Position Drill

[Runner]

You have been granted 500K to invest in only one stock. This stock is HD. Your job is to use good position sizing and get as large of a return as possible you can only buy this stock on the long side so sorry shorts. Your max. down side limit is 7%. You can sell anytime this is a core position and so this is not a swing trade.

The firm has trusted your judgement in the past and so now they are throwing you a bone. How well you perform will only open bigger doors for you and a larger stake of the company.

Drill rules:

Date Time number of shares buy sell.....
Must state “NO CHANGE” if you do nothing for 1 week.

The purpose of this drill is to open a different approach to investing through using position sizing..Understand all are welcome to participate if interested... If enough participate I’m sure we may learn some interesting things here..


ThanX
Runner

[scifos]

do we have to hold our position for the week?

[billyjoe]

Runner,
This is very interesting and I will take part after a little more research into position sizing. In the past my losses have been greatest in my largest positions which is a big no no. This will never happen again as it is one of my New Years Resolutions.


billyjoe

[scifos]

Okay, well here's the system i'm going to start out with for HD:

I'll look at a daily chart over the last 6 months.
I"m going to use oscillators to give me my signals, specifically a Slow STO k=20, d=1 with keltner channels overlaid on it. The higher k removes some whipsaws at the expense of timing, but for now this is the value I'll start with. I've found it a good indicator. I'll use the centerline crossovers of the keltner channel to give me the buy/sell signals. I'll use bollinger band width as a measure of volitility, the goal being low but rising volitility combined with a buy signal will mean that it is accelerating upwards. Here's a chart of what the system would have done over the past 6 months.



notice that the last buy signal came at high volitility, and the success of that trade seems to be almost accidential.

Anyways, I'll start with a buy tomorrow on open because the STO line is way above the centerline, and volitility is rising. since I'll be late to the game by my system's rules, I'll take a 200k size position (or do I have to give # shares instead?) Stop loss will be the -7% as per the fiated rule.

[Runner]

I’ve herd many on this forum enjoy going to the casinos. The house loves a certain type of gambler. They are called martingale gamblers. The house knows that these people are easy prey and that the chances of winning is less than 50% and the losing streaks could be huge.

What these people do is this. They double the bet size when they lose. If they lose 1.00 they bet 2.00, then 4.00-8.00-16.00 and so on. After 10 rounds you lose 2,047.00 to get your original dollar back. Thus your win-loss ratio at this point for less than a 50:50 bet is 1 to 4,095. What this means is you will be risking over 4K to get a 1.00 profit.

You can see by this little example that you might not want to be a martingale type of investor. Now the flip side is what they call an anti-martingale. These people risk more during a wining streak. This works on the table and in the markets. Smart gamblers know when to increase the bet size with-in certain limits when they are winning. Position sizing that works calls for you to increase your shares when your ahead.

We will get into more of this as time goes on. Just wanted to give example. If you got Tharp’s book you can find this info in it.

[Runner]

Okay, well here's the system i'm going to start out with for HD:

I'll look at a daily chart over the last 6 months.
I"m going to use oscillators to give me my signals, specifically a Slow STO k=20, d=1 with keltner channels overlaid on it. The higher k removes some whipsaws at the expense of timing, but for now this is the value I'll start with. I've found it a good indicator. I'll use the centerline crossovers of the keltner channel to give me the buy/sell signals. I'll use bollinger band width as a measure of volitility, the goal being low but rising volitility combined with a buy signal will mean that it is accelerating upwards. Here's a chart of what the system would have done over the past 6 months.



notice that the last buy signal came at high volitility, and the success of that trade seems to be almost accidential.

Anyways, I'll start with a buy tomorrow on open because the STO line is way above the centerline, and volitility is rising. since I'll be late to the game by my system's rules, I'll take a 200k size position (or do I have to give # shares instead?) Stop loss will be the -7% as per the fiated rule.

Looks like a nice system!!
scifos 200K @ open stop -7%

[IIC]

Double Down...LOL

Hopefully I'm not out of place...but since you mentioned gambling systems you might want to check out one of my many "non-stock" related sites:

http://WinnersAnonymous.com

It is a 12 step site for people who always win

Karel...If I'm out of line...please just delete this post...Thanks, Doug(IIC)

[skiracer]

Runner,
Just a couple of questions. How long does the exercise last. Can you sell off a portion of the position or buy more anytime during the exercise but not exit the position completely. I know you said this was not a swing trade so I'm taking it that exiting completely and re-entering after a few days in not in the rules.

[Runner]

Interesting huge investor reveals interest in HD today

http://news.morningstar.com/doc/article/0,,144207,00.html

[Runner]

Runner,
Just a couple of questions. How long does the exercise last. Can you sell off a portion of the position or buy more anytime during the exercise but not exit the position completely. I know you said this was not a swing trade so I'm taking it that exiting completely and re-entering after a few days in not in the rules.

SKI, no time limit and you can sell anytime you want or buy anytime you want based on your system. I would hope this does not turn into a day trading thing though. I feel that different position sizing examples will prove an important lesson and we may even learn something of value in the exercise..

I would like for sales or stops to be planned instead of just selling because stock is dropping some...

[skiracer]

Runner,
Just trying to get a handle on the parameters. I understand your desire to keep it from becoming a daytrading exercise. Thanks.

[Runner]

I have given this some thought and it sometimes is difficult for me to relay what I’m thinking through my key board.. Please if any questions fire away.

[spikefader]

Hey Runner. This should be fun.

I'll play. Bid a fifth of a position at 35.00 and I'll go to sleep while I wait

[RL]

Runner sounds great I'm going to try not sure I understand all that well when Is the start date?

[New-born baby]

I'm in

Runner,
You can count me in. Now is not the time to buy for me. I am going to wait.