Market Curiosity: Exploring Markets And Systems

December 7, 2010

Response To Those Who Suggest People Can’t Make Money Trading

Filed under: Editorials — Tags: , , , , , , , , — Jeff Fitzmyers @ 11:18 am

Free stuff I happen to have handy:
– This System Works So Well, I’m Not Sure I Should Tell You About It, By Dr. Steve Sjuggerud

Meb's trading system

– There’s a 98% Chance Stocks Will Be Higher in 90 Days, By Dr. Steve Sjuggerud

– Turn $10,000 into $2 Million with My Simple Gold Strategy, By Dr. Steve Sjuggerud
Sjuggerud Gold ROI

– My Simple Oil System, By Dr. Steve Sjuggerud

There is no curve fitting here, nor optimiztion skews, nor fancy HFT, nor blood, brains, luck — it’s TOO SIMPLE.

The party line seems to be, “The market can’t be timed (but give us 2 and 20 and we will give it a go)”.

Because our monetary system is inflationary, just buy profitable stocks every time a fast moving average closes over a slow one, or price closes over a moving average — The 5 EMA seems to work best, or when the moving averages are trending up buy every time the the 20 ema is touched. Then, and more importantly, SELL when the buy condition reverses. And don’t go short! (in these examples)

The 5-Day Exponential Moving Average (EMA) crossover is the best simple trend-following indicator we tested against daily DJIA daily closing data from 1900 to 2001. Starting with $100 and reinvesting profits, total net profits for this 5-day EMA Crossover Strategy would have been $16 billion, assuming a fully-invested strategy, reinvestment of profits, no transactions costs and no taxes. This would have been 78 million percent better than buy-and-hold … one trade every 5.88 calendar days. There would have been 2,417 profitable trades and 3,889 losing trades, for a winning percentage of only 38% profitable.

Stansberry’s Dan Ferris: buy dominator stocks and reinvest dividends over a long time. Add Jeff Clark’s: Acquire stock via selling puts at the money when an oscillator dips and sell covered calls when an oscillator tops out. If you do it really conservatively you can readily make 10%/year.

He is Karl Denninger’s long term system: “Buy when the 20 week simple moving average crosses above the 50W SMA by more than 1%.”

Check out the Xiphos Trading group on Twitter — great info for free!

And remember William J. O’Neil’s CANSLIM. AAII’s implementation averages 27% per year. IBD newspaper has been published for a while now. At first it was not making any money at all — O’Neil bankrolled it from his trading profits. And some of these stocks are put into the Top 100 list because they had a huge gap up the week before — so they are included in the list at about the worst price one could buy them.

And then there is Mr. Dan Zanger! A pool contractor who turned about $15,000 into $20+ million in 1.5 years. Here is over 15 articles dating from ~2000. How often will those articles be presented in finance programs??? Let me guess … probably about 0.00.

How could a fancy college program charge money if people interested in numbers could just go to the library, study Market Wizards, find a trading/investing style that suits them — most are showcased in Market Wizards, blow out their account once or twice, get some therapy to get their emotions/self discipline properly managed, and then make money?

And Nicolas Darvas’ How I Made $2,000,000 In The Stock Market (in about 18 months) He was a full time dancer in Paris, WIRING trades to New York using data that was A WEEK STALE!!! And his book was first, that fully discloses his system, was printed in 1960! YET MIRACULOUSLY, business schools have never heard of him???

When dollar cost averaging, buy on the last day of the month.
+ “Since Sept 1 1997 the Dow has gained 4,417 pts. The first trading day of month has produced 6,021 pts. All other days? (-1603).” — John Benedict
+ “61% of the entire 2010 rally in $SPY was due to gap opens on the first day of a new month. Unusual, yes, but it was 65% in 2005.” — Jason Goepfert

From the GrowthStockWire: Taught by Chris Weber: When Nixon broke the U.S. dollar’s tie to gold in 1971, Chris figured out that holding foreign currencies would probably be lucrative for U.S. dollar-based investors like himself. Figuring out which currency to hold instead of the U.S. dollar was easy (for Chris). He simply looked around the world and bought the highest-yielding currency he could find… He began doing this way back in the early 1970s and has been doing it ever since. Each January, he simply buys the major currency yielding the most. This keeps his cash compounding, year after year. He’s made 14% annually with this method.

Long term strategy:

Dr. Steve Sjuggerud: If you had started with $100 in 1900, and invested in the highest-yielding countries each year, it would have turned into over $1 million at the end of 2010 – versus $370 from investing in the lowest-yielding countries.

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