Blind Freddy Trends

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i_claudius

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Post Number: 1235
Registered: 11-2002

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Tuesday, January 06, 2004 - 10:39 am:

Hello Stevo

A UK site www.updata.co.uk (expensive products which I've not bought) discusses optimising stock losses.

On occasions they've quoted figures like 4.3% trailing stop for short term traders and 10.3% for long term traders for particular stocks ... which obviously means giving back significant profits in the short run ... yet keeps you in for the long haul ...

What I've yet to understand is this .. for every case where that works, how many cases are there where you are stopped out & do the wins pay for the losses?

I also have not fully understood how they set the above stops or others at lower or higher percentages ...

This whole area is a work in progress for me ...

Maybe some forum members have statistics based on their own experiences?

With Best Wishes

Claudius

carolyn

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Post Number: 13
Registered: 09-2002

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Tuesday, January 06, 2004 - 12:16 pm:

Hi everyone, great posts, thought I'd add my twopence worth, as I currently hold FUN. I am a long term holder, found that I didn't make much money trying to be short term, so long-term works for me.

I entered at 72c in August 02, it was already in an uptrend, ideally I should have bought it a little earlier, but I also would rather be too late, than too early.

I have added to it on 4 separate occasions, when the new stop loss on a new purchase goes above my last purchase price (and I have the funds available).

Stevo, I agree that exits are the most important part of trading. If you are getting stopped out of long term trends too often, try a wider stop. I use a simple 30 week MA as my stop loss,and so far FUN has kept bouncing off the 13week MA and not been very close at all to the 30 week MA. When it hits the 30 week MA, I will be out. Some will probably say that I will give back too much profit, but I accept that as the cost of doing business. If I get on the majority of a trend, I'll will do well. Why don't you go back and see if a 30 week MA would have kept you in those long trends you were stopped out of?

The only other reason I would sell FUN is if its yearly rate of return goes below 40% (even if technically it is still in a uptrend and above the 30 week MA). This rule keeps me in the most actively moving stocks, not in any that have stalled for too long. As an example, I have just sold ADG, even though it is in a good uptrend, because the rate of return dropped below 40%. I now have the funds to put into a stock in a stronger uptrend.

The other side benefit of FUN is that it is paying a good dividend, and is nice to receive (particularly when compared to my purchase costs, not current value).

This is by far my biggest holding, and I'm comfortable with that. I think it is vital to add to the Blind Freddies. By the way, I love that name.

Regards, Carolyn

(Message edited by Carolyn on January 06, 2004)

wadda

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Post Number: 212
Registered: 10-2002

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Tuesday, January 06, 2004 - 12:43 pm:

Nice post Carolyn. Sometimes we get a bit carried away on this forum with very short term views with respect to trading so its refreshing to hear good news and techniques for longer term traders/investors.

Coincidently, today I took a longer view on one of my holdings by adding to it for the first time - DRA. A little late as I would have had several opportunities to do so over the past couple of months - but still comfortable with the concept.

One of the forum contributors (Snifter I think) a while back indicated that they pyramid half their initial holdings when adding to a rising stock...then half that amount next time, etc.

Did you use any particular idea when you added the several times to FUN?

Regards,

Wadda

'This above all to thine own self be true'
Hamlet, Act II, Scene III

spider

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Post Number: 1369
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Tuesday, January 06, 2004 - 01:04 pm:

carolyn,
excellent post.

stevo,
exits are something that I have put a lot of thought and work into.
I have learned a way to trap the maximum amount from a move without being bounced out all the time.

But rather than introduce a new system at this point I would like to suggest that you use part of the system that you now use and add on to it the system that carolyn uses.

Set a railing stop using an ATR formula (the one that you are using now or a modified version), but instead of closing the position I suggest that you halve it. This will trap a significant portion of your profits while leaving you in the position.
Then you can use the long weekly MA as your final exit point.

But, here is the important thing............
You must be prepared to reenter the position if it recovers before it hits the MA, AND moves up past your exit point.

