A simple strategy

Has anybody ever looked at a strategy of the following:

By simply looking at major movers on the day and then placing a long or a short depending on what the major move is, i.e. riser place a long, down place a short the same day. Obviously this does not catch the up or down move but statistically the price would usually follow the same direction the next day. Obviously not always the case but I have done some checks over the last few days and the percentages are 70% in favour 30% against. So if you utilise sensible Stop Loss then this may be a good stratergy albeit mind numbingly simple.

I would be interested if anybody has used this and can shoot me down in flames if it hasn't worked for them.

Just sometimes the simplest statergies are often the best.

Obviously there are issues of spreads charged etc but if you select your stocks cleverlyl i.e. avoid some of the larger stocks.

I would also look at utilising some TA i.e. Trends and support and resistance levels.

Anyway I am ready for being shot down.

The problem, if you are Spread Betting, is that if you set a stop to get out with a small loss you can easily get stopped out just by the normal price fluctuation of the next day. So, while the EOD price may have ended up in the correct direction as per your system, you may get stopped out earlier in the day.

This is one of the enduring dilemmas of short term trading, particularly SB, where losses can arise very quickly. If anyone has a view on minimising this I , for one, would appreciate the advice.

You are not too far off the mark. I noticed this a while ago and only recently worked on some predictions based on a similar system. I also noticed that there is a strong correaltion to R1/S1 levels. Based on this I worked out a way to 'predict' stocks in FTSE 100 that would either hit the R1 or S1 levels.

Only been trying it for a few weeks but have put the results here. Opening gaps play a big part and as the list is made up based on closing data some figs are out. I have modified the lists for 2nd & 3rd October to take into account opening gaps as an excercise.

Week 1 :
http://www.tradersoftware.biz/testdata/22092003.html
http://www.tradersoftware.biz/testdata/23092003.html
http://www.tradersoftware.biz/testdata/24092003.html
http://www.tradersoftware.biz/testdata/25092003.html
http://www.tradersoftware.biz/testdata/26092003.html

Week 2 :
http://www.tradersoftware.biz/testdata/29092003.html
http://www.tradersoftware.biz/testdata/30092003.html
http://www.tradersoftware.biz/testdata/01102003.html
http://www.tradersoftware.biz/testdata/02102003.html
http://www.tradersoftware.biz/testdata/03102003.html

Kevin.
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There is one side to the stock market; and it is not the bull side or bear side, but the right side.

Dazzam ,

you are right ,, The simplest strategies are often the best because every one else is using it too .. Your observation is actually a profit making strategy,, In techncal analysis we feel the break out from consolidation are OFTEN in the direction of the previous trend.. .. I have a feeling many swing traders be making a fortune out of this strategy now that US recovery is ahead..

You can attach a simple Money managment system to your finding and you got yourself a good and proven money making system.

Hi Dazzam
My own survey of price behaviour following release of results suggests that a rise on the publication day is followed 2 times out of 3 by a further rise on the next day. As these are often the best risers of the day, it seems to back up your obs.

The strategy of buying the biggest risers for another rise tomorrow was put forward by Malcolm Stacey in either Armchair Tycoon or Poolside Tycoon, 2 of the less serious books on the markets. He suggested buying the riser from the top of the BBC Ceefax gainers list.