I am always fixated with swing trading because I do not have patience with most things in life. Whenever there is a 15% unrealised gain in a position, I will be very tempted to monetise the gain. I believe that I am in the category of “sell winners too fast, hold on to the losers”. To some extent, I truly believe that we live in a world that is filled with ‘black swans’. Hence, the bird in the hand theory matters. Swing trading provides wealth creation opportunities in the shortest possible time frame. On a serious note, one should seriously consider long term investing in order to balance out a portfolio that is filled by a combination of short-medium and long term trading / investment positions. It is usually the case that multi-baggers come from long term investing. To qualify for long term investing, one should truly look beyond an investment horizon of more than 2-3 years.
Based on the recently developed multi-indicators trading systems , the key indicators & buy signals are summarised as follows:
- Price crossover above lower Keltner Channel (20,2.25)
- RSI(14) crosses above 30.0
- RSI(14) was below 30 for the last 5 days
Based on the above stated technical rules, the following is the results of the stocks screening (as of 4 Jul 2017):
Was backtesting a simple trading strategy using R based on the following key parameters:
- Selected security : Maybank (Malaysia)
- Time period: 1 Jan 2011 – till 23 June 2017
- Single technical indicator test
- Test 1 – Price crossover based on 50D Simple Moving Average (buy signal: buy when closing price of Maybank crosses above SMA, and sell when prices closes below SMA)
- Test 2 – Price crossover based on 50D Simple Moving Average (with transaction costs at 1.0%)
- Test 3 – Price crossover based on 200D Simple Moving Average
- Test 4 – Price crossover based on 200D Simple Moving Average (with transaction costs at 1.0%)
- Test 5 – Buy & Hold Strategy
Note: Blue line (50 Day SMA) and pink line (200 Day SMA)
The summary of results are shown below. It shows that the Buy & Hold strategy appears to be more superior than of the 50D and 200D SMA price crossover strategies.
Transaction costs exacerbated the mediocre results of the two simple trading strategies 50D and 200D SMA.
Next experiment – need to fine-tune the trading strategy (including use of multiple technical indicators), in order to outperform the Buy & Hold strategy.
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Personally, I believe that it will be quite interesting to combine a technical trading system with a fundamental approach (may be we shall categorise it as the “funtech” trading methodology). In this posting, we will explore the Earnings Band Method.
On 14th November 2016, the FBM KLCI declined 17.55 points or 1.1% on expectation that US President-elect Donald Trump’s expansionary fiscal plans for the US economy will lead to higher inflation and interest rates there. Higher US interest rates do not bode well for Asian markets in anticipation that investors will shift their money into US dollar-denominated assets. At 5pm, the KLCI closed at 1,616.64 points. Read More