Folks, I doubt you’re going to find a profitable long-only equities trading system, incorporating a stop-loss, using percent-risk position-sizing, that has been traded in real-time, with commissions and slippage included, on the internet.
Except for on this blog. But I will not continue to give away the keys to the kingdom, forever.
One may legitimately ask why I would offer for subscription a viable system. That is a great question, and I have asked myself that many times. But I have the answer; or actually, I have two answers.
1. The first reason why I am pitching this system as a possible candidate for subscription is because I have had numerous people ask me for such a system. I feel this system is a good fit for traders who want to try system trading as it has a high win rate, does not require shorting, employs a stop-loss, and trades often enough to reduce the boredom factor. Furthermore, I have made, and will continue to make every effort to be completely transparent as to the potential gains and pitfalls that may be had from trading the Power Dip system. I pride myself on being transparent, and so I feel I am offering a great product.
2. The second reason why I am pitching this system is because I have spent the past 3 years blogging virtually for free, giving away countless tips, setups, research, etc., and I am very curious to see if I can actually monetize some of my efforts. If there is not much interest from people in subscribing to these alerts, then I will simply keep trading it myself; no harm, no foul.
Therefore, over the next couple of weeks, I will be pitching the Power Dip to the readers of iBC and this blog. Look for detailed system metrics, gained through backtesting, in the near future. Also, I want to be clear that there are usually more Power Dip setups than I post here. I am only posting the setups necessary to round out the portfolio. Tonight there are 44 more stocks that meet the criteria, but I am only naming one of them here. Regardless, all 44 setups should possess a similar edge to the one stock being added to the portfolio.
As for the spreadsheet above, it has now logged 30 trades, most of which were taken by myself and/or my partner, and thus includes Tradestation’s commission structure as well as slippage. I have included a calculation of commissions as a percentage of profits. This is important because it shows that for some traders, it may be much more beneficial to use a fixed commission system, rather than per-share. I might switch to a per-trade commission structure.
The system has underperformed expectations, over the past 30 trades. Feel free to ask any questions about the performance.
NKTR stopped out today. This leaves room for one more position. As evident at the bottom of the sheet, AAPL is the next Power Dip and will be added to the portfolio on the open.
You may know about it but folioinvesting.com may be a good choice for you: low actual slippage since they cross customer orders if you place market trades and are willing to wait for the twice a day window trades. Annual fee close to zero % on a large account for commissions for trades placed in such windows
Thomas, not aware of it. Thanks. I’ll check it out.
Do you like MTXX for a power-dip play?
Woody,
As you said you have 40 picks but can only take aapl. how does it work. In your backtesting you probably tested with all the picks. Do you think you need to add extra filter to narrow selection.
do you say we need to add some discretion based on news/earnings and price patterns.
How is ambibroker working for you.
thanks
Bill
and coin?
Shed,
Let me know what you think of folioinvesting.com. I had never heard of it either, but it looks pretty interesting. Has anyone else here used them?
Bill, all the picks have a similar edge. I do have a ranking mechanism but how it works is fairly unimportant.
Here is what is important. For a dip-buying strategy, it is optimum if you fill the portfolio slowly, over a few days or a week. What this does is it keeps you adding stocks that are more and more oversold, instead of filling the portfolio in a couple of days while the market continues to weaken.
For example, usually what happens is there will be a few odd Power Dip positions on at any one time. Maybe only one or two. Then the market will soften, and you’ll get maybe 2-3 more opportunities. So now you are looking at 3-5 positions, which leaves up to 5 more (I prefer 8 total, but 10 max would be acceptable). If the market bounces, and you get exit signals, then the process starts again. If it doesn’t bounce, you will get even more signals, until you have filled your portfolio. So over a few days to a week, you have bought new dips, while the market gets closer and closer to bouncing.
The secret is to limit yourself to a max number of positions. If you allow too many positions (more than 10 is too many imo) then each position will be so small, that if you only get a few on before the bounce, they do not add enough to the bottom line.
Certainly, if there were more signals than room in you portfolio, you could sell off positions that were underperforming and add the new selections, but I have not tested that.
Also, no discretion is permitted, except maybe unless the company is reporting earnings, which means maybe you ignore the signal, or get out of it.
Discretion is the enemy of the mechanical system trader.
The system filters itself. If the markets get too weak, it will eventually quit giving signals. Once it recovers it will give signals again.
The idea here is KISS: Keep it simple stupid.
Let me know if I have confused you.
Been a while man, hope things are going good man. What do you think about the SPY RSI below 50? Thin volume but this seems concerning to me, any views? Thanks man, take it easy.
VCU, good to hear from you. I’ve had more time lately and have been trying to check in and post at the PPT.
RSI(14) really has no edge so I don’t use it. For the most part, it is just a proxy for price. Drop your RSI period setting down and it will begin to have an edge. Check this out for more clarity.
http://www.ibankcoin.com/woodshedderblog/index.php/category/optimum-rsi-period/
I am short-term bullish here, still an intermediate term bear.
Like Fly, I think volume is tailing off due to summertime, more so than any other reason.
Let me know when you want to get a beer downtown. Life has finally slowed down a bit for me.
Yes I use folioinvesting.com.
Very happy with total annual transaction costs, both spreads and their charges. Works best if you place orders with large # of stocks and are willing to trade one group for another at their twice a day “window” times. You can place market orders at other times (or limit orders) for a small commission matching other cheap brokers, but the real savings is in creating your own “mutual fund”.
Thanks Wood. I am like you (terms of view on market) but something just doesn’t seem right. Seems like more fear in the market or something. I added TWM today as a hedge (20% of portfolio) just incase we retrace to 880 and am keeping some cash to buy some dips. Also minimizing techincal breakout plays and buying stocks with more of a fundamental backing. 3rd Qtr will be interesting to say the least.
I am down for some beers, weekends or weekdays better? I will e-mail you, take care man.