO as well. Also
picked up Ehler's module ACT; but am evaluating it. If it does not
perform as expected, I will return that and keep the MS10.
Regards,
--- In equismetastock@xxxxxxxxxxxxxxx, superfragalist <no_reply@xxx>
wrote:
>
> Hello rvalue1. I haven't heard from you in awhile. I hope you're
still
> prospering.
>
> Here's a link that explains the difference between quantitative
> analysis and fundamental analysis. When I'm speaking of quants, I'm
> not talking about the people who do quantitative analysis but
rather
> the use of quantitative analysis to rank stocks.
>
> http://www.fool.com/school/basics/basics06.htm
>
> What Works on Wall Street is O'Shaughnessy's book on combinations
of
> fundamentals and how they impact future stock prices. There are
also a
> few tests in the book that involve mixes of quant numbers (QA) and
> fundamentals (FA).
>
> There are several other books, papers and long term studies that
have
> looked at how various FA and QA factors impact stocks. There are
> similar to MS that do FA and QA analysis. Reuters has powerscreener
> for example. There are also back testers specific to this kind of
> analysis.
>
> I have used several of these programs over the years. They are
> generally very expensive and have a long learning curve, so I don't
> recommend them.
>
> In my experience if someone wants to trade mechanically using FA
and
> QA, then spending a lot of time finding the best mix is important.
> Motley Fool has a forum dedicated to mechanical trading based on FA
> and QA. There are three or four memebers of that group who are
some of
> the best FA and QA traders around.
>
> However, the best mix I've come across and have ever tested is to
use
> a group of stocks that have already been screened using FA and QA
and
> that are available from a strong group that has been doing this for
> many years with a published very long term track record. Value
Line,
> Ford Equity Research, IBD, S&P Platinum or Neural list and a few
> others like AAII.
>
> It's not important to pick the provider with the highest returns
from
> their group. Each of the lists has certain characteristics that
make
> it easier or harder to trade. For example the IBD list is more
> volatile with lower cap, lower volume stocks on it than the list
from
> Value Line. The Ford list contains only 20 stocks where Value Line
and
> IBD have 100 on them.
>
> Basically once someone settles on a list that fits what they're
going
> to be doing, then the application of some very simple TA improves
the
> returns from the list. Using TA on these stocks is more effective
than
> using TA on stocks from the entire market for several reasons.
>
> Many thousands of people follow some of the lists so there is a
lot of
> buying activity in those stocks. In addition, the stocks have
strong
> FA and QA attributes so the same stocks often appear on analysts
> recommend lists and in other forums stock buyers use to make their
buy
> decisions. This can be good for momentum.
>
> In addition, these stocks have strong business fundamentals behind
> them so they have a reason to go up.
>
> The bottom line is a little TA goes along way on these lists. The
> lists provide the easiest population of stocks to trade which means
> that the average trader is going to be more successful sticking to
> list. Like all trading there has to be a strategy, a set of rules
and
> the discipline to stick to the rules. The list don't get rid of the
> need for those things. However, some very simple and limited use
of TA
> makes the charts easy to read and the buying and selling decisions
> much more obvious.
>
> Guru's and guru want-to-be who have products to sell promote the
idea
> of picking huge stocks. You never hear a word about consistency.
> Rarely is the subject of std deviation in returns mentioned, and
long
> term, transparent track records are non-existent. There is a reason
> for that.
>
> With QA and FA, the long term track records of the good firms are
> there. Like everything else, the know-it-alls and
> bitch-about-everything if it isn't my idea will criticize the track
> records because they didn't include slippage or whatever. It
doesn't
> matter. Those are trivial and irrelevant arguements unless someone
is
> going to buy and sell the entire list on a purely mechanical
basis.
>
> The comparisons between lists are relative only, and viewing a few
> list of past picks on a chart will tell you if you have a
reasonable
> chance of trading the stocks the way I've mentioned.
>
> The lists I've included in this post are all tradable. I've tested
the
> Value Line list extensively and well as a couple of others.
>
> People wanting to use a combination of QA, FA and TA to make money
in
> stocks shouldn't try to reinvent the wheel and run millions of
tests
> using various testers or look for the perfect program that combines
> all of them together. In the end it will take too much time, too
much
> money and be too difficult to master for most.
>
> Keep it simple. Use what is out there and is proven.
>
>
> PS I wonder why Equis didn't publish any back test results on the
RMO
> system that is sweeping the world of trading.
>
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