Stock selection in 1 hour a week.

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Archive through July 24, 2004 wombat40 25 1 24-Jul-04 11:33 pm

Archive through July 21, 2004 julles 25 1 21-Jul-04 01:08 am

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pootah

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Post Number: 4
Registered: 06-2004

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Sunday, July 25, 2004 - 01:40 am:

Hi Esyarra
Re linear regression as used by AHull
If you take say a 10 week period then simple moving average is sum of prices divided by 10 which is also the sum of each price multiplied by a factor of 0.1
ie p1 * 0.1 + p2 * 0.1 + ------ + p10 * 0.1 (note sum of factors = 1.00)
weighted moving average is similar but uses a small factor for the oldest price and factors increase up to a maximum for the latest price (sum of factors also = 1)
so called linear regression is similar to weighted but is more heavily weighted to the most recent prices (sum of factors also =1)
I refer to so called linear regression because most people confuse drawing a line of linear regression through a set of values with what is really an over-weighted weighted moving average. This is a curve similar in shape to sma or wma but more responsive than the other two
I consider that the CALCLSQR function in fcpro does a very good job at producing the regression curve.
eg set a udi to "calclsqr close, 13" is all that is needed to plot a 13 period regression average of closing price.
To those who hate mathematics please ignore this post.
Pootah

adrsnd

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Registered: 07-2004

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Sunday, July 25, 2004 - 12:57 pm:

Snifter,

On your original post you did mention the S&P 500 even though his newsletter only covers ASX shares. Did you come to the conclusion that it is possible to use on US stocks or did Alan provide support for this idea.

I have spoken to him before about this and he said the US is a different game and a US version of the newsletter is a way off. If this is not the case it is just a matter of finding US fundamental data.

My other point is that surely someone in the US is doing this already ?

PS.

Have been following his ACTVEST newsletter (www.actvest.com) since Oct 02 for the family DIY Super and are happy with the results. Now using his ACTTRADE newsletter as well (www.acttrade.net)

snifter

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Post Number: 581
Registered: 11-2002

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Sunday, July 25, 2004 - 07:49 pm:

adrsnd

I asked Alan if he knew of any publication that listed fundamentally sound US companies. He replied that he didn't, and that he had never been involved with the US market and knew virtually nothing about it.

The conclusion that the Hull system can be used on the
S+P 500 is mine alone....a conclusion I reached after putting the Hull template on all of the approximately 600 stocks in my US workbook, including all the S+P 500, and checking out the buy/sell signals over the last 20 years or so.

Now, while I'm not aware of any Martin Roth style newsletter to tell us which of the US blue chips are fundamentally sound companies, I believe we can reasonably assume that if a big US blue chip begins trending strongly, it does so (in most cases) because hundreds of thousands, and perhaps even millions of investors have done their homework on the company and have concluded that it has sound fundamentals and good future prospects. Included among these investors would of course be the large fund managers who would employ the best research analysts to help them find good companies.

This is the only type of fundamental assessment I ever do of a company....I simply look at it's weekly trend to get an idea of whether it's fundamentals are good, bad or indifferent.
I call it 'the lazy man's ways of doing fundamental analysis'. I'll concede that sometimes the state of the trend can give you false indications of the soundness or otherwise of a company (e.g. Davnet during the tech boom),
but overall this method of fundamental assessment does a good job of helping me to zero in on companies with good fundamentals(or poor fundamentals when looking for shorting opportunities).

Regarding Alan's comment that the US market is a different game, I'm not sure what he means by that comment.
My view is that its essentially the same game - if the name and the price were removed from a chart of a US blue chip, it would be impossible to know what market it belonged to. The same trends, the same chart patterns are still there no matter which market we analyse.
If anything I'd say the Hull system would tend to work even better on the US blue chips than Australian blue chips, due to the larger percentage moves and generally smoother trends of the US blue chips.

You stated that surely someone is already using the Hull method on the US market. I'd say you're almost certainly correct...Alan's system is fully available on the net for anyone who wants to look into it and apply it to whatever market they trade.
In fact I'd be surprised if there isn't a US publication similar to the Martin Roth publication, that lists the most fundamentally sound and unsound blue chips US companies.

Cheers,
Snifter

snifter

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Post Number: 585
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Sunday, July 25, 2004 - 10:44 pm:

Mouse traps, tractors, shares......what do they have in common?

Today I went down to the local convenience shop to get the Sunday paper. Among the various items stocked on the shelves I noticed some unusually cheap mouse traps. I asked Paul, the shop owner, why he was selling the mouse traps so cheaply. He said to me 'Mate, between you and me those are the most useless bloody mouse traps I've ever seen - they don't work very well and apart from that they break. I've had them here for ages and I've only sold a few, so I've dropped the price to get rid of them - in this game you can't afford to have dead stock hanging around on your shelves.'

On the way home from the shop I called in to see my neighbour, Doug, who recently took on a new job as a sales manager for a farm machinery dealership. Doug told me the firm is snowed under with second hand tractors and other machinery they traded in on new machines, but haven't been able to sell. This 'dead stock' is a chain around the firm's neck, slowing choking it to death. Doug's first priority is to move this dead stock so that the company can then free up some capital to invest in more productive areas of it's business. To that end he was busy putting together a brochure with photos of all the second hand machines the firm is holding - he intends to mail the brochure out to 8,000 farmers within a 150 km radius of his employer's firm.

