MMCIT Stock Systems

Mechanical Trading

This site provides information on making money by using mechanical stock trading systems.

Mechanical trading systems scan the markets looking for buy/sell signals. These signals are presented so that traders can "follow" the system, trading as it does and therefore achieving the same results.

 

We provide stock buy and sell signals. We use mechanical trading systems to find stocks as they generate buy and sell signals. Information provided includes, full history of stock signals and orders along with current portfolio, history and performance data.

 

So, why might you want to adopt a trading system?

  • It can save a lot of time - Once an effective system is developed and optimized, there is little to no effort necessary on the part of the trader. Computers are often used to automate the signal generation, which can often involve many complex calculations on a daily basis. Hence the trader is freed from spending time on analysis.
  • It takes all emotion out of trading - Emotion is often cited as one of the biggest flaws of individual investors. Investors who are unable to cope with losses second guess their decisions and end up losing money. By strictly following a pre-developed system, system traders can forgo the need to make any decisions: after the system is developed and established, trading by means of the system is not empirical since it is automated. By cutting down on these human inefficiencies, system traders can increase profits.

Information provided

For each system that has been developed and is available on this site, we provide information on buy/sell signals as they occur (with a complete history), the history of orders made, the portfolio generated and its performance so far.  

Provide Input - Make Profit

Currently this is a site which provides the results of research into only a few mechanical trading systems. We are looking for input from others for more trading systems so that we can offer the results from a range of profitable trading systems. If you know of a profitable trading system, can clearly articulate the "system rules" and want to make a profit from sharing it, then please contact us.

Need Different Data

We currently only process a limited amount of data from a couple of exchanges. If you would like to see other stocks and/or exchanges, then please contact us.

 

 

 

General Trading Rules

Warning: Everything on this page is someone’s opinion. You need to form your own opinion and validate it before acting on anything!

 

Here’s a few tips that hopefully will help you in your trading:

 

  • If you have a system (here we assume that your system is profitable!), then follow it – to the letter. Do not try to outguess the system. Just what will tomorrow’s markets bring? Regardless of current price, remember there will always be a good rational argument that can be made to either sell now or buy now. There will always be an emotional environment of doubt. No matter which asset sector, don't worry about what the market is going to do or the stories surrounding them. Worry about what you are going to do in response to those markets in the present. You can’t undo the past and you can’t predict the future. No one can consistently predict anything!
  • Make sure your system has a exit plan and a plan to minimize your losses.
  • Long Term market success is simple but not easy: Long term market success is simple...simply remove your ego and submit to the process of obeying the orders of the mathematical models. This is not easy for some as they allow external doubt and emotional mettling to question their commitment. Submitting to the system and always obeying the orders from the signals is what makes for a long term successful investor!
  • Don't sacrifice your position for fluctuations.
  • Don't expect the market to end in a blaze of glory. Look out for warnings.
  • Never try to sell at the top. It isn't wise. Sell after a reaction if there is no rally.
  • Don't imagine that a market that has once sold at 150 must be cheap at 130.
  • Don't buck the market trend.
  • Don't look for the breaks. Look out for warnings.
  • Don't try to make an average from a losing game.
  • Never keep goods that show a loss, and sell those that show a profit. Get out with the least loss, and sit tight for greater profits.
  • Manage your risk. Position liquidations are triggered by significant adverse price action and are never pre-determined objectives. Concentrate on managing the risk. The returns will take care of themselves.
  • Do not attempt to buy lows and sell highs. Buy market strength (highs) and sell market weakness (lows).
  • Manage your risk: Concentrate on managing your risk. In life, it is not how much you make that determines the winners, it is how much you don't lose. Avoid the major losses and the returns will take care of themselves.
  • This site has some good info http://invest-faq.com/fiveminute/
  • “Trends always go further than rational people expect, or even imagine. Most investors don’t have the stomach for extended rallies or declines. The philosophy of not having a predetermined profit objective allows us to continue with a trend for its full duration and then some. We try very hard to avoid the pitfalls of liquidating a trade too early, even at the cost of giving back large profits...Trends exist and they endure for a specified time, longer than most imagine. In a very uncertain world, perhaps nothing makes more sense than simply following trends.” John W. Henry

 

A Possible Approach: Trading With Limited Money

Let’s face the fact right at the start – it’s difficult. It’s difficult for a few reasons, including

  • You have no experience
  • The only way you can reduce your risk it to trade small. If you trade small then broker commissions make it much harder for you to make a profit.
  • If you don’t trade small, you might get wiped out. On the other hand maybe you’ll get lucky and put it all on the right stock.
  • You probably don’t have a proven profitable system to follow

 

Since you have no experience, you’ll need to do a lot of reading first. After you’ve some idea of what to do (including the “system” you should follow) you should start “paper trading”. Only once you have completed a few months of this should you start trading real money.

