Rule #1 Finance Blog

With Investor Phil Town


Yesterday I posted Al’s stop loss study along with my response.  I asked Al for a second study. Here it is:


I did what you said:  I re-examined the effect of changing the sensitivity of the major indicators from daily to weekly, then compared the results of trailing stops vs. buy-and-hold vs. your method of getting out on 2 reds/sideways movement. 

Week_stop_study[Click on image for a larger view.]

It looks like you may have something here.  In almost all cases, the 2-reds-and-out scenario came close to or beat (most of) the other scenarios (see attached snapshot). 

Looks like, as you say, this may be a good compromise for certain investors.  Note that in the attached study, I changed the MACD, MA and Stochastics indicators to 1-week PERIODS, so that the moving average, for example, was for 10 WEEKS, not 10 days, etc. 

I don’t know if this is what you were suggesting in your note, but it turned out better (e.g. gave better results) than leaving the MAs at 10- and 30- days (hope that made sense).

By the way, if I were in the market in 2000, where even most good companies were severely overpriced, I’d watch the market like a hawk, and get the hell out of Dodge at the first sign of a selloff.  I hope the lunacy of the market in 2000 never shows up again, or if it does, I’ll set the indictors to 10-MINUTE periods.

Anyway, by de-tuning the indicators, it appears we get a good compromise between the safety of your not wanting to lose money, and the buy-and-hold maximum return.  Now I just have to study this some more against stocks that are more volatile than this group.

I’ll keep you posted, if you’re interested.

Again, thanks for your help.  I sincerely appreciate your time, knowing how busy you are.

Al G.