trend trading australian shares 3. rotational...
TRANSCRIPT
3. Rