Ten Greed Small Cap Portfolio Discussion

Just a placeholder for a Small Cap Trading System.  Any ideas welcome.  

My initial thoughts:  This one will focus on small caps ready to breakout or already started to breakout.  Holding time will be short, 2 weeks maximum.  It will include the stock picks, when and how to buy, and when and how to sell.  This will not be as slow as the TGMBFS, and may require intraday buys and sells.  Will only use NYSE and NASDAQ listed stocks.

Found a filter that someone else created that appears to be pretty good, but I'll have to understand it better and modify to suit our goals:


/* Breakout Filter - small and microcaps - run intraday*/
/* Looking for small cap breakouts that may run for a few days to weeks*/
/*Run in morning at noon, and past 3 */
/* look for tech China, pharma,etc breaking out of well formed base */
/* look for long upslope on OBV with recent increase*/
/* Look for higher lows on recent rsi2 */
/* Look for multiple new high volume bars rather than 1 huge volume bar*/
/* Look for recent breakouts that fib retraced, if OBV is holding up, look for reentry*/

set{money, close * average volume(50)}
set{cmf1, count(Chaikins Money Flow(20) > 0, 99)}
set{cmf2, count(Weekly Chaikins Money Flow(20) < 0, 99)}
set{days_cmf1, days(Chaikins Money Flow(20) < 0, 99)}
set{days_cmf2, days(weekly Chaikins Money Flow(20) < 0, 99)}

close reached new 30 day high
/*close 6% above close 1 day ago*/

money > 8000
money < 1500000

/*close 1 day ago below upper bollinger band(16,2) 1 day ago*/
close above upper bollinger band(16, 2)
open below upper bollinger band(16, 2)
rsi(2) > 95
close > 0.05
close < 5
/*weekly Chaikins Money Flow(20) > 0*/
draw Chaikins Money Flow(20)
draw OBV
add column rsi(2)
add column pe ratio
add column eps
add column market
add column ind
add column separator
add column Chaikins Money Flow(20) {CMF20}
add column weekly Chaikins Money Flow(20) {weekly CMF20}
add column money
add column cmf1
add column cmf2
add column days_cmf1
add column days_cmf2
sort by column 13 ascending

Running the above after close, last night's picks were, mm, hotr, and hnsn. It appears that every day it has at least one 10% runner. I'll have to do an intial backtest to see what it can do. May not be what we want to do, but just the first crack at it.

I like the idea of a midcap picker.....
Of the three picked....HOTR has a good track record of higher highs and lows, but with tremendous volatility by % and is up 11-13% overall in last 30 days.
MM is less consistently up but shows 8% gain over 30 days....
HNSN seems too small.....

I have experimented with tracking stocks that are on a winning trend and have been disappointed in the short term results. Seems invariably they are at the height of their bollinger bands....which leads me to believe they are going to drop.....I think it would be interesting to set buy targets based upon the BBs and then be patient for those entries and eventually ride the trend up....but I don't know.

Was looking more closely at hnsn....... at .94.. Looking at the short term volatility....last 5 days...low about .86 and one spike to 1.00.....that's 16%.....if one followed closely and used a buy down strategy with this stock, looks like you could make some good money over any give short term....

Over time, I have identified other stocks that have large percentage price swings, but trade in a very horizontal channel....wonder about identifying such....

I've just looked in some old files for the one's ID'd as daytraders, but haven't found them yet.

One thing that I noticed is that a lot of brokerages charge extra for trading stocks that are below $2, so we can use a minimum of $2 in any selection process to make the system more accessible to all. So although, it maybe a small cap system, it will not be a penny stock system.

Just to try something, applying the bottom feeders system filters to small cap stocks did not work at all. What I am wondering though is if I apply a faster version of that system. Doesn't hurt to play around with filters anyways!

It appears it is easy find/write numerous scans that can find profitable stocks (and loser stocks), but implementing them into a trading system appears to be an issue. Kind of the same situation I've been having for years really with small caps. Easy to find, hard to implement.

As a goal, I think we would want to have returns of double of the Bottom Feeders System which focuses on large caps, since small caps are riskier, so we should expect more returns.

For comparison purposes, here is the bottom feeders portfolio backtest without the addtional buys (which would improve returns - but the backtester does not permit this). But all things equal, this should be good for comparison purposes.

Viewing: Bottom Feeders Portfolio

Approach Information

Approach Name: Bottom Feeders Portfolio
Test started on 2012-12-31 ended on 2014-12-31, covering 504 days

Filter used:


Bottom Feeders Portfolio (saved filter))


Trade Statistics

There were 88 total stocks entered. Of those, 59 or 67.05% were complete and 29 or 32.95% were open.

Of the 59 completed trades, 53 trades or 89.83%resulted in a net gain.

Your average net change for completed trades was: 15.61%.

The average draw down of your approach was: -9.27%.

