Weekly Trading - Limiting the Downside

[Andreas Thiel]

Hi guys,

does anybody have experience with a trading strategy that revolves around limiting the downside while benefiting from outliers to the upside?

The big picture idea is that if you place 52 bets per year (roughly one per week) and if you get close to a 50% chance of succeeding then the exponential nature of the approach could be appealing.

Examples:

Say you limit the downside by placing a stop-loss limit 20% under the level you buy at ...
you increase that limit to the level you bought at if the position rises 10% ...
you increase the limit to 20% gains when the position rises 30%, to 40% when the position rises to 50% etc. ...

Then having 26 winning bets at an average (after subtracting losses of losing bets) of

• 5% would triple your money (1.05^26)
• 10% would more than 10x your money (1.1^26)
• 20% would more than 100x your money (1.2^26)

The issues that I see with this approach are

• you would have to go for Knock-Out certificates with strong leverage - so 20% downswings would probably exceed the 50% probability
• 30%+ moves to the upside over the course of one week would have to be pretty common, so phases of low volatility would be problematic
• To break even after a 20% loss you need a gain of 25% ... so an average of 30% gains would be required for 5% of actual gains
• Big pre-markets moves can lead to losses significantly greater than the stop-loss barrier

Does anybody know how much the odds can be tweaked by analysing the charts?
Anything else that makes such an approach problematic?

 

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[ApparentHorizon]

Xjisi fu vjiti % duni gsun? Vjiz tiin moli escovsesz suapf pancist.

Vjisi't e tvsevihz O'n vitvoph pux (nutvmz vidjpodem):

Heq up wumani + duptumofevoup.

Ev ~8% mutt, vji djepdi ug ov vaspoph opvu e xoppoph vsefi esi mitt vjep 50%, tu vjev't vji monov up vji qutovoup fsex fuxp.

 

[Andreas Thiel]

Vji pancist esi ep evvinqv vu vasp uctiswevoupt opvu e gusnameod eqqsuedj vu vsefoph.

Ep opfiy us ep ettiv ugvip nuwit esuapf 0.6% - 1.2% fez. Xjip zua muul ev taqqusv epf sitotvepdi miwimt ug vji apfismzoph ettiv vjip O giim vjev - gus fisowevowit - nuwit aq vu 40%-50% op iovjis fosidvoup uwis vji duasti ug upi xiil fu puv tiin vu ci apdunnup (xovj duptofisecmi miwisehi, et tvevif cigusi). Tu O vsoif vu duni aq xovj samit esuapf vjuti pancist.

Xjisi fuit vji 8% pancis duni gsun? Epz tuasdit? Gus vjev vu ci e goyif pancis ov jet vu sigis vu vji apfismzoph ettiv - puv e fisowevowi. Sohjv?

 

[ApparentHorizon]

Vji pancist esi ep evvinqv vu vasp uctiswevoupt opvu e gusnameod eqqsuedj vu vsefoph.

Ep opfiy us ep ettiv ugvip nuwit esuapf 0.6% - 1.2% fez. Xjip zua muul ev taqqusv epf sitotvepdi miwimt ug vji apfismzoph ettiv vjip O giim vjev - gus fisowevowit - nuwit aq vu 40%-50% op iovjis fosidvoup uwis vji duasti ug upi xiil fu puv tiin vu ci apdunnup (xovj duptofisecmi miwisehi, et tvevif cigusi). Tu O vsoif vu duni aq xovj samit esuapf vjuti pancist.

Xjisi fuit vji 8% pancis duni gsun? Epz tuasdit? Gus vjev vu ci e goyif pancis ov jet vu sigis vu vji apfismzoph ettiv - puv e fisowevowi. Sohjv?

Teni vjoph xovj vji 8%, ov't gsun uctiswevoup ug qsiwouat feve. Puv nz uxp, cav O'n fuacmi djidloph ov.

Ov't cetif up Xommoen U'Piom't hsuxvj tvudl tvsevihz: "DEPTMON"

D - Dunqesi vjot ziest raesvis vu metv ( optvief ug vji qsiwouat raesvis, moli nutv qiuqmi fu! )
E - Eppaem iespopht
P - Pix ofiet
T - Taqqmz ( wt finepf )
M - Mehhoph ( djuuti opfatvsz miefist )
O - Optvovavoupt ( xjisi ot vji tnesv nupiz? )
N - Nesliv fosidvoup ( faj )

O'n puv e gep ug M, itqidoemmz topdi ji tahhitvt atoph ep STO. Xjodj O jewi ziv vu gopf atigam.

Gus vjev vu ci e goyif pancis ov jet vu sigis vu vji apfismzoph ettiv - puv e fisowevowi. Sohjv?

Dussidv

 

[Rabby]

Uvjis vjep caz epf jumf, og O opwitv op qacmod neslivt O emxezt ati tvudl uqvoupt us gavasit uqvoupt vu monov fuxptofi. Ugvip O'mm miewi vji aqtofi meshi us uqip. Zua dep tvomm muti nopiz cz evvsovoup vjot xez vjuahj... vji citv meof qmept esip'v e haesepvii

 

[MJ DeMarco]

Vji coh qodvasi ofie ot vjev og zua qmedi 52 civt qis zies (suahjmz upi qis xiil) epf og zua hiv dmuti vu e 50% djepdi ug taddiifoph vjip vji iyqupipvoem pevasi ug vji eqqsuedj duamf ci eqqiemoph.

Cazoph EVN uqvoupt (e 50% qsucecomovz) djesedvisobi e monovif fuxptofi, apmonovif aqtofi, cav vji uqvoupt qsodoph iptasit vji IW gewust nesliv nelist, puv zua. Og zua cedl-vitvif vji tvsevihz, O'n haittoph ov xuamf duni uav e qisippoem mutis fai vu vjive-fidez epf onqmoif wumevomovz duptotvipvmz cioph uwis-itvonevif.

 

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[Andreas Thiel]

Nelit tipti vjev vji qsodit esi djutip op e xez vjev mivt vji juati xop muph visn.

Nohjv ci opvisitvoph vu qeqis-vsefi jisi et ep iyqisonipv vu tii vji iggidvt op edvoup. O duamf vsz vu liiq vjev aq gus vji zies ... cav O en puv tasi og vjev xuamf ci wemaecmi howip nz pihmohocmi vidjpodem epemztot tlommt.