Price Index 6 months

Price Index 6 months

I wrote this strategy hoping to start some discussion on value trading vs. day trading and also to give a different option to people with little time available.

I adapted a buy-and-hold strategy based on the price index 6 months with an long-only-entry. When the close of the day crosses above 144% to the price registered 6 months ago we go long and we hold the stock for 1 year (apron 254 bars).

As I said it’s an adaptation made for automatic trading!! With Italian stocks the results are very good but might be MUCH better if you used Price to book (P/B) and  Earning yields (EY) to confirm the entry. Running this strategy manually with the use of P/B and EY12 months, and using a portfolio, returned an average of 55% a year in the last 10 years (Only one year I didn’t beat the market).

Blue sky!!!

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Risk disclosure:

No information on this site is investment advice or a solicitation to buy or sell any financial instrument. Past performance is not indicative of future results. Trading may expose you to risk of loss greater than your deposits and is only suitable for experienced investors who have sufficient financial means to bear such risk.

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  1. Nicolas • 20 days ago #

    Very interesting but why 144%? What about the drawdown of the portfolio? The one from this single stock is already huge! 😉 

  2. Kenneth Kvistad • 20 days ago #

    I have never been wondering about long trades or made any due to overnight costs, butdo you think it still can.be affordable for such long trades as months/years?

     

  3. gabri • 20 days ago #

    Nicolas,

    144% was just an adaptation to make the automatic trading. Any number between 140% and 150% is fine. You should take the 20-40 stocks with the highest 6 months Price Index and search their fundamentals to pick the right one. Drawdown are not really a factor when you buy and hold value stocks.

    This was actually a real trade I made but I bought only in September 2004 since P/B was 1.4 (expensive but not too bad for the market of that moment) and the other fundamentals were promising. What I wanted to prove is that there are bizilions of trend indicators on the various trading platforms but the real big wave worth surfing is the one started by the institutional investors and they buy GOOD companies for CHEAP. Price index (for momentum) and fundamentals are the only data they use. 

    Having a portfolio made with stocks selected with fundamentals leads to really high performances (they almost always beat the market), even better the one of this single stock.

    G

  4. gabri • 20 days ago #

    Kenneth,

    I buy stocks, hence a part of a business. For stocks there are not overnight fees. You find overnight fees for CFD and derivatives. On top of that I go LONG only. With my bank I pay approx 3.5 Euros everytime I buy and the same amount when I sell. It’s totally worth for me.

    G

  5. Kenneth Kvistad • 19 days ago #

    Ah okay. You can make automated trading with stocks as well 🙂 ?

    I dident know that

  6. gabri • 19 days ago #

    Kenneth,

    I manually trade only but I decided to code this strategy to show that there is more than intraday trading and this “more” might lead to substantial gains with less work and stress (on the stress I am not so sure 🙂 )

    G

  7. luxrun • 17 days ago #

    Hi Gabri,

    I realized screener with the specifications of your trading system. Do you give me feedback on its reliability? This is the code:

    // Price Index 6 months

    thr=44 // entry threshold
    ref=close[130]*(1+thr/100) // price entry level
    cond1=(close CROSSES OVER ref)

    SCREENER[cond1] (Variation AS “% Var barra prec”)

     

  8. gabri • 17 days ago #

    Luxrum,

    I would personally  just make it like this:

    thr=44 // entry threshold
    ref=close[130]*(1+thr/100) // price entry level
    cond1=(close > ref)
    
    SCREENER [cond1] (ref AS "Price index")

    so you can see ONLY the stocks that meet the condition and they will be ordered by the amount of gain in the last 6 months. You want to pick the top 20-30 stocks in the list so the amount of gain is important. Like I already mentioned 44 is not a fixed umber. If you’d rather use a yearly return you can lower the threshold to 30-ish. The setting are very personal.

    G

  9. gabri • 17 days ago #

    Also, don’t forget to make sure you are buying stocks with low Price to Book ratio.

    G

  10. gabri • 16 days ago #

    Luxrun,

    I wrote the previous answer in a rush. Try this code:

    thr=44 // entry threshold
    ref=close[130]*(1+thr/100) // price entry level
    cond1=(close > ref)
    pi6m=100*(close-close[130])/close[130]
    SCREENER [cond1] (pi6m AS "Price index")

    Now you will see the stocks that meet the requirement and they will be ordered based on their gains. Sorry for the wrong code of before.

    G

  11. luxrun • 15 days ago #
    Thanks Gabri for your screener rework. I'm working on producing the indicator to get the graphic signal on the chart. It seems to me important to understand when it signals in the six months considered by the trading system. Luxrun
  12. gabri • 15 days ago #

    Luxrun,

    non ho o capito di cosa hai bisogno?

     

    • luxrun • 15 days ago #

      Nulla di particolare! Scusa il mio inglese tradotto da google. Dicevo solo che sto provando a costruire l’indicatore che mi mostra a video quando scatta il segnale long, nei sei mesi che il trading system, prende in considerazione. Non serve a molto, ma forse aiuta visivamente. Grazie Luxrun

  13. gabri • 15 days ago #

    Luxrun,

    no problem per l’inglese. Ti posso fornire due soluzioni. La prima disegna la linea del 44% e quella del prezzo:

    a=close[130]
    
    linea1=(1+44/100)*a
    
    return linea1 style (dottedline,1) as "44%",close coloured (205,0,0) as "Close"

    La seconda ti disegna il ritorno degli ultimi 6 mesi e quando passa il 44% ti segnala la zona positiva:

    a=100*(close-close[130])/close[130]
    
    return a,44

     

  14. luxrun • 15 days ago #

    Benissimo, grazie, molto gentile e disponibile! Lo provo subito.  Io avevo scritto questo codice (ma programmo poco e male…), per l’indicatore:

    // Price Index 6 months indicator

    thr=44 // entry threshold
    ref=close[130]*(1+thr/100) // price entry level

    // conditions to verify entry long
    c1 = (close CROSSES OVER ref)

    IF c1 THEN

    cross = 1

    ENDIF

    return cross as “CROSS”

    • gabri • 15 days ago #

      Il tuo codice va benissimo, continua cosi’!! dovresti solo aggiungere una linea per fare in modo che cross non rimanga sempre uguale a uno:

      c1 = (close CROSSES OVER ref)
      
      IF c1 THEN
      cross = 1
      else 
      cross=0
      ENDIF
      
      return cross as “CROSS”

      in questo modo ti da dei picchi quando avviene il cross over (e solo quel giorno). Oppure puoi fare cosi’:

       

  15. gabri • 15 days ago #
    c1 = (close CROSSES OVER ref)
    c2 = (close CROSSES under ref)
    IF c1 THEN
    cross = 1
    ENDIF
    IF c2 THEN
    cross = 0
    ENDIF
    
    return cross as “CROSS”

    In modo che cross rimanga uno fino a che il valore di gain e’ superiore alla soglia.

     

  16. luxrun • 15 days ago #

    Grazie, Gabri, per il tuo supporto e aiuto. Ti sono veramente grato! Continuerò a seguire il tuo lavoro! L 

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