Sounds easy but, it takes discipline and courage to do this.

Taking the decision to exit can take it out of you.
You need to shake it off and get back in the game.

carolyn is absolutely right when she says that the big money is in the long movers.
The 40% rule is too hard for me though.

I cannot bring myself to exit a position until my charts tell me I must, I just never know what might be around the corner.
SNX and RAC are classic examples of 'just around the corner'.

spider.}

"Dance like it hurts, love like you need money, work when people are watching.

"The ultimate filter is the sell signal" ....'stevo' IC forum.

"If you start out depressed everything's kind of a pleasant surprise." from the movie 'Say Anything'.

carolyn

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Tuesday, January 06, 2004 - 04:15 pm:

wadda,
When I added to FUN (or indeed,any other stock) I calculate my position sizing based on 1% risk, that is, I would lose 1% if the stop on the new position is hit. Hence, the actual amount I add each time varies a bit.
The half-each-time pyramid method suits a lot of people, but I feel confident enough to add more than that to a good trend, still limiting the risk by using the 1% rule.

spider,
as usual, excellent post, great point, re-entering a position is vital, but it is really important to treat it as a new trade, and completely forget that it has been kind in the past. I have done that, tweaked my rules due to feeling good about the stock, and suffered for it.
When I exit a trade, it goes onto my 'possiblities list' and I will re-enter if it warrants it.

I also have the 40% rate of return as I only hold no more than 6 stocks at one time. Hence, they have to earn their position in the team, as I usually have one or two on the sidelines I am dying to buy, but won't if I already have 6 stocks bought. It used to be a 25% R of R but there are plenty of good trends around, so I have upped the anti.

Contrary to what many day-traders think, you don't need a lot of stocks to make a lot of money. A friend of mine had just two stocks in her portfolio for many years- CSL and COH. She did extraordinarily well, and yes, she did know when to exit them.

By the way,I think computerised charts have a lot to answer for. When charts were done by hand, there was plenty of space on the right hand side of the page so you could imagine the trend continuing. But with computer charts, the chart fills the page and it looks like the stock has reached the maximum and it is harder to imagine it moving higher.

Use the zoom function on stocks like CSL and COH from a few years ago and you would think the stock had reached the highs, but then print out its entire history, pick the same point (early in the trend) and cover the right hand side of the page with blank paper. This may give you an idea of what I'm talking about.

I like to look back at good charts, use the zoom and see what the buy set-ups were like early on. It helps me to recognise them again. I also do that to help me recognise when a stock breaks down and when to sell them.

I also use longterm charts before I look at the short-term for entries and exits.

Regards, Carolyn

stevo

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Post Number: 120
Registered: 01-2003

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Tuesday, January 06, 2004 - 05:45 pm:

Spider & Carolyn
I have tested pyramiding into positions with marginal, although potentially worthwhile results, but I haven't done a lot with pyramiding out of a position. Any testing I have done show that this is an area of potential, but it isn't easy to backtest. Combining similar systems with different exit strategies has shown some gains in this area.

Just for interest I have plotted both the 30 week MA and my ATR stop on a couple of charts, also showing my entry(1) and exit(2) points. Follow up entry points are shown by the hollow arrows. You can see the totally different nature of these stops.

Fun 2 stops

On the SDI chart even the 30 Week simple MA would have signalled an exit early 2003. Fortunately I picked up the trend in April at $5. Often the MA will give up quite a bit, whilst the ATR is closer to the price it will wait whilst the price goes sideways, whilst the MA may continue to move up.

SDI Athena

I might do some retests on the 30 week MA, but from memory it didn't perform quite as well as the ATR stop. Knowing when to fold them is quite tricky. I am sure that a few have bailed from FUN recently.

thanks

Steve

daveb

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Registered: 06-2003

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Tuesday, January 06, 2004 - 06:34 pm:

Hi Everyone,

Thanks to those who replied to my previous post about FUN entry.. but I agree with stevo, a good exit strategy may be more important than entry.

