Trend 8 - No Limits, No Stops - Down, Down, Down

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Rules:

Data set taken from 01/01/10 to 31/03/10

Trading Type: Stocks
Start Time: 08:00
Finish Time: 16:00
Stop Loss: None
Limit: None
Long/Short Trading: Long
Buy Rule:
-7 Day Close > -2 Day Close

-2 Day Close > -1 Day Close

-1 Day Close > 0 Day Open

Sell Rule:

If Day 0 Profits at Close > x% then take Profits; else

If Day 1 Profits at Close > x% then take Profits; else

If Day 2 Profits at Close > x% then take Profits; else

If Day 3 Profits at Close > x% then take Profits; else

Day 4 Close take Profits/Loss

Results:

Report:

Damn! I was hoping to use a phrase like "well what did you expect from something that goes down, down, down!" but I can't really. Yet again it is a quick wins one. Doesn't look like it is worth while following up though, becuase even at the quick wins stage you only get 2% return. There are bound to be more riper fruits that are easier to pick.

We will have to come back and test the 1% - 3% marks to see if it works well over a longer timeframe or with a random selection of stocks from the ones that are following this trend.

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Trend 7 - No Limits, No Stops - Down, Down, Up

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Rules:

Data set taken from 01/01/10 to 31/03/10

Trading Type: Stocks
Start Time: 08:00
Finish Time: 16:00
Stop Loss: None
Limit: None
Long/Short Trading: Long
Buy Rule:
-7 Day Close < -2 Day Close

-2 Day Close > -1 Day Close

-1 Day Close > 0 Day Open

Sell Rule:

If Day 0 Profits at Close > x% then take Profits; else

If Day 1 Profits at Close > x% then take Profits; else

If Day 2 Profits at Close > x% then take Profits; else

If Day 3 Profits at Close > x% then take Profits; else

Day 4 Close take Profits/Loss

Results:

Report:

No, no, no! This is just no good. We are losing money hand over fist here. We definitely can get rid of this trend and say we have successfully found one more way not to make money on the stock market!

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Trend 6 - No Limits, No Stops - Down, Up, Down

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Rules:

Data set taken from 01/01/10 to 31/03/10

Trading Type: Stocks
Start Time: 08:00
Finish Time: 16:00
Stop Loss: None
Limit: None
Long/Short Trading: Long
Buy Rule:
-7 Day Close > -2 Day Close

-2 Day Close < -1 Day Close

-1 Day Close > 0 Day Open

Sell Rule:

If Day 0 Profits at Close > x% then take Profits; else

If Day 1 Profits at Close > x% then take Profits; else

If Day 2 Profits at Close > x% then take Profits; else

If Day 3 Profits at Close > x% then take Profits; else

Day 4 Close take Profits/Loss

Results:

Report:

Wow!! OK, three months return of 48%! OK. Now I have to breathe! So we might have found our first golden trend. The Avereage trades is good at 54 each day which means we get a good selection. It also means that any huge trades are evened out by the low trades However, I am slightly worried by the maximum trade being nearly 2500% and the minimum beng only -39%. However the risk to reward is obviously good and the return speaks for itself.

Now I don't want to jump right in here head first without doing a bit more scouting. This one will be first on my list for some more rigorous testing to see about timeframes, percentages, random selections and more. Keep yourselves posted because I will make sure we get some good data on this and if it works out well. Well, you can do what you want with the information.

Let's chalk it up and we will definitely revisit this later! (Read here for the full report on this trend!)

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Trend 5 - No Limits, No Stops - Up, Down, Down

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Rules:

Data set taken from 01/01/10 to 31/03/10

Trading Type: Stocks
Start Time: 08:00
Finish Time: 16:00
Stop Loss: None
Limit: None
Long/Short Trading: Long
Buy Rule:
-7 Day Close < -2 Day Close

-2 Day Close > -1 Day Close

-1 Day Close > 0 Day Open

Sell Rule:

If Day 0 Profits at Close > x% then take Profits; else

If Day 1 Profits at Close > x% then take Profits; else

If Day 2 Profits at Close > x% then take Profits; else

If Day 3 Profits at Close > x% then take Profits; else

Day 4 Close take Profits/Loss

Results:

Report:

Now this is an interesting trend. We seem at last to have some sort of trend determined by the percentage cut off. Yet again, as with the previous find, it only gives us a 3% return. Similar to that of the FTSE over the same period. But we have growth. This is definitely a good one for us to push the percentages higher and see if they pay off. Also I would like to test this over a longer period to see if it gives better results.

