Researching a strategy

You become successful trader once you stop experimenting and finalise a strategy and start trading it. That is the difficult part for most traders. The strategy might undergo minor revisions, but most of the success is derived from sticking to the basic parameters of the original strategy.

So while I continue to study and explore new strategies, unless the new thing dramatically changes results from what I get from my current strategies, I am loath to change what works. In any given year I test and study 100's of thing, but I continue to trade basically the same thing.

In a given year I read most of the books published on stock trading and stock market (even the junk books on technical analysis). The first thing I look at when I visit a trading blog is what is that persons method, how much can this realistically make, what is this persons edge and is it duplicable. I have in my database 100's of things I have tested previously, articles on market, some unpublished systems and so can most of the time find if I have researched similar approach before.

Lot of successful trading is part concept and part artistry, so it is not very easy to duplicate someones strategy. It becomes even more difficult if the strategy involves discretion. But you must research all triple digit plus systems and traders. That is my guiding philosophy, why waste time and effort researching someone who make below 25%.

Recently I spent an intense amount of time researching a highly successful traders approach. The trader is pretty well known and is extremely secretive. He has a publicly demonstrated record of triple digit plus kind of returns for many years. He sells a service for institutional client which costs a fortune and is restricted to certain number of clients only. Few months back, he had on his website more details about his methods and actual examples of past trades and example of his portfolio holding at a given period of time. The information was up only for few days, before it was taken down.

So here is what I did to understand and breakdown this secretive traders method.

1 Reviewed all his media mentions through available databases going back up to 15-25 years, to do content analysis of what he has said in his interviews and occasional writings.

2 Went painstakingly through past databases to see the financial ratings for stocks in his universe at the time of his entry and subsequently and also for stocks mentioned in his interviews.

3 Studied the news on those stocks for a year before his entry and post entry. Looked at other stocks with good earning during that time which performed better than his picks.

4 Looked at earnings plus other financials, inside buying, fund ownerships, sector trends and comparison before and after entry

5 Looked at intra day charts for period before and after his entry. ( he says he
everyday looks at around 800 stocks chart on 5/15/30 minute plus
daily, weekly, monthly yearly charts. That is lot of work plus it
indicates lot of his stuff is subjective)

6 Tried to look at his past holdings find information on it. Most of those stocks are defunct so it was very difficult to find information on it.

7 Tried to model returns using my current approach to see what stocks my current system would have possibly picked at similar time he mentioned stocks in his interviews.



It takes lots of effort and resources to make publicly available proven systems to work. Ultimately, you have to customise them to your own style. The lull in market has been good , as I put in some serious man hours on all this stuff in last couple of weeks.

Now after lot of studies, I am making few changes in my method to incorporate some of the learning. Needless to say the traders approach is also based on earnings. In fact most of the triple digit kind of returns systems or traders I have studied closely are based on earnings and momentum.