I've been quite successful at buying into good trends such as TOL at $11.00 but then sold at a loss for $10.30. Spider makes a good point about buying back, TOL went to about $38 within a couple of years or so.

Anyway, I bailed from FUN today at a small loss (I re-entered recently at 2.15). I'm nervous after yesterday's price slump, and since 90% of my trades are losing trades I'm staying out of the market for a while until I can figure out where I'm going wrong.

On the comment from i_claudius about setting stops, my experience is that tight stops generate relatively large numbers of losing trades and very few winners, wide stops tend to produce large losses with too few winners to make up for the losses. I haven't found a compromise strategy that works.

Regards,
daveb

(Message edited by daveb on January 06, 2004)

wadda

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Post Number: 217
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Tuesday, January 06, 2004 - 07:18 pm:

Thanks Caroline...digesting the info along with Spider's and Stevos.

Daveb...now may not be the time to take a break from the market. Do you get Colin's Trading Diary?...today the XAO broke 3317..a bullish signal.

Even my accountant sent me an e-mail generally on other matters but stating "Happy New Year to you too. There is every reason to believe it will be".

Hang in there I say.

Regards,

Wadda

'This above all to thine own self be true'
Hamlet, Act II, Scene III

rocky2

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Post Number: 69
Registered: 05-2003

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Tuesday, January 06, 2004 - 07:48 pm:

Hi daveb,

A 90% loss rate would certainly have me out of the market and looking at either my trading system or my emotions. There is something wrong somewhere my friend. I am sure we have all had periods where we just can't seem to get anything right.

If you would like to post your strategy, thoughts and maybe your analysis on a recent trade (or a couple of them), I am sure the members here could help you sort out the bugs, if that is where they lie.

If the problem lies within, rather than in the system you are using, I am sure we can help here also.

If you are uncomfortable doing this, I will understand, but it may be of some benefit to all of us.

Kind regards,
Rocky

spider

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Post Number: 1371
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Tuesday, January 06, 2004 - 10:04 pm:

Yo daveb,
this is just a suggestion.

There is a lot more to this story but, a small part of it goes like this......

ONCE UPON A TIME...............
there was an eight legged dude who wanted to get rich quickly.......... skip over a few years where he finds out that it is not going to happen quickly................. skip ahead a bit to where he decides that crystal ball trading does not work for him.............. jump ahead a bit to where he discovers that if you find a share that has been down for a while and it shows signs of being popular again, and if all the ducks line up these suckers run for quite a while.

Small light bulb goes on, realization that following a trending share, and staying with it will make him money............... fast forward a bit to where he figures out an exit strategy where he gets to keep most of the move.

Only one problem with all this, you sometimes have to wait a long time for the right candidates to come along.

But, if you are already getting your butt kicked, what have you got to lose?

You may wish to construct a list of stage one shares and wait for real breakouts (plenty of info on this forum as to what constitutes a genuine breakout.)

Do a few searches an pick up some info on how and when to add to this position (s).

Another search to find out how to exit with the best chance of trapping your profit while still remaining in the position while it is still running.

Just as an exercise, go back an look at FUN and ask yourself if you would have exited now if you had come in at say,$1.20?
Interesting , isn't it?

Remember, it aint over till it's over.
spider.

.

SPIDER HAS AN IDEA.

spider

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Tuesday, January 06, 2004 - 10:14 pm:

Not as classic as FUN, it would have tested you a bit with those deep retracements, but none the less, with hindsight, it's a BLIND FREDDY TREND.
BHP

daveb

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Registered: 06-2003

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Wednesday, January 07, 2004 - 06:04 pm:

spider, I like your idea, I think the small bulb just turned on.

On the point you raised about selling FUN, if I'd bought at $1.20 I would now have set my stop at ~1.80, so why did I sell at 2.05?... probably because I'm losing money. It's less painful to lose paper profit than real money.

Regards,
daveb

staybaker

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