The situation of businesses holding 'dead stock' - whether its mouse traps or tractors or whatever - has certain parallels in the business of trading the financial markets. According to research, less than 20% of people who get involved in the stock market actually make money. Also according to research, less than 20% of stock market players use stop loss orders.
In the absence of stop loss orders, its all too easy for a stock market trader/investor to end up holding a bunch of stocks that aren't performing satisfactorily, or worse still are losing him money. Just like the tractor dealer or the shop owner, a share trader can find himself sitting on 'dead stock' that costs him serious money both in holding costs, and in lost opportunity costs as a result having less capital available to put into strongly performing stocks.

Alan Hull has come up with a simple, commonsense strategy to avoid holding dead stock....he pulls the plug on any stock that drops below 20% Rate Of Annual Return (ROAR). His strategy is so brilliant in it's simplicity that I wonder why I didn't think of it myself.
To any of you who see the importance of holding only solidly performing assets in your trading business, I'd suggest that Alan Hull's simple strategy is well worth considering so you avoid the trap of holding on to 'dead stock'.

Cheers,
Snifter

branchline

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Post Number: 25
Registered: 12-2003

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Monday, July 26, 2004 - 01:14 am:

Snifter, Rocky brought a similar stratagy to Alan Hulls system to the forums attention a while ago focusing on the US market, using a six step screen of stocks called the Trade Candidate Filter by Dr Steven Cooper which you can work through yourself if you have access to The Investors Business Daily (US financial paper)!
Or,as I believe Rocky has done subcribe to Dr Coopers Advanced Membership on OnlineOption.com and advised by email of most interesting top US trading candidates as per
Alan Hulls system here.

Great to see you posting again!

Kind regards
Branchline

merlin

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Post Number: 202
Registered: 10-2002

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Monday, July 26, 2004 - 12:56 pm:

Hey guys

I recently purchased Active Investing and have been doing a bit of backtesting and have found that there are a lot of stocks that get stopped out early while there are only a few that end up being decent profits. I know the idea of active investing is to cull all the duds and let the bulls run but i just wanted to know what the win/loss ratio is for people using this strategy. Are there more winners than losers?

adrsnd

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Monday, July 26, 2004 - 01:06 pm:

Alan has stated a win rate of between 50% and 75% for ACTVEST.

merlin

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Post Number: 203
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Monday, July 26, 2004 - 02:07 pm:

Thanks adrsnd.

I seem to be having the same problem as Gregb with downloading the course notes. How can i join his newsletter if i can't access the subscription form!!

adrsnd

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Monday, July 26, 2004 - 02:33 pm:

Yep, got the same problem.

Try emailing them enquiries@actvest.com to let them know I am sure they will forward the notes,sample newsletter and application form to you.

merlin

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Monday, July 26, 2004 - 05:21 pm:

Yeah i sent an email to alanhull@optushome.com.au and they sent me the course notes and said that they're in the process of moving the site and they've got a problem with one of the existing pages.

The course notes are definitely helpful for anyone who wants to know more about the subject. And a lot of the stuff in the notes has come from straight out of his book.

chance

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Post Number: 238
Registered: 09-2002

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Monday, July 26, 2004 - 08:55 pm:

Adrsnd,

the expected win/loss ratio has been downgraded slightly

in the latest Course Notes, and is now 40 to 70%

Another site where you can read some articles by Alan is

http://www.justdata.com.au/TG_AR.htm

Regards

chance

spider

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Post Number: 1711
Registered: 10-2002

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Votes: 10


Tuesday, July 27, 2004 - 03:47 pm:

I have tried to stay out of this thread, but here I am.

Firstly, I'm not surprised that there has been such a lot of interest in yet another indicator, but I am surprised that such 'established' traders have failed to ask the obvious questions.

Thanks to 'merlin' for asking the most obvious question (actually he supplied the answer).
It does not appear to stand up to back testing.

I can see 'rate of return' being a useful indicator if you only have enough money to make one trade, but , for the life of me I cannot see why this discussion has dragged on for so long with long term traders involved.

YOU FOLLOW THE TREND TILL IT DIES!!!!!!!

Did I miss a meeting?
Did my dog eat the memo?
When did we decide that a long term trade (follow the trend) was no longer a good idea?

If it wasn't so bleeding obvious, I'd drag out a couple of dozen charts to illustrate the folly of getting out of a trade just because it drops below the 30% per year mark?

Hands up all those with a crystal ball.
How the hell do we know that the share we a following will stay below the 30% mark.

Answer.

We don't.

I won't even waste typing space on "Fundamentally sound companies"!!

It's tough enough for newbies to put together a system that they can believe in without 'heavyweights' muddying the waters.

KEEP IT SIMPLE !

spider.

Fundamentals that you read about are typically useless as the market has already discounted the price, and I call them "funny-mentals". However, if you can catch on early, before others believe, then you might have valuable "surprise-a-mentals".
Ed Seykota.

The elements of good trading are: (1) cutting losses, (2) cutting losses, and (3) cutting losses. If you can follow these three rules , you may have a chance.
Ed Seykota.

staybaker

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Post Number: 39
Registered: 03-2003

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Tuesday, July 27, 2004 - 03:52 pm: