Hi guys!
I’m playing with some ideas I have for buying and selling shares and since I finally found a way to easily create automatic trading system without coding I decided to share some and get some feedback on it.
I am new to investing, so don’t be too harsh on me
In this super-simple strategy I tested what would happen if AAPL as the leader of the tech giants would fall 5% in a week and the very next Monday I’d buy $CSCO, $IBM, $MSFT and $AAPL – expecting all to rally. As a secondary indicator I used Price (of each asset traded) should be below exponential moving average (EMA) of period 20 – just to make sure the asset actually has some room to go up and return to the fair price.
My portfolio balance to start with is around $6k so I decided to buy as much shares as I can for $1k, but set Stop Loss orders of $90 – which is 9% of position loss, but only 1,5% of my initial balance loss. As Take Profit I set $420 – which is 42% of position profit, but 6% of the initial balance. It is very rudimentary risk management setup, but for some basic testing it’ll do. I am okay with having quite a big exposure at in these considerably stable companies, but I wanted to minimize potential loss on up to 6% on a single trading setup (4 assets times 1,5% risked). At the same time I wanted to leverage this exposure for at least 4:1 RRR (risk reward ratio).
I backtested the strategy on past 5 years (oct. 2013 – oct 2018) and got Net Profit of $3,225 – which is around 53% of my initial balance. That equals to around 10% per year – not bad, it’s pretty much the same as S&P did in the same period, but with much smaller drawdown of only 5,5% in the whole period. So perhaps by using some moderate leverage (1:2), it could be something.
Any ideas on how I could enhance the system some more? All constructive ideas appreciated
Backtested via cleo.one