Paper Trading

Paper trading is an educational tool. It’s probably a good idea to move on to real trading only once you have “graduated”. Its hard to define what graduation is but it probably should be after a few months of paper trading where you have traded at least 10 or 20 times and overall you have made a profit.

 

You need to make your paper trading as real as you can. Assuming you are going to use an online broker once you start trading real money, you can start paper trading by opening your brokerage account and depositing all of your trading funds. This will give you access to real time quotes and market depths and possibly other information which will help you. It also gives you a chance to get used to the site before you really need it.

 

Make your trading a realistic as possible. Start your trading diary. Document your intentions, the signals and the orders you “make”. If anything make your buy and sell prices worse than they really would have been. Remember to subtract commissions from each buy and sell order.

 

Always remember that it’s often really easy to make a paper profit since you really have nothing at stake and this frees you to trade as your system dictates. You’re never going to feel the real “feelings” of stock market greed and fear until you actually start putting some of your own real money on the line.

Real Trading

Once you’ve placed your first order and you actually own some stock, then you’ll be exposed to the classic stock market feelings of fear and greed. These might come out as “the stock price keeps dropping but I won’t sell just yet because it might go back up” or “the price has dropped so much now it’s a real bargain”. Both of those are signs that perhaps you are not following your system or maybe your system needs to be revised because you are losing money!

Stock Selection

Sometimes this is called “stock picking”. But make sure you don’t confuse this with “hot stock tips!”. There are many approaches to stock picking and this is beyond the scope of this discussion. Choose wisely, do your research, and don’t rely purely on a third parties picks.

Money Management and Position Sizing

“Preserve your capital”. This is a good adage for all traders. However, if you have a small trading account then you are much closer to having nothing than someone with a large account. In some ways you have more on the line and hence you need to be very careful about minimizing your losses.

 

You certainly need to always have a stop loss position defined. This should be defined before you enter the trade. If you know that you are about to purchase a stock at $1 then you should also know that you will exit if the price goes below a certain amount e.g. $0.95. If possible use a broker which allows you to place conditional orders. When you place a buy order, also place a conditional sell order which will be automatically executed on your behalf if the stock drops below a certain level.

 

One of the unique problems small accounts have is broker commissions. You must size your trades such that the broker commission doesn’t make it too hard to make a profit. Here’s an example.

 

You buy $500 of stock and the commission for the purchase was $20. You have a stop loss at 5% to cut your losses.

In order to make a profit you must sell the stock and incur another $20 commission.

So your total commission after you sell the stock is $40 or 8% of your purchase price. This 8% overhead makes it harder for you to make a profit and makes it easier to make a loss.

The stock must rise above $540 for you to make any money. That’s an 8% gain. That’s a large gain before you even make anything. If the stock rises 20% (to $600) and you sell, you’ve only made a 12% gain.  

If the stock is a loser, you’ve got a problem as well. Your stop loss is at $475. The stock hits $475 and you sell. You’ve actually lost a total of $65 because of commission. That’s a 13% loss. If you set your stop loss higher, to say 2% ($490) to reduce this loss then you have more of a risk that your stop loss will trigger the day you buy the stock since the stock might easily fluctuate this amount in a day.

 

In summary:

Stock Purchase Price

$500

Commission Amount to Complete Trade

$40 (8%)

Breakeven Point

$540 (8% gain)

Maximum Loss

$65 (13% loss)

 

Here’s that same example for a $2000 purchase amount.

Stock Purchase Price

$2,000

Commission Amount to Complete Trade

$40 (2%)

Breakeven Point

$2,040 (2% gain)

Maximum Loss

$120 (6% loss)

 

In the $2000 example the stock only has to rise by 2% for you to start making a profit. That’s significantly better than the 8% we saw before.

 

Here’s what it looks like for a $20,000 trade. In this case we assume that the flat $20 brokerage still applies.

Stock Purchase Price

$20,000

Commission Amount to Complete Trade

$40 (0.2%)

Breakeven Point

$20,040 (0.2% gain)

Maximum Loss

$840 (4.2% loss)

 

You should easily be able to see how larger trading accounts instantly have a much smaller commission problem than small accounts.

 

So what have we determined? Larger trades are more profitable than the same smaller trade. However, this then leads to the next problem. Don’t go an put all of your money into one large trade.

