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Portfolio123 » List all forums » Forum: Technical Analysis Topics » Thread: Penny Stocks challenge |
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Total posts in this thread: 5 |
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olikea
Advanced Member
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At the weekend I went to the London Money Show, and there was a presentation by VictorVest (I met the founder!) about buying penny stocks. Their idea was to buy penny stocks that had recently broken out, giving examples of ones that had performed well. As usual, an English audience somewhat skeptical of the claims, and indeed the ultimate purpose was to sell the VictorVest software (which I believe is behind p123, but that is another story!). Anyway, I thought I might have a play. There may be problems trading such stocks etc. but I think if a suitable system can be created then it should be investigated. My idea was to create a ranking system sorting stocks by price, lower is better, and then buying on breakouts. Buying breakouts is probably a far better strategy on small penny stock type stocks. Anyway, some simple sims suggest the idea isn't without merit: http://www.portfolio123.com/port_summary.jsp?portid=329482 And also see: http://www.portfolio123.com/port_summary.jsp?portid=329506 And bear in mind that is a 40 stock portfolio! Rarely do you see a 40 stock port with > 100% CAGR. The problem is that the turnover is very high. It isn't quite what I had expected in terms of trying to pick up a few winners but I haven't really been able to make that work. Nevertheless it does seem to be a good idea to buy on a breakout of various different timescales. It would be interesting to see where we could go with this... |
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visankar
Advanced Member
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olikea, I changed the slippage to 2% , for a penny stock that sounds reasonable, perhaps a bit exaggerated, please correct me if I am wrong. The results are not that great. http://www.portfolio123.com/port_summary.jsp?portid=329525 The AvgDailyTot(20) > 10000 may be too limiting as well. As Oshaughnessy says, penny stocks are where the greatest gains are to be made, but they are hard to trade. My experience with P123 and Penny stocks is that the ranking systems do not work all that well because of lack of reliable data and the results vary widely due to slippage etc . I use a simple penny stock screener to filter out trending penny stocks and that part seemed to work well till last year. I understand it is not back tested, and I have around 20% of my account invested in less than $5 stocks with market cap of less than 50 million . Obviously, many members of P123 will have liquidity constraints with this type of strategy. |
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visankar
Advanced Member
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 My bad, I did not see that you were doing this for fun.. |
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BJS
Advanced Member
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Low priced breakouts have proven to be the hardest model for me to design. The problem is that most breakouts fail. So you need to have a system that dumps the failures early, and lets the winners run. My latest attempt looked very promising. I designed a new breakout system this spring, then started paper-trading a live port in June. As you can see, a system that looked good from 2001 to this summer, totally fell apart starting this July. ---------------------------------------- 
Breakouts.PNG
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DennyHalwes
Advanced Member UNITED STATES Joined: Apr 28, 2004 Posts: 1553 Status: Offline |
Olikea, You need to add PRSF to your Restricted Buy List. In your Sim it is shown as a 10,000+ % gain. There is an error with the price of PRSF on 04/23/03. It is shown as $0.05 but the price on other days around this time is ~ $5.40. This causes a 300+ % jump in the Sim’s performance on that date even though the Sim holds 40 stocks at the time. Denny  ---------------------------------------- "The significant problems we face cannot be solved at the same level of thinking that we were at when we created them". Albert Einstein |
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Re: Penny Stocks challenge
