- Jack Schwager, "The New Market Wizard" -
Objective:
This site is a result of applying statistical models for stock screen analysis to achieve superior investment return(annual return>18%) with extremely low risk of your capital. This is not a solicitation for stock purchase. It represents author's view of stock trend based on a swing model that the author created.
Warning: Stock investment is a risky game. There is a high probability of loss. The author assumes NO responsibility of any loss if you invest in these stocks.
Methodology:
Lots of you asked about the stock selection method (Swing Model). Here is a revised version that was published about a month ago. A big emphasis has been placed on risk control. You can find a detailed statistical analysis of the result by clicking the favorite links. Jack Schwager who interviewed many America's top traders discussed risk control in his excellent book "The New Market Wizard". Jack Schwager wrote: "Almost every person I interviewed felt that money management was even more important than the trading method. Many potentially successful systems on trading approaches have led to disaster because the trader applying the strategy lacked a method of controlling risk." Here is a brief description. We are NOT liable to your investment loss if you apply this
model. Please do your homework!
Let's swing:
1) Data Collection
I use TC2000 to collect data on daily or weekly basis depending on how busy
I am.
2) Data Pre-processing
Each week, more than 250,000 data points are processed to provide a list of 2000-3000 stocks with good liquidity.
3) Pattern Recognition
I use three computers to process the data collected (24hr/day, 7 days/wk) according to a combination of fundamental and technical indicators...
Profitable candidates from more than 9000 stocks are selected
according to the statistically significant patterns.
4) Visual Inspection
I visually inspect the stock charts which have been narrowed down to 5-20 by now and calculate P/R ratio (Profit/Risk Ratio). The stocks are ranked according to P/R ratio. The higher it is the better.
Visual plot of data is very important in that it can tell a good story.
In financial market analysis, one critical issue to ask is: How do you distinguish price trending mode and price oscillation mode(non-trending)? One method called "random walk", was introduced by E. M. Poulos in the Feb. 1991 issue of "Technical Analysis of Stocks and Commodities". This has bcome known as Random Walk Index (RWI). (Does it sound familiar? Scientists know this random walk for many many years now.) This RWI method compares the actual price with a truly random movement. If the price range moves out of the random walk range over the lookback period, it suggests a trending market. Trend is your friend!
5) Execution
Stocks with highest P/R ratio are purchased.
6) Position Management
Stop loss, trailing stop rules are coded in this swing model.
