(Sort-of OT):
For entertainment purposes only, here's my attempt at an automated idiot. What I did was use some of my own buying rules to drive the buy side, and then since I don't really have any sell rules, I made some up. The system looks at two numbers: the current stock price as a percent of the all-time high drives the buy side, while the percent rise above the 200-day moving average drives the sell side. The parameters are set based on my own experience with the stock, no attempt was made to tune them for better performance (probably pointless anyway). The program gives the following signals:
75% or less of all-time high Screaming Buy
85% or less of all-time high Strong Buy
90% or less of all-time high Buy
130% or more of 200-day mavg Sell
150% or more of 200-day mavg Strong Sell
In essence this is a buy-low, sell-high strategy. Of course there's an interpretation issue. If you periodically have new funds to invest, you can use the buy side to time entries. Using the sell side is much trickier since you risk being out of the stock during strong upswings, plus you might have to pay tax. Another rule of mine is that I rarely commit all my funds in a single transaction, generally buying 1/2 or 1/4 positions during an accumulation to avoid catching a spike. A final rule is that you should hold any shares purchased for at least one year for tax reasons, and to avoid "churn" during volatile periods when lots of buy/sell signals are being sent. To make the comparison even versus the no-brainer strategy of buy-and-hold, I started with a fixed cash stake with no future inflows. But, in compensation and to save effort, I neglected tax effects. The rules for the idiot are thus:
If a buy signal is received, take a half position.
Commit all remaining funds if a strong buy is received.
Sell only on a strong sell signal.
Hold any position at least a year regardless of sell signals.
Which then produced the following results:
Day Close 200d mavg last high %hi %ma signal position cash
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1 4.640630 4.640630 4.640630 100 100 0 1000
123 5.398440 4.994530 5.937500 90 108 Buy 92.62 500
167 5.007810 5.119010 5.937500 84 97 Strong Buy 192.46 0
777 13.625000 8.804690 13.625000 100 154 Strong Sell 0 2622
779 11.812500 8.857420 13.625000 86 133 Buy 111.00 1311
781 11.500000 8.905940 13.625000 84 129 Strong Buy 225.00 0
1171 25.781250 17.156640 25.781250 100 150 Strong Sell 0 5000
1204 22.531250 18.809410 25.781250 87 119 Buy 110.96 2500
1394 31.750000 31.755650 37.343750 85 99 Strong Buy 189.70 0
1664 81.250000 54.035310 81.250000 100 150 Strong Sell 0 15413
1675 79.500000 56.122180 87.500000 90 141 Buy 96.94 7707
1683 75.000000 57.464370 87.500000 85 130 Strong Buy 199.70 0
1944 89.375000 93.313120 119.125000 75 95 Screaming Buy
1945 90.750000 93.371250 119.125000 76 97 Strong Buy
The no-brain strategy buys 215 shares on day one, and so finishes ahead of the idiot, which only has 200 shares. It would probably look better if I started both of them with 100% invested positions. Also, it probably would work better if both schemes were forced to take say quarterly cash infusions, with the idiot spending them according to the signals while the no-brain just buys at the price on the day the cash is received.
This of course takes no account of volume, a factor which should probably be included. It also takes no account of "news" (but how could it?).
You might look at the data to see if you can spot any patterns. Generally the "strong sell" preceeds a relatively decent drop of some sort, while the rare "screaming buy" levels have always proven to be bonanzas for the courageous.
FWIW the idiot has a strong buy on MSFT right now, and had a "screaming buy" at 89.
Cheers! |
