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Re: How have you changed your investing style and/or methods?

I developed these habits since starting at P123:
1. Keep a trading log sorted by port, reasons for entry and exit, track profits carefully.
2. Vet most trades by Analysts Reports and/or technical charts for confirmation.
3. Lean toward minimal buy/sell rules to avoid over-training.
4. Try to minimize turnover rate (note- this may not correlate with rebalance frequency)

Dec 18, 2019 10:37:58 AM       
Re: How have you changed your investing style and/or methods?

Previously In my ranking systems I gave stocks that have lower market capitalizations a higher ranking. Lately I have reduced the market cap factor to increase the chance of buying mid-cap and larger cap stocks. I believe with the increased number of Investors purchasing Large cap Index ETF's that the small cap premium may continue to somewhat underperform even though we are seeing somewhat of an improvement in small cap and value stock p/e ratio expansion. I believe that value and quality factors that are used in ranking systems will never go out of style. Stocks that are growing earnings and producing high ROI and trading at reasonable valuations with manageable debt levels will outperform in the long run. To be prudent I now try to limit the amount of micro and small cap stocks to a maximum of 20-30 % of my total portfolio value. Anyways I am sure some will disagree but that's my 2 cents.


Dec 21, 2019 12:28:06 PM       
Re: How have you changed your investing style and/or methods?

I’ve tried to do the following as I’ve learned the hard way. Fortunately I haven’t lost money and still made some, but I’ve lost opportunities. These are what I’ve learned:

1. Minimize Turnover (as slippage can kill you).

2. Use a broker with good price execution as poor execution will erode market gains even if it means not getting free trades.

3. Don’t rely on one strategy or factor. If you like a factor combine it with others which diversify. A factor or strategy can stop working for a period of time (or maybe it really never worked).

4. Strategies need to be causal not correlative. Also be careful of overfitting. I’m my mind a strategy that shows weakness at times is probably more realistic than one that always outperforms. Look at the designer models. Most of them start underperforming as soon as they launch...

5. Trade stocks with sufficient liquidity. Micro caps look great in simulations but can you really get in and out of trades to make those strategies work? My experience is one of frustration where you slip multiple percent to get in and out.

6. I read Marc’s writings on valuation principles. It is very good and eye opening. It really got me to be much more critical of backtesting. I think backtesting can still identify good strategies, but again overfitting can kill future returns.

7. I used to do limit orders during the day and tried to get good entry and exit points. It seemed like more often than not I would either overpay or undersell or end up adjusting limit orders to chase the price to update the position. Now I just do market on close orders. I get the end of day price which matches my sims and eliminates having to time during the day. Quite frankly I got trader fatigue from having to do limit trades. How do day traders do stressful and frustrating? I still trade weekly but I set up trades on weekend and they just go through on Monday at close.


Dec 21, 2019 9:57:16 PM       
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