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I got a lot of email asking for more info, mostly
from people who (A) don't want to spend $50 for Jeff
Cooper's book; (B) bought the book but don't want
to spend another $75 for the software; (C) bought the
book and the software despite not having any stock
data to test it against; and (D) have stock data and
bought the book and bought the software, but won't
actually run the software themselves because they
simply don't want to spend the time.
To accomodate these requests I have composed a little
file which is attached to this email; it is named
"cooper.zip". If you don't have unzipper software,
I am very sorry. If your email software mangles the
attachment and you can't read the zipped file, again
I am very sorry.
This file shows my historical backtest results on
the Cooper 5 day system, under the following conditions:
* Commission = ZERO dollars, round trip. This is
of course incorrect. On the other hand, I have
no idea what commissions your broker charges,
for the particular types of orders the Cooper
system generates. (No they aren't the simple
at-the-market orders that Joe's Brokerage charges
$5.00 to execute).
* Bid-Ask spread causing "adverse execution" (also
known as "slippage") equals ZERO points per share.
This is of course incorrect. Cooper makes a guess
and says 1/8th of a point on entry, and another
1/8th of a point on exit. Go ahead and suck my
data into a spreadsheet, then adjust the prices by
whatever slippage you feel is proper.
* Absolutely NO position sizing is assumed. The
backtest results show the system's buy price and
sell price (including actual price gaps etc) PER SHARE.
* System is unmodified Cooper algorithm from his book
5 Day Momentum Method. This includes "market on close"
orders which not all stock brokers will accept.
No profit targets or trailing stops or breakeven exits
or other enhancements are used.
* Prices are reported in points and 16ths of a point.
"xxx-yy" means xxx + (yy/16). Since the system only
trades stocks whose price exceeds 40, sixteenths
are the finest increment of price for these stocks.
* This backtest was run on only 71 stocks, not on the
full universe of >20,000 different stocks. These 71
are the ones that I, in my ignorance, feel are among
the most promising candidates for Cooper 5 day system
trading. But hey: I COULD BE WRONG. Don't trust me,
do you own tests, examine your own results, use your
own brain and experience and intuition.
Here is an example line from the backtest results file:
19990223 S RMBS @ 76-07 EXIT 19990301 @ 71-11
It says that on 23 February 1999, the system went short ("S")
on the stock of Rambus Inc. ("RMBS") at a price of 76 and
7/16ths. After 5 market days, the system exited this short
position (on 01 March 1999), at a price of 71 and 11/16ths.
With this information it is easy to calculate that the gross
profit on this short trade was therefore 4 and 3/4 points
per share. {math: 76.4375 minus 71.6875 equals 4.75}
This is a profit of 6.21 percent in five days if you are
unleveraged (neglecting commissions and slippage!), or a profit
of 9.32 percent in five days if you use 50% leverage.
Of course this trade happens to be a winner; as you
will see when you peruse the backtest results, there are
losers too :-).
I hope you enjoyed reading this.
Attachment Converted: "c:\eudora\attach\cooper.zip"
--
Mark Johnson Silicon Valley, California mark@xxxxxxxxxxxx
"... The world will little note, nor long remember, what we
say here..." -Abraham Lincoln, "The Gettysburg Address"
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