How to beat the market for $1.25 per week | stockbee

2/08/2007

How to beat the market for $1.25 per week

Today is Thursday. Time to revisit the "How to beat the market for $1.25 per week" strategy. Those following that list must be enjoying their profits. In last few weeks if you had followed the IBD 200 strategy as outlined your returns should have been very good. If you had taken every signal and followed every rule and got stopped out (ideal situation and assumes no capital constrains, no use of leverage), your return would have been many times the market returns.

Stock selection is the key idea behind IBD200. If you select stocks with high probability of going up and use simple entry and exit rules you can make lots of money.It is my second most profitable strategy after the earnings lead breakout strategy. If you are willing to put in the time and effort to make this strategy work, the profit is just an outcome. If you trade a bunch of high probability systems, you never run out of ideas.

Stocks from IBD 200 list up 30% or more in few weeks:
AOB,American Oriental Bioengineering Inc (Google  Yahoo  Earnings  Chart
ATRS,Altiris Inc (Google  Yahoo  Earnings  Chart
AXR,Amrep Corp (Google  Yahoo  Earnings  Chart
CHINA,CDC Corp Class A (Google  Yahoo  Earnings  Chart
CNS,Cohen & Steers Inc (Google  Yahoo  Earnings  Chart
GLDN,Golden Telecom Inc (Google  Yahoo  Earnings  Chart
HMIN,Home Inns and Hotels Management (Google  Yahoo  Earnings  Chart
HRT,Arrhythmia Research Tech (Google  Yahoo  Earnings  Chart
HXM,Homex Development Corp (Google  Yahoo  Earnings  Chart
ICE,Intercontinental Exchange Inc (Google  Yahoo  Earnings  Chart
IGLD,Internet Gold-Golden (Google  Yahoo  Earnings  Chart
IMKTA,Ingles Markets Inc Cl A (Google  Yahoo  Earnings  Chart
JST,Jinpan Internat Ltd (Google  Yahoo  Earnings  Chart
LFL,Lan Chile Sa (Google  Yahoo  Earnings  Chart
MFW,M&F Worldwide Corp (Google  Yahoo  Earnings  Chart
PCCC,Pc Connection Inc (Google  Yahoo  Earnings  Chart
PTT,Vcg Holding Copr (Google  Yahoo  Earnings  Chart
ROCM,Rochester Medical Corp (Google  Yahoo  Earnings  Chart
SVNT,Savient Pharmaceuticals Inc (Google  Yahoo  Earnings  Chart
SWS,Sws Group Inc (Google  Yahoo  Earnings  Chart
SYX,Systemax Inc (Google  Yahoo  Earnings  Chart
TRCR,Transcend Services Inc (Google  Yahoo  Earnings  Chart
VIP,Vimpel Communication Ads (Google  Yahoo  Earnings  Chart
WFR,Memc Electronic Material (Google  Yahoo  Earnings  Chart



The biggest problem with most mechanical approaches is second guessing by traders. The signals which you do not take invariable perform the best.

Earlier posts in this series:
How to beat the market for $1.25 per week- Part3
How to beat the market for $1.25 per week- Part2
How to beat the market for $1.25 per week

7 comments:

market operator said...

Curious, have you backtested these strategies in bear market conditions, ie. 2001-2002 and if so how did the results differ?

Pradeep Bonde said...

In any market there are 200 stocks which have better earnings compared to all other stocks. In all markets there are 200 stocks whose relative price performance is better than the rest of the market.
What stocks were on this list in 2001-2002, many of them are now not trading or have merged but if I remember my trades there were lots of home builders, educational companies like APOL, STRA, CECO, some technology companies like GNSS, MTON (which has changed symbol now to INFO), ROOM, EXPD, lots of retailers like AZO, MOVI, many medical companies.
As to the other Double Trouble system, essentially in a bear market you have less number of candidates to play around with but because it uses absolute i.e minimum 100% move from a low, there are stocks which meet that criteria in any market situation.There were handful of stocks which were up 500% plus from the 260 day low in the period you mentioned.
Do your own testing before trading it.

Shiva said...

Do you know the exact method by which IBD determines which stocks make it to the list? If we know that then shouldn't it be possible to come up with the list even before IBD does ???

Pradeep Bonde said...

If you read IBD very closely they tell you how they do it, but some pieces you have to put together yourself. I know exactly how they calculate it with reasonable degree of certainty. To do it yourself you need access to fundamental databses which are expensive.

http://stockbee.blogspot.com/2007/01/how-to-beat-market-for-125-per-week_17.html

What does that list indicate, it has the stocks with best earning momentum plus price momentum and which are currently in favor.
I first developed this concept as a lazy way to beat the market , obviously if you put in more efforts you will make more out of it. This is most suitable for weekend warriors.
To understand it better read William O'Neil's first book and Mark Boucher.
The key concept is if you want to beat the market vehicle selection is the key.
See my post:
http://stockbee.blogspot.com/2006/10/should-you-buy-breakouts.html
It summarises the philosophy behind everything I trade and the philosophy behind all the systems I talk about.

Shiva said...

Thanks for the info..

Amit said...

The formula on IBD top 200 returned 14 candidates for today. Would it be a good idea to sort these 14 by float and then keep the top 3-4 candidates as potential buys for next day?

Pradeep Bonde said...

Buy the ones which are starting a fresh move after a long consolidation. This can be done by sorting your number of breakouts by 65 day growth using a formula like this in Telechart
100 * ((C1 + .01) - ( MINC65.1 + .01)) / (MINC65.1 + .01)
Take those with lowest reading after sorting the 14. So if you select 3 like this from 14, you can further reduce them by other criteria like 260 days growth.
Same thing applies to the 100% plus list.