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| Thursday, September 13, 2007 |
| A slow transition of style |
Recently, maybe due to the volatility, my time horizon is slowly switching from short term ( few weeks) to a longer term (few months). While my triggers are still the same, in which I will most probably buy at a short term level, it is more of just "getting in while its hot". I will however, look at the longer trend indicators and make more of my judgements based on that indication.
One of the main reason is that "noise" might accidentally trigger my sell signal/cut loss even when its on an uptrend. This shouldn't be the case though. Thus now, by looking at the longer time horizon, price shocks that arise will more often than not be rectified within the next few days.
Secondly, due to time commitments, it is not easy for me to monitor my stocks constantly during the short term. Sure enough, I know I will miss out on profits as my cut loss will be more delayed, but that is part of the price. My main objective is to find the balance on cutting loss on short term or loading on long term.
Remedy: My triggers are still the same, I will use the same cut loss strategies as before. However, this is where my experiement will come in. If a cut loss trigger is sounded at close, I will close my positions the next day. If not, I will look at the weekly data, looking to see if it breaches the the long term trigger. Of cos, if it triggers that signal, I have to sell it.
Rationale: I want to ignore the noise but sometimes, price shocks does trigger the exit signal. Using the longer perspective, I have the second layer to observe my holdings. Granted that the loss will be more severe if I cut using the long term, but this also allows me to filter out the noises.
Next, due to such tweakings, the buying strategy will have to change. No longer will I buy just on short term surges. Buys will have to be in the period when there is a potential retracement in the longer perspective. This is to ensure myself capturing the most of the longer time horizon.
Top up buys might be reduced (pending) because top ups usually occurs during market runs. Trying to buy at the support level of both the short and middle-term is not easy.
With all these, the exit strategy (Note that this is different from cut loss) will be different. I guess, in the nutshell, if its bought at the support level of the mid-term indicators, it should be sold using that indicator. That is the ideal case. But sometimes, if it triggers both, what should I base it on? Maybe I should base in on the short term first, as it is of higher priority? Or maybe I should base on the longer term. If I were to make a decision now, I would choose the short term. This is to better protect my capital. Until it reaches a certain price ("zero" risk), then I would switch to longer term. Haha.. this is getting complicated now.
In a nutshell:
Buy criteria
1. Risk incurred must be within limits
2. Postiion to buy must not vary too much from the intended risk to take
3. Must fulfill short term indicators that shows momentum AND mid-Term retracement (This does not mean downtrend even though it is close to a downtrend)
4. Topping up of positions not reccomended now as each batch of positions loaded should be treated on its own and not be averaged. However, if it fulfils criteria 1 to 3, then it is ok to load.
Cut loss
1. Short term indicators are still important and it will still be the rule to follow. (Maybe, the cutloss multiplier should be modified based on current market volatility)
2. As trading during the day is often guided by excessive fear or greed, EOD triggered during that time should be taken into consideration and closing it only if it doesn't reverse after mid-day. (this wont happen if multiplier is carefully set)
Exit
1. Short term indicators cut if position is loaded solely based on short term indicators
2. Short term has priority if its based on both mid-term and short term indicators
3. Long term has priority if its based solely on long term indicators.
ARgh.... seems like a lot of fine tuning needs to be done. I must make sure to back test on past records as this is one possible mistakes traders will make. They think that their refined methods will work now but thats because of a few cases. Few failed cases doesn't make the method wrong. So when fine-tuning, make sure it is an improvement. And as a reminder to myself. Do not over-optimize. This trading system shouuld be robust and flexible, behind the systematic approach..Labels: NenixDreams Fund |
posted by Nenix @ 1:41 PM   |
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| NenixDreams Fund |
| Fund launchprice on 1st August 2006= $1
Target for 2007 = Beat STI index
Current price of NDF as of 1st Oct 2007 = $1.58
Current price of STI as of 1st Oct 2007 = $1.54
Difference with STI index is 0.04
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