9 Jan 24 Practice Results (AMZN)

Ticker: AMZN

Date	Trade	Entry	Stop Loss	Exit	Percentage Profit		Days To Exit
2 Mar 10	Buy	6.283	5.74	6.43	27.07%		16
30 Mar 10	Buy	6.8955	6.43	6.69	-44.15%	Stop loss was based on a recent low	3
2 Sep 10	Buy	6.68	6.11	7.64	168.42%		26
21 Oct 10	Buy	8.294	7.57	8.11	-25.41%		8
4 Nov 10	Buy	8.4805	8.11	8.44	-10.93%		7
21 Dec 10	Buy	9.249	8.68	9.18	-12.13%		21
2 May 11	Buy	9.94	8.83	9.84	-9.01%		11
27 Jun 11	Buy	9.8	9.08	10.44	88.89%		15
20 Jul 11	Buy	10.97	10.44	10.52	-84.91%		11
7 Sep 11	Buy	10.94	10.22	11.236	41.11%		12
29 Dec 11	Sell	8.5745	9.22	8.93	-55.07%		3
11 May 12	Buy	11.504	10.91	11.1	-68.01%	Stop loss was based on a recent low	5
27 Jun 12	Buy	11.3695	10.84	11.19	-33.90%		8
30 Jul 12	Buy	11.967	11.03	11.65	-33.83%		10
14 Sep 12	Buy	13.15	12.36	12.69	-58.23%		7
25 Jan 13	Buy	13.8825	13.39	13.39	-100.00%		3
18 Sep 13	Buy	15.2825	14.763	15.55	51.49%	Stop loss was based on a recent low	14
22 Oct 13	Buy	16.6445	15.19	17.63	67.76%	Signal bar was a gap up	13
15 Nov 13	Buy	18.497	17.2	19.13	48.80%		13
7 May 14	Sell	14.778	15.82	15.23	-43.38%		11
6 Nov 14	Sell	14.5645	15.84	15.21	-50.61%		3
8 Apr 15	Buy	19.06	18.33	19.01	-6.85%		8
21 Apr 15	Buy	19.647	18.72	21.14	161.06%	Stop loss was based on a recent low	20
3 Jun 15	Buy	21.895	21.14	21.31	-77.48%		4
19 Jun 15	Buy	22.0365	21.13	21.68	-39.33%		7
13 Jul 15	Buy	22.4145	21.28	23.86	127.41%	Signal and entry bars are both gap up	9
21 Sep 15	Buy	27.4485	25.74	26.57	-51.42%		4
13 Oct 15	Buy	27.641	25.41	32.15	202.11%		24
19 Nov 15	Buy	33.344	32.15	33.06	-23.79%		12
29 Dec 15	Buy	33.875	32.87	32.8145	-105.52%	Stock gapped down	4

Profitability

Today’s result is bad. I expected AMZN to perform well, but I end up with an unprofitable session. Granted, I have not finished the entire period, but the results for 2010 to end 2015 is a net loss.

Using strategy 4 for position sizing, the final balance is $96,863.69, with a maximum drawdown of -15.26%.

Analysis

So what went wrong? I can’t say that Amazon does not trend well, cos it does trend well during certain periods. Today’s results ‘crushed’ my hypothesis that my previous poor performance for stocks like SWN and DKS is because of their low volume. My theory is that low volume stocks do not trend well.

Amazon has an extremely high volume. Indeed, it does trend well, but I failed to capitalize on the trend in most cases. So there is something wrong with my strategy. Amazon’s trend tends to be slightly more choppy, trending in a slightly broader channel than I would like. A lot of times, I got stopped out mid-trend, normally at a loss. Re-entry ends up being too late, and results in a loss.

Perhaps my stop loss is too tight? This is not the first time I failed to capitalize on a trend. It happened previously with MU too.

What should I do?

• Loosen my trailing stop?
• Work on better entry?

Loosening my trailing stop will keep me longer in the trend and result in fewer late trend re-entries. However, my position size for each entry may be smaller since I calculate position size based on stop loss. Hence, the percentage profit will be smaller when I catch a trend.

Working on my entry seems to be a better solution. This is hard though. I need to consolidate the best trades and focus on them. Should I take very selective trades and concentrate my portfolio on fewer stocks? The way I see it, there are two approaches:

• Find a few good stocks and bet big on them (like Nicholas Darvas)
• Be less stringent in stock selection and work to catch a large trend (like Richard Dennis and the turtles). One large trend can cover a few losses.

For now, I am more inclined towards the second strategy. But the problem with this strategy is that the transaction cost can accumulate quite significantly. However, this strategy seems more suitable for my psyche. I’m not sure if I can stomach the risk of having a concentrated portfolio.

Perhaps, I should consider how to pyramid when I am in a strong trend. Something to think about…

Next Steps

• Complete the practice for AMZN
• Compile the best trades for the last few stocks

Sidenote

Although today’s practice is not profitable, on the plus side, I managed to figure out how to import forex data into Amibroker. Check out the next post for instructions.

Also, I find that because stocks tend to go down faster than up, I may have to initiate short positions earlier, instead of waiting for three moving averages to cross. I should consider initiating the position after two moving averages cross.