Over all, let's chalk this up and come back to it later.

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Trend 4 - No Limits, No Stops - Down, Up Up

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Rules:

Data set taken from 01/01/10 to 31/03/10

Trading Type: Stocks
Start Time: 08:00
Finish Time: 16:00
Stop Loss: None
Limit: None
Long/Short Trading: Long
Buy Rule:
-7 Day Close > -2 Day Close

-2 Day Close < -1 Day Close

-1 Day Close < 0 Day Open

Sell Rule:

If Day 0 Profits at Close > x% then take Profits; else

If Day 1 Profits at Close > x% then take Profits; else

If Day 2 Profits at Close > x% then take Profits; else

If Day 3 Profits at Close > x% then take Profits; else

Day 4 Close take Profits/Loss

Results:

Report:

Ok so this is the worst so far. up to 62% losses over a 3 month period. That is as bad as having your money in a pension fund from Novermber 2008 to March 2009! I think we can steer clear of this trend.

Another way successfully found not to make money on the stock market! 

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Trend 3 - No Limits, No Stops - Up, Down, Up

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Rules:

Data set taken from 01/01/10 to 31/03/10

Trading Type: Stocks
Start Time: 08:00
Finish Time: 16:00
Stop Loss: None
Limit: None
Long/Short Trading: Long
Buy Rule:
-7 Day Close < -2 Day Close

-2 Day Close > -1 Day Close

-1 Day Close < 0 Day Open

Sell Rule:

If Day 0 Profits at Close > x% then take Profits; else

If Day 1 Profits at Close > x% then take Profits; else

If Day 2 Profits at Close > x% then take Profits; else

If Day 3 Profits at Close > x% then take Profits; else

Day 4 Close take Profits/Loss

Results:

Report:

Ow! This one definitely looks like a no. 50% losses across the board no matter what % cut off we use. Well thats what you get if you lose 1% a day for three months! I think we can chalk this one up as another way successfully discovered not to make money on the stock market.

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Trend 2 - No Limits, No Stops - Up, Up, Down

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Rules:

Data set taken from 01/01/10 to 31/03/10

Trading Type: Stocks
Start Time: 08:00
Finish Time: 16:00
Stop Loss: None
Limit: None
Long/Short Trading: Long
Buy Rule:
-7 Day Close < -2 Day Close
-2 Day Close < -1 Day Close
-1 Day Close > 0 Day Open
Sell Rule:
If Day 0 Profits at Close > x% then take Profits; else
If Day 1 Profits at Close > x% then take Profits; else
If Day 2 Profits at Close > x% then take Profits; else
If Day 3 Profits at Close > x% then take Profits; else
Day 4 Close take Profits/Loss

Results:

Report:

Now this trend is a little more intersting. It shows some progress when the return percentage trigger is 1%, but tails off towards the higher ends. But this kind of hit and run tactics can be dangerous. It takes a long time to build up your gains when they are so small, and it can take one loss to wipe them out. But with a win average of 56% and a risk reward ratio of over 3 it may be worth looking futher into.

This trend actually beat the FTSE 100 which rose only 3% over these three months, but did not beat the FTSE 250 or FTSE AIM which both rose at just under 7%. At a growth rate over this period, which did include a Correction, of 5% this is never going to give amazing results, but for steady growth I am sure no one would complain if they had their money in a bank account that returned 5% per quarter.

All in all, this actually might be worth looking into. I will flag it up and go over it with more data at another time.

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Trend 1 - No Limits, No Stops - Up, Up, Up

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Rules:

Data set taken from 01/01/10 to 31/03/10

Trading Type: Stocks
Start Time: 08:00
Finish Time: 16:00
Stop Loss: None
Limit: None
Long/Short Trading: Long
Buy Rule:
-7 Day Close < -2 Day Close
-2 Day Close < -1 Day Close
-1 Day Close < 0 Day Open
Sell Rule:
If Day 0 Profits at Close > x% then take Profits; else
If Day 1 Profits at Close > x% then take Profits; else
If Day 2 Profits at Close > x% then take Profits; else
If Day 3 Profits at Close > x% then take Profits; else
Day 4 Close take Profits/Loss

Results:

Report:

So this trend is obviously not a winner.It shows that over the time frame selected, the results are negative. Even though the previous trend for all of the selected stocks is up over all three time periods, there is no guarantee that money will be made.  Additioanlly, it can be seen that the changing of percentages ranging from 1% to 10% has little or no impact on teh average return, minimum or maximu returns and end % gain/loss.

Overall, we have successfully discovered a way not to make money on the stock market.

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Trends - Introduction

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Originally this blog was going to be started at the stage of Technical analysis. But I realised before I began that section that I had actually started this experiment many months ago before I really knew what I was doing. Back then, I had a theory that there was some undefined truth behind the buying and selling of shares. Even before I had heard about technical analysis or fundamental analysis, I believed that everyone watching the ups and downs of these charts will be seeing the same thing as me and would be looking for the best time to get in to the market. It was the start of this experiment even if I didn't know it then.

In the beginning I used excel to perform a number of different calculations to work out what would happen based on a stock price trending up, down or sideways over a given time period. So I have given over the beginning of this blog to testing my trends theories for everyone to see.

In this section I will test these theories and work within the parameters we have set, but I will set additional rules so we can see if these basic almost neanderthal premises can have some substance in our experiment.

Even as I write this Excel is ticking away behind this screen. I can see from sudden flashes along my task bar that Excel is working. It is working to pull off the data I has asked it to, and soon enough I will be able to once again take up the figures and see if they will work for us in the days of post recession boom...

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Ground Rules - Part 3 - Platform

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So we have the genera and report rules satified. Now I will explain about the system I am using. I think this is necessary because when we move into dealing in the real world we are going to need to use some system in order to trade. There are any number of ways of doing this including brokers, both online and offline, CFDs (contracts for difference), spreadbetting and more. For my experiment I am going to be using a spreadbetting platform.

There are reasons behind this choice:

• Spreadbetting is outside the market. When you place a bet on a spreadbetting platform itdoes not impact on the price. Therefore all my results will be clean.
• Leverage. You are able to set up an account with a spreadbetting firm with very little capital. Therefore many more people are able start using the thories immediately.
• Tightening Bid/Ask Spreads. The spreadbetting market is getting more and more competitve as more competitors enter the market. Therefore we can take advantage of tighterspreads for more gain.
• No admin charges. One issue with using brokers is that there are charges attached to everytrade. This means you wither have to have a large amount of money invested, or it is not worth investing it. Therefore, with no admin charges, it means we cdo not have to earn as much before it breaks even and then into a profit.
• No commission. Using brokers generally means there is a commission on all sales. Therefore, without this, once we have completed our sale we do not ahve to give any away and keep more for ourselves.
• No Tax. Since the tax is incorporated into the initial bet there is no tax to pay on any profits. Therefore yet again once we have made out money we don't have to give any of it away.

Be warned though, there are disadvantages to spreadbetting:

• It is a leveraged product. This means that though you can gain way more than you bet, you can also lose more than your initial deposit, and even your funds if you do not have the correct safety measures in place.
• There are time limits in place. There are generally time limits in place for spreadbetting, these include: Daily, Near Quarter (the one we are in), Far Quarter (the next one), Very Far Quarter (the one after that). The issue with this is that as we change the timeframe the bid/ask spread widens.
• Calculations. I don't expect everyone to be able to use Excel to such an extent that they can work everything out in an instant. I myself have difficulty sometimes. Since it is a leveraged product the calculations we will have to do will be based on deposit vs funds. I will do my best to provide you with everything you need for this.

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Ground Rules - Part 2 - Report Rules

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With the general guidelines established I will now look at what variables I am going to have within each report. These wil be changed for each report and wil be given at the top before any results are shown. The outline of each report will be as below:

Rules:

Trading Type:  Either Forex, Index or Stocks
Start Time:  This applies only to timeframes of M5 or below
Finish Time: This applies only to timeframes of M5 or below
Stop Loss:  If put in place
Limit:  If Put in Place
Long/Short Trading:  Either Long, Short or Both
Buy Rule:  What the rule for taking position is
Sell Rule:  What the rule for exiting position is

Results:

Since this blog does not allow tabular formats, these results will be stored as images, with links to them become available as we proceed.




Report:

This will outline my findings and give an overview of why it might work and why it might not have worked. each of these will build upon the next so we can then start looking at the strengths and weaknesses of each indicator to see what we can combine to get the best results.

Ground Rules - Part 1 - General Rules

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If I am going to be doing this scientifically, then I need to establish the rules and guidelines I must use to ensure that all the experiments come back with the same level of accuracy as all others. There are also a set number of general variables that I first need to identify. These are:

1) Type of Trading Data
2) Source of Trading Data
3) Timeframes
4) Number of Ticks

1) Type of Trading Data

There are a number of different types of trading data. These range from Indicies such as FTSE100 and S&P500 or Euro Stoxx 50, to Commodities like Oil, Gold, Sugar and so forth, to Foreign Exchange (Forex) like the GBP/USD or GBP/EUR, to simple stocks such as those listed on the indicies above, and many, many more.

There is virtually no end to the different trades available and to the ways in which they can be traded eg Options, CFDs, Spreadbetting, Long Buying, Short Selling, the list goes on. So for the purpose of simplicity I am going to be using the following datasets:

Forex - GBP/USD
Index - FTSE100
Stocks - A selection of UK Stocks TBC

If I find a solution which seems to work on one I will test it on another. If It works on one type of dataset then I will use another dataset from the same category to test the theory.

2) Source of Trading Data

There are a number of great sources for data on the intenet. These can be obtained for free if you know where to look, and some can be obtained for a small fee, but are well worth it. The best sources for data that I have found so far are as below:

Technical Analysis

Yahoo Finance UK
Price: Free
finance.yahoo.co.uk
Excellent for old data sets for use in technical analysis across a range of stocks dating back to 1980s. You are also able to find historical index prices here.
Time frames: Daily, Weekly, Monthly

EODdata
Price: Some sets are free others are for a charge. Reasonably priced.
http://www.eoddata.com/
A very good selection of data for stocks. you can chose your country and the time frame you want then download all the stocks in the country and timeframe. This option is chargeable but if you want to test the theories with a huge amount of datasets for individual stocks this is potentially one of the best places to get this information.
Time Frames: Daily

MetaTrader
Price: Free
http://www.metaquotes.net/
Metatrader is a free tick-by-tick program that actually allows you to see the action as it happens. This is a great source of infrmation for Forex markets especially, though they have a built in history tool that allows you to see prices for some Indices and comoddities, as well as a limited number of stocks. For any serious potential investor I would truly recommend downloading this, as it allows you to test your theories in realtime practice through the use of a demo account, and a number of backdated historical tools.
Time Frames: 1 Minute, 5 Minute, 15 Minute, 30 Minute, 1 Hour, 4 Hours, 1 Day, 1 Week, 1 Month

Fundamental Analysis

Hemscott
Price: Free (Registration required for best data)
http://www.hemscott.com/
There is a good selection of data here including Financial data, Cash flows, Earnigs per share and more. However it is not in a very downloader friendly format, so it can be a laborious task to get the data into comparative sets.

MSN Money
Price: Free
uk.moneycentral.msn.com
I was surprised at the sheer quantity and quality of the information on the MSN Money website. They have spent a lot of time putting this togther. Additionally for those who know Excel, it is a fairly simple task to get the data you want so you can have a side by side comparson.