 

“Spread your risk”. Another good trading adage. It basically tells you that you should not put all your “eggs into one basket” and do not buy just one stock so that the commission charges are a lower percentage of your purchase. You should be buying different companies in different market sectors. However, that’s not so easy with a small trading account. What if you only have $10,000 to trade with? At this level you can only be in 5 simultaneous trades at $2000 each.

 

There is no really good answer. You are going to have to decide if you want to diversify into 10 stocks each at $1000 with lower chance of profit or whether the 5 at $2000 suits you better. This really depends on your risk profile. That is, how much risk you are happy to take. If you don’t mind a higher risk (and potentially higher gain) then the 5 at $2000 is for you. Risk adverse people should opt for the 10 at $1000.

 

Hopefully, over time (a short time!) your total trading capital should increase. As it does, review the standard position size you use. Even if you started with $10,000 using position sizes of $2000 (high risk with only a stock spread of 5), once you reach $20,000 total capital you would want to consider leaving your position size unchanged, since now you are capable of diversifying to a more acceptable level of 10 different stocks.

 

Taking a careful approach such as discussed above will enable you to gain more trading experience more quickly (you will execute more trades and be exposed to more nuances of the markets) and still leave you with an increasing trading capital account.

Using the Trading Data

How To Use The Trading Data

Typical Menu StructureThe "systems" presented here use end-of-day data and hence for best results you should access the data daily, after the close of the market so that you can prepare for the next trading day.

 

In summary, each "system" uses a different combination of trading rules and stock symbols. The system then trades those stocks according to the rules and presents the results on a daily basis allowing anyone to follow along and trade the same way the system is trading. The trading data provides signals which tell you when you should place orders to buy/sell stock. It also shows how the "system" acted upon those signals and the resulting orders.

 

The Trading Data page allows you to access multiple ‘systems’. Select the system you are interested in from the menu. You can then access information about that system from the sub-menus. The menu system for each system has the same layout, providing the same information for each system.

 

Here are the descriptions for each of the menu options

Overview Menu

This menu item provides access to an overview of the system and the stocks that are monitored.

Dates

A couple of dates are shown:

1.      The date that the data was updated on. Remember that these systems are based on end-of-day data. This means that the data accessed using the remaining menus is relevant after the market close on the date shown. For example, if the update date is shown as 10th May 2005, then the stock signal and order data has been generated after the market close on the 10th May 2005 and includes data from the market on 10th May 2005. The data should then be reviewed before the market opens the next trading day, which in the case of the example would be 11th May 2005.

2.      The date that the system was started i.e. when we started monitoring the stocks for signals. This shows how long the system has been active for. This may be relevant when you also review the system performance.

Money Management

Management of the money within a system is very important to its success. Money management is largely about sizing your stock positions in order to optimize the usage of your capital and reduce the risk of trading. If you place too much money on a trade that goes bad, you may never make up the losses again.

Money management may be simple as:

  • When entering a new position, always spend $4000 or less.
  • Place a stop at 4% under the purchase price (for long positions)

Or it may be more complex like:

  • When entering a new position, create a position size where the "at-risk" portion is always 2% or less of your total portfolio.
  • Place an initial stop at 2% under the initial purchase price (for long positions).
  • Review the stop daily. Move it upwards as the "close price" of the stock increases.
  • Never move the stop downwards.

Stocks in the System

The stocks that are included in each system are listed under the "Stocks" menu item.

Each of the stocks listed is

  • Monitored for buy/sell signals
  • Traded under the appropriate conditions

 

In some situations the list of stocks may be subject to change. If you are following a specific system and hold a position in a stock that is removed from the system you will need to apply the systems rules to exit the position manually. You should ensure that you maintain a stop to prevent catastrophic losses.

System Rules

The rules of the system are only one part of the requirements for success. Do not use the signals in isolation from the other important facets of the system. The system description may or may not include specific details on how the buy/sell signals are generated depending on how "open" the system is. The system rules will include information on:

  • How to place orders once a signal has been generated. For example, a system may rely on buy orders for long positions being placed the day following a signal at 1% higher than the close price on the day the signal was generated.
  • How and where to place stops

Signals Menu

The signals menu shows all of the signals that the system has generated. A system generates signals to buy and sell stocks once they meet the criteria defined by the system. For example, a simple system may generate a buy signal when a stock rises 5% or more from the close price the previous day, or it may generate a sell signal when the RSI indicator drops below 20.

 

Additional to just buy and sell signals, information is also provided about ‘stops’. Stops are generally used to limit losses. The signal data will include information on when to set stops and what price to set them at. Sometimes, a ‘stop trigger’ will be shown. This is simply an indication that a sell order should be placed because the stock has reached the stop trigger level.