The average max profit of your approach was: 20.21%

The Reward/Risk ratio for this approach is: 11.25


Annualized Return on Investment (ROI): 41.25%, the ROI of ^SPX was: 22.94%.


Equity Summary

Starting Account Value: $100,000.00 Fees per trade: $5.00

Ending Account Value: $144,512.37. Cash: $1,342.42 Market value of holdings at end: $143,169.95 (paid: $143,268.62)

Realized gain/loss: $45,051.04 ($763.58 per trade.)

Total Commissions Paid: $735.00

Unrealized gain/loss: $-98.67.


Exit Statistics

Stop Loss was triggered 0 times or 0.00% of the time.

Stop Profit was triggered 43 times or 72.88% of the time.

Trailing Stop Loss was triggered 0 times or 0.00% of the time.

You held for the maximum period of time (182 days) 16 times or 27.12% of the time.

An exit trigger was executed 0 times or 0.00% of the time.

And my first crack at backtesting a small caps strategy. Not great.

Viewing: Small Caps

Edit Delete

Approach Information

Approach Name: Small Caps

Test started on 2012-12-31 ended on 2014-12-31, covering 504 days

Filter used:

Small Caps (saved filter))

Trade Statistics
There were 185 total stocks entered. Of those, 185 or 100.00% were complete and or 0.00% were open.

Of the 185 completed trades, 95 trades or 51.35%resulted in a net gain.

Your average net change for completed trades was: 1.59%.

The average draw down of your approach was: -8.58%.

The average max profit of your approach was: 9.89%

The Reward/Risk ratio for this approach is: 1.45

Annualized Return on Investment (ROI): 27.25%, the ROI of ^SPX was: 22.94%.


Equity Summary
Starting Account Value: $100,000.00 Fees per trade: $5.00

Ending Account Value: $112,798.88. Cash: $112,798.88 Market value of holdings at end: $0.00 (paid: $-925.00)

Realized gain/loss: $12,798.88 ($69.18 per trade.)

Total Commissions Paid: $1,850.00

Unrealized gain/loss: $925.00.

Exit Statistics

Stop Loss was triggered 0 times or 0.00% of the time.

Stop Profit was triggered 13 times or 7.03% of the time.

Trailing Stop Loss was triggered 0 times or 0.00% of the time.

You held for the maximum period of time (15 days) 172 times or 92.97% of the time.

An exit trigger was executed 0 times or 0.00% of the time.

Wow! Those are dramatic differences. Big companies, with great management seems to win out when things go bad for the companies/markets. Is that your opinion? Also, I suppose the larger orgs have better access to capital and perhaps better cash flow, etc. to manage turnarounds. At least that's what I think the BFS scan picks up...orgs with collapsing stock prices...meaning there is crisis somewhere in the org or industry....???

Yes, large companies have a lot less risk. Check out the reward/risk ratios. 11.25 vs 1.45. No brainer on which system I'd invest in at this point. Bottom feeders is a lot more reward for a lot less risk. But we are not throwing in the towel on small caps just yet. The benefit of small caps is volatility and tendency to have more muti-baggers quicker. I think we can exploit that. Just need to keep trying stuff. Is there a subcategory of "safe" small caps or at least "safer" small caps? Maybe.

Getting better:

Viewing: Small Caps
Approach Information
Approach Name: Small Caps



Test started on 2012-12-31 ended on 2014-12-31, covering 504 days

Filter used:
Small Caps (saved filter))


Trade Statistics
There were 80 total stocks entered. Of those, 80 or 100.00% were complete and or 0.00% were open.
Of the 80 completed trades, 74 trades or 92.50%resulted in a net gain.
Your average net change for completed trades was: 17.05%.
The average draw down of your approach was: -6.46%.
The average max profit of your approach was: 22.41%
The Reward/Risk ratio for this approach is: 18.94
Annualized Return on Investment (ROI): 34.48%, the ROI of ^SPX was: 22.94%.

Equity Summary
Starting Account Value: $100,000.00 Fees per trade: $5.00
Ending Account Value: $166,867.62. Cash: $166,867.62 Market value of holdings at end: $0.00 (paid: $-400.00)
Realized gain/loss: $66,867.62 ($835.85 per trade.)
Total Commissions Paid: $800.00
Unrealized gain/loss: $400.00.

Exit Statistics
Stop Loss was triggered 0 times or 0.00% of the time.
Stop Profit was triggered 34 times or 42.50% of the time.
Trailing Stop Loss was triggered 0 times or 0.00% of the time.
You held for the maximum period of time (180 days) 46 times or 57.50% of the time.
An exit trigger was executed 0 times or 0.00% of the time.

Not too bad during the 2008 crash either. I think anyone would have been happy losing less than 10% during that timeframe.

