Each morning I check foreign markets and DOW futures and ...
>And try to predict the opening machinations of your favourite stocks, right?
Yes, something like that.
|I figure if my stock opens UP by, say 1%, then it's on a roll and might go even higher.
I check to see how often this happened in the past and whether I might expect another 1% rise.
For example, take a look at Figure 1. It's the stock price over the past 2 years.
>I wouldn't touch that stock with a ten foot pole!
Yes, but check this out:
GCE.TO opened UP by (at least) 1%, 37% of the time. That's quite often, eh?
In 83% of those cases, it continued to increase (to the daily High) by another 1% (at least).
In fact, the average increase (to the High) was 4.7%.
>So, it's guaranteed?
Okay, suppose we had bought the stock every time it opened UP by at least 1%.
In fact, we bought at the Opening price.
Then we sold it later in the day ... praying it would increase by at least another 1%, from the Open.
If it didn't rise to the occasion, we'd sell it at 1% below the Open. Then ...
>Then you'd have lost your shirt!
Check out Figure 2.
Though the stock prices dropped 13.5%, our strategy would have made us 198%.
>But 185 trades? What about trading fees?
We've assumed a fee of $10 every time we bought or sold.
Hardly. We'd want a stock where opening UP by 1% happens frequently and, in a large percentage of those times, it continues to go UP.
Here are some not-so-happy examples of this ritual:
Here's the spreadsheet:
Closes UP or DOWN ... then what?
I keep wondering whether, when my favourite stock closes UP today, will it tank tomorrow? Or when it closes DOWN will ...
>Will it be UP tomorrow.
Yes -- exactly, so I made up a spreadsheet like so:
It looks at the past 5 years, identifies those days where it closes UP (or DOWN), then checks the next Low (or High) and
... well, it's pretty clear what it does. For example, here's GE stock
>You talkin' about the past or the future?