 

The signal data is arranged so that the latest data is always easily accessible. Simply click on the ‘Latest’ menu option and you will be presented with the signals that were generated for the date shown. If no signals were generated on that date, then no signals will be shown.

 

All of the signals ever generated for the system are available by navigating through the ‘History’ menu option. The data is broken down into year and month, with all of the signals for a given month being shown on a single page.

 

A typical signal page gives the following information about each signal:

·        The date it was generated

·        The signal type e.g. Sell, Buy, Set Stop, Stop Triggered

·        The stock symbol, including the stock exchange

·        A price, if this is relevant. Prices are shown when you should set a stop. Some systems may also generate a price showing where you should place your buy or sell order. If the price is blank you should follow the system rules (outlined in the Overview section). The systems rules should give some guidance as to the how and at what level your buy/sell orders should be placed.

·        The quantity of stock that will be purchased in order to follow the money management rules that the system is using. The money management rules for any given system will be detailed in the Overview section for that system. If you are using your own money management rules and are simply using the information presented on the signal pages for timing information, then you should ignore any quantities presented on this page.

Orders Menu

The orders menu shows all of the orders that have been placed by system. Normally, a system generates signals to buy and sell stocks and these would be executed the next trading day (assuming that the purchase criteria have been met). For each signal generated, you should be able to find the corresponding order that was executed due to the signal. For example:

·        On 10th May 2005, after the market is closed, the data for that day is processed.

·        A buy signal for YHOO is generated. This signal is shown on the ‘latest’ signals page. No specific price is listed but the system rules state that buy prices should be placed before the market opens the next day at the close price on the day that the signal was generated. For this example we assume that the close price on 10th May 2005 is $34.

·        On the 11th May 2005, after the market is closed, the data for that day is processed. For this example we assume that the low price for this day was $33 and the high price was $35.

·        Since our order was placed at $34, it was executed on 11th May 2005. This order is shown on the ‘latest’ orders page.

·        If the price for YHOO on 11th May 2005 moved between $35 and $36, then our order would not have been executed. Then, if the price for YHOO on 12th May 2005 moved between $33 and $36, our order would have been executed on 12th May 2005. This would show as a buy order on the ‘latest’ orders page after the market closed and the system processing had been performed on the 12th May 2005.

 

The order data is arranged so that the latest data is always easily accessible. Simply click on the ‘Latest’ menu option and you will be presented with the orders that were generated for the date shown. If no orders were generated on that date, then no orders will be shown.

 

All of the orders ever generated for the system are available by navigating through the ‘History’ menu option. The data is broken down into year and month, with all of the orders for a given month being shown on a single page.

 

A typical order page gives the following information about each order:

·        The date it was generated

·        The signal type e.g. Sell, Buy

·        The stock symbol, including the stock exchange

·        The price that the order was executed at.

·        The quantity of stock purchased. The quantity of stock shown will be in accordance with the money management rules that the system is using. The money management rules for any given system will be detailed in the Overview section for that system. If you are using your own money management rules and are simply using the information presented on the signal pages for timing information, then you should ignore any quantities presented on this page.

Portfolio Menu

The portfolio menu is broken down into two sub-menus: Current Positions and Completed Trades.

Current Positions

This sub-menu shows all of the current stocks held. A current position is where buy/sell orders of unequal quantities have been executed and still result in you holding an interest in a given stock. Another name for this page could be "Open Trades".

For long positions (where you make money from the stock price increasing), a stock trade is started by initiating a buy order. Some systems may add to the initial trade by purchasing more stock, normally only as the stock price rises over time. These additions to an existing stock position are counted as belonging to a single trade. Other systems may initiate multiple positions for a single stock, each one being considered a separate trade. As long as you hold any of a single stock, the position is considered "open" and hence will be reported on this page. Some systems may initiate "profit-taking" sell orders (eg where half the stock is sold once the price has doubled) which may result in a reduction in the quantity of stock held, but which still leave you with an interest in the stock.

 

The information provided on this page for each current position includes:

·        The type of position taken i.e. Long or Short

·        The name of the stock, its symbol and exchange.

·        The date, quantity and price paid for each buy or sell order

·        The current price of the stock

·        The percentage gain or loss that the trade would have produced if the trade had been completed at the current stock price

·        The dollar gain or loss that the trade would have produced if the trade had been completed at the current stock price

 

The simplest example of a current position is a single buy order:

·        1070 shares of Caltex Australia purchased.

·        These shares have not yet been sold and hence result in you still retaining a position or interest in the stock.

 

Another example is:

·        462 shares of QBE Insurance (qbe.ax) purchased on 26th Feb 2004 at $10.95.