Viewing: Small Caps

Approach Information
Approach Name: Small Caps
Test started on 2007-12-31 ended on 2008-12-31, covering 253 days

Filter used:

Small Caps (saved filter))

Trade Statistics
There were 61 total stocks entered. Of those, 61 or 100.00% were complete and or 0.00% were open.
Of the 61 completed trades, 35 trades or 57.38%resulted in a net gain.
Your average net change for completed trades was: -2.78%.
The average draw down of your approach was: -23.68%.
The average max profit of your approach was: 16.40%
The Reward/Risk ratio for this approach is: 0.78
Annualized Return on Investment (ROI): -9.85%, the ROI of ^SPX was: -37.85%.

Equity Summary
Starting Account Value: $100,000.00 Fees per trade: $5.00
Ending Account Value: $90,964.84. Cash: $90,964.84 Market value of holdings at end: $0.00 (paid: $-305.00)
Realized gain/loss: $-9,035.16 ($-148.12 per trade.)
Total Commissions Paid: $610.00
Unrealized gain/loss: $305.00.

Exit Statistics
Stop Loss was triggered 10 times or 16.39% of the time.
Stop Profit was triggered 26 times or 42.62% of the time.
Trailing Stop Loss was triggered 0 times or 0.00% of the time.
You held for the maximum period of time (182 days) 25 times or 40.98% of the time.
An exit trigger was executed 0 times or 0.00% of the time.

Still had to use a 6 month hold time though, but upped the exit criteria to 30% returns.  34 of the 80 stock purchased returned about 30% or more.  4 more returned 20% or more, 6 more returned 15% or more.  Some made 15-30% in a few days, some took the whole 6 months, it varied.

If anyone interested in taking the reigns on this, I could pass this over to you for further improvement.  If anyone is interested in taking this one as is, here are the picks for Monday's open:

EWBC
SBNY

I'm thinking 10% target within 30 days, 20% within 90 days, 30% within 180 days resulting in annualized gains of 120%, 80%, and 60% respectively and 16.667% fibonacci average downs with 20% sells on all drawdowns.

as a side note, i think the financial sector and energy sectors are the place to be for the foreseeable future.  I'm liking that the small cap system appears to be bank heavy and the large cap system appears to be energy heavy.

Warren Buffet has the same line of thinking on banks and energy:

"What stocks does Warren Buffett think will do well in a correction? Since the second quarter of 2012, Berkshire Hathaway has increased its holding in Wells Fargo & Company (NYSE/WFC) by 225%, American Express Company (NYSE/AXP) by 193%, U.S. Bancorp (NYSE/USB) by 21%, and The Bank of New York Mellon Corporation (NYSE/BK) by 31%."

http://www.thestreet.com/story/12983119/1/buffett-and-billionaire-investors-look-to-oil-health-care-and-spinoffs-in-2015.html

It appears all the big boys, Buffet, Soros, Pualson, etc, are shedding off the consumer spending stocks, like J&J, Kraft, P&G.  Interesting.

I'll make a new thread for the system and we can keep this as the discussion thread. Everyone can add their picks and targets. We'll make this one more open for the team's ideas, and refine as it matures.

Very interesting observations on the banking and energy sectors...gonna pay attention to this...

Having not created an account, nor even fully understanding the criteria that you have selected (and printed) above, I am loath to think about taking over reins.....But I am very interested in all of this and may find my way to it yet.
Really appreciate all the time and effort you have put into this and the generosity of sharing it all....good man!

Here is the criteria - the first line keeps them to the safer small cap stocks - has to meet the stringent criteria to be placed in the S&P 600 Small Caps Index. Next 2 lines just Moving averages - below the short term, above the intermediate term. The next line keeps them to companies above $5B market cap - these stocks are really right on the line between being small cap and large cap - so I'm kind of cheating. If I go smaller, too many picks. The other way we can do it is to make the rest of the criteria more stringent in order to go with smaller cap stocks - for example add in "price crossed upper Bollinger band (10)". I just tried though and it loses money. Ha, it also loses money for "price crossed lower Bollinger band (10)". Hmm, not really liking that the picks I have really are sort of large caps.

show stocks where index is S&P 600 Small
Price crossed below the MA(5)
Price above the MA(20)
market cap above 5000

For now I think we'll just leave this system as an evolving system, with everyone making some picks until we get a better handle on it. The scan above works, but it really isn't small cap.

I ran this guy's criteria, and just awful:

http://www.winninginvesting.com/small_cap_screen.htm

do about 5x better just investing in index funds. Just interesting the stuff being spewed out there.

The more and more I look at this, I think I'll stick to paper trading small caps for awhile. Can't find any real good logic that works that great. I'll some picks in the thread though to track.

Actually, I like the large cap BFS...which seems to have proven or at least tested positive results.

I have a question about large cap BFS, but will bring it up in that forum...

thinking Lumber Liquidators as an add as a small cap pick.  Will let it play out today first and decide later tonight.