TradingwithRayner presents:
Profi t ab l e Tra ding S ec re ts :
Le s s ons from a De ca de of Tra di ng
Profitable Trading Secrets
The biggest reasons why traders fail and how to avoid it
Trading principles that work
Mistake #1: Buying “cheap” stocks
Can remain “cheap” for years (opportunity cost)
Higher probability of loss
Mistake #2: No clue, no plan, no idea
Mistake #3: Fooled by randomness
The law of large number
Short run, your trading results are random
Long run, it’ll be aligned towards the system’s expectancy
An example
50% win-rate:
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Abandon the strategy and look for the next “big thing”
Recap
Don’t buy “cheap” stocks
Have a plan
Don’t be fooled by randomness, understand the law of large number
Principle #1: Buy high sell higher
Backtest #1: Buy low sell high
Buy rule:
Go long when a stock hits a 50-week low
Exit rule:
20% trailing stop loss
Filter:
Top 20 stocks with largest price decline over the last 50 weeks
Backtest #1: Buy low sell high
• Transaction Costs: $0.01 per share
• Test universe: Russell 1000 stocks
• Execution: Market open
• Maximum open positions: 20
• Positions size: 5%
• Test period: 1990 – 2018
Results: Buy low sell high
Number of trades: 467
Winning rate: 43.68%
Annual return: 9.28%
Maximum drawdown: 52.27%
Backtest #2: Buy high sell higher
Buy rule:
Go long when a stock hits a 50-week high
Exit rule:
20% trailing stop loss
Filter:
Top 20 stocks with largest price increase over the last 50 weeks
Backtest #2: Buy high sell higher
• Transaction Costs: $0.01 per share
• Test universe: Russell 1000 stocks
• Execution: Market open
• Maximum open positions: 20
• Positions size: 5%
• Test period: 1990 – 2018
Results: Buy high sell higher
Number of trades: 707 (467)
Winning rate: 48.66% (43.68%)
Annual return: 12.81% (9.28%)
Maximum drawdown: 40.75% (52.27%)
Principle #2: Rising tide lifts all boats
Rising tide lifts all boats
Trend filter
US Stocks (Russelll3000, S&P 500, etc.)
Philippine Stocks (PSEi)
Singapore Stocks (STI)
Backtest #3: Buy high sell higher (with TF)
Trend filter:
Buy only if the Russell 3000 index is above the 100-week MA (or else stay in
cash)
Buy rule:
Go long when a stock hits a 50-week high
Exit rule:
20% trailing stop loss
Filter:
Top 20 stocks with largest price increase over the last 50 weeks
Backtest #3: Buy high sell higher (with TF)
• Transaction Costs: $0.01 per share
• Test universe: Russell 1000 stocks
• Execution: Market open
• Maximum open positions: 20
• Positions size: 5%
• Test period: 1990 – 2018
Results: Buy high sell higher (with TF)
Number of trades: 905 (707)
Winning rate: 49.17% (48.66%)
Annual return: 15.70% (12.81%)
Maximum drawdown: 35.08% (40.75%)
Principle #3: You got to have a plan
1. What markets are you trading?
2. What’s your entry trigger?
3. How much do you risk per trade?
4. How many shares/units do you buy?
5. How will you exit the trade when you’re right?
6. How will you exit the trade when you’re wrong?
Backtest #3: Buy high sell higher (with TF)
Trend filter:
Buy only if the Russell 3000 index is above the 100-week MA (or else stay in
cash)
Buy rule:
Go long when a stock hits a 50-week high
Filter:
Top 20 stocks with largest price increase over the last 50 weeks
Exit rule:
20% trailing stop loss
Backtest #3: Buy high sell higher (with TF)
• Transaction Costs: $0.01 per share
• Test universe: Russell 1000 stocks
• Execution: Market open
• Maximum open positions: 20
• Positions size: 5%
• Test period: 1990 – 2018
Recap
Buy high sell higher
Use the stock index as a trend filter
You got to have a plan
But before I end…
The lessons…
Your past ≠ your future
The WHY is more important than the how
WHY > Excuses
PDF Slides
Tradingwithrayner.com/event
THANK YOU
