Saturday, May 26, 2007

Energy stocks and more system thoughts

So a few more trades this past week, I'll point on the bad: CEG.
I was really anxious to get in to this stock, it hit my target which was well below the previous close, and then sunk to my stop-loss. On the bright side, risk was limited, but I feel like I could have done some better research and known that this stock was gonna dive like it did (still not quite sure why). It's actually around another good buy point, but I am reluctant to get back in, even though my gut says buy. I'll watch it and see what happens.

I ended up getting in another utility, CNP, hopefully that will go a little better, and I'm out of SRE which hit it's price target the previous week. I am wondering if I need to check the correlation between stocks and make sure that I am not over investing in a specific market.

My system testing has going fairly well. I have developed systems that return 50-60% paper profits. I am running in to a bit of a problem in keeping track of my changes and then the results of those changes. I really need to keep a spreadsheet of these backtests and the changes made.

I implemented the move the stop up to buy price which didn't seem to have too much an effect on the overall system (about a 1% change in Annual return over 10yr). I have a ton of ideas I'd like to test in addition to this. I'd like to test a multiple entry and exit system. Take some of the best systems out there and combine them to work in sync. After that I'd like to work with specific stock lists for different systems placing trade priority based on strength of signal or other confirming signals. I really need to spend some time on position sizing. Right now I am using a very small volatility adjusted algorithm (basically a simple subtraction off the base amount based off volatility).

One last thought, from something I read this week. I really need separate systems for bull markets, for bear markets and sideways markets. This is gonna take some time, as right now my system is mostly for sideways markets, but it also works well with bulls. I need more specific systems for a market like this, where I can follow a strong trend for a shorter period.

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