3) Timeframes

There are a lot of different timefrmes that can be looked at, especially with technical analysis. Therefore I have decided to test the follwoing timeframes:

Forex: M1, M5, M15, M30, H1, H4, D1
Index: M1, M5, M15, M30, H1, H4, D1
Stocks: D1

I have decided not to include weekly and monthly trading due to the desire to trade on more frequent basis to capitalise on compounding. Trades above 1 day do not allow this for my needs, but if you want to test the theories against historical data for this timeframes they will still calculate it for you.

4) Number of Ticks

This is a much more complex choice, as to choose too few ticks will mean we have not enough data to prove our theory, where as too many ticks will mean that there will not be enough data fro some of the higher timeframes. Therefore I have selected the following time frames:

M1 - 1 Week - 10080 ticks
M5 - 1 Week - 2016 ticks
M15 - 2 Weeks - 1344 ticks
M30 - 4 Weeks - 1344 ticks
H1 - 12 Weeks - 1440 ticks
H4 - 52 Weeks - 1560 ticks
D1 - 260 Weeks - 1300 ticks

The number of ticks is highest in M1 since it is the leve at which there is the greatest volatility, and so I have tried to get a fair average of results.

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Contents

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This is the Contents page. This list will grow as I continue and I will do my best to update this as required, so it's easier for you to view all my research:

Part 0 - Before We Start

Ground Rules - Part 1 - General Rules
Ground Rules - Part 2 - Report Rules
Ground Rules - Part 3 - Platform

Part 1 - Trends

● Introduction
● Trends - No Limits, No Stop Losses
  ○ Up, Up, Up (N)
  ○ Up, Up, Down (?)
  ○ Up, Down, Up (N)
  ○ Down, Up, Up (N)
  ○ Up, Down, Down (?)
  ○ Down, Up, Down (N)
     - Follow-up Report
  ○ Down, Down, Up (N)
  ○ Down, Down, Down (?)
● Trends - With Limits, No Stop Losses
  ○ Up, Up, Up (N)
  ○ Up, Up, Down (N)
  ○ Up, Down, Up (N)
  ○ Down, Up, Up (N)
  ○ Up, Down, Down (N)
  ○ Down, Up, Down (N)
  ○ Down, Down, Up (N)
  ○ Down, Down, Down (N)
● Trends - No Limits, With Stop Losses
○ Up, Up, Up (?)
○ Up, Up, Down (?)
   - Follow-up Report - Test 1
○ Up, Down, Up
○ Down, Up, Up
○ Up, Down, Down
○ Down, Up, Down
○ Down, Down, Up
○ Down, Down, Down
● Trends - With Limits, With Stop Losses

● Conclusion

Part 2 - Technical Analysis

● TA Introduction
● Accumulation/Distribution Line
● Average Directional Index (ADX)
● Aroon
● Aroon Oscillator
● Moving Average Convergence/Divergence (MACD)
● Relative Strength Index (RSI)
● On-Balance Volume (OBV)
● Stochastic Oscillator

Part 3 - Fundamental Analysis

● FA Introduction
● P:E Ratio
● P:B Ratio
● Net Worth vs Market Capitalisation

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Introduction

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Hello all.

I was inspired to make this blog upon hearing the famous Thomas Edison quote: "I have not failed 1000 times. I have successfully discovered 1000 ways not to make a lightbulb."

I am sure I am not alone in the pursuit of finding ways to make money through trading. It is a life's ambition for me to be able to simply develop a scheme that works, not 100% of the time, but enough times for it to give a healthy return and to not only generate passive income, but also generate passive cumulative growth.

Since I have been doing this for a little while, I have already tasted the success and failures of a number of different trading routes, most specifically in the Technical Analysis route. I have noticed that there is a huge volume of people looking for the same things as I am, but there never seems to be any of the research that can back this up, or at least not for free. Most of the websites available want you to pay for their secrets and but there is never any guarantee that the money you pay will be returned by the secret they reveal. It could all just be a scam, right?

So from this day forward I am looking to take a more scientific route to discovering at least one way of making money by trading before I die poor!! And I will share every bad and (whenever I find one) good example with you all the way! Free of charge.



So far

Experiments:                                                                     17
Successfully discovered ways NOT TO MAKE money:       13
Successfully discovered ways TO MAKE money:               0
Experiments awaiting confirmation                                   4

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