·        The position was added to by purchasing 432 more shares on 23rd April 2004 at $11.60.

·        As of 13th May 2005 the current price of QBE Insurance is $14.66.

·        If the trade was completed (i.e. all the stock sold) at this price, the gain would be 30.15% and the profit would be $3036.

Completed Trades

This sub-menu shows all of the completed stock trades. A completed trade is a buy/sell pair with equal quantities for the buy and sell.

For long positions (where you make money from the stock price increasing), a stock trade is started by initiating a buy order. Some systems may add to the initial trade by purchasing more stock, normally only as the stock price rises over time. These additions to an existing stock position are counted as belonging to a single trade. Other systems may initiate multiple positions for a single stock, each one being considered a separate trade. The completion of the trade is marked by the selling of all of the stock purchased. Often, all of the stock is sold in a single sell order, although "profit-taking" sell orders (eg where half the stock is sold once the price has doubled) may occur in some systems.

 

The information provided on this page for each completed trade includes:

·        The type of position taken i.e. Long or Short

·        The name of the stock, its symbol and exchange.

·        The date, quantity and price paid for each buy or sell order

·        The percentage gain or loss that the trade produced

·        The dollar gain or loss that the trade produced

 

The simplest example of a completed trade is as single buy/sell pair:

·        1070 shares of Caltex Australia (ctx.ax) purchased on 5th January 2004 at $4.68.

·        The shares were then sold on 3rd November 2004 at $8.60.

·        This resulted in a gain of 84% and $4,194.

 

Another example of a completed trade is:

·        173 shares of CSL Limited (csl.ax) purchased on 13th June 2000 at $28.00.

·        A further 166 shares purchased on 16th June 2000 at $30.00.

·        All 339 (179 + 166) shares of CSL were sold on 21st September 2000 at $34.05 resulting in a gain of 17.5% and a profit of $1719.

Performance Menu

This sub-menu is divided into two major sections.

Results by System

This table shows system as a whole has performed since its start date. For some systems there may be more than one sub-system making trades. Each sub-system will be shown separately. Information provided here includes:

 

·        The name of the sub-system. Normally only one sub-system would exist for each system.

·        The individual performances for each stock that was traded, including the return per period (normally the annual return), the gross return (since the system started) and the maximum draw down.

·        The number of gains made by the system

·        The number of losses made by the system

·        The average return per period (normally the annual return)

·        The average return if a buy and hold approach had been taken.

Results by Code

This table shows how each individual stock has performed since its start date. For some systems there may be more than one sub-system making trades. The returns for each sub-system will be shown separately. Information provided here includes:

 

·        The name of the stock

·        The individual performances for each stock that was traded, including the name of the sub-system (normally there would be only one sub-system), the return per period (normally the annual return), the gross return (since the system started) and the maximum draw down.

·        The number of gains made on the stock

·        The number of losses made on the stock

·        The average return per period (normally the annual return)

·        The average return if a buy and hold approach had been taken.

The Buy and Hold Approach

A buy and hold approach represents a system where you always buy (for long positions) stock and never sell it. In a rising market this may be a higher performing system, since most other systems attempt to reduce risk by cutting losses, which often also results in reducing gains. However, in a falling or sideways market, a buy and hold approach is may be more likely to result in bigger losses whilst other systems attempt to provide higher returns overall.

 

If you do prefer a buy and hold approach, the signals produced by a system become less important. You would only ever consider using the signals that led you to enter a position as it may provide slightly better timing than other methods.

 

Access The Trading Data

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Important Disclaimer

The financial markets are risky. Investing is risky. Past performance does not guarantee future performance. This site is prepared solely for informational purposes and is not a solicitation, or an offer to buy or sell any security. Opinions and signals are based on historical research and data believed reliable, but there is no guarantee that future results will be profitable.
Any information contained on this site and any trading signals it shows may contain statements that are the opinion of the author. The information and opinions contained on this site, signals, order, and performance data are believed to be correct, however the information is not warranteed or guaranteed in any way. The subscriber may use the information provided at his or her own risk. No representation is being made that the information will produce trading profits. In no event shall anyone related to creating, developing or publishing information on this site, be held liable for any special, incidental, or consequential damages, whatsoever (including: without limitation, trading losses or any other losses incurred) arising from the use or inability to use the information contained on this site, or from delays or failures in the updating of site content.

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Data Source

At the current time, our primary source of stock data is Yahoo! Finance. It may be possible that sometimes this data is incorrect. If you find an data anomaly that is mostly likely related to our use of this data source, please contact us. If you let us know, and the issue is incorrect data, we can most likely resolve the issue. Anomalies may occur after events such as stock splits, rights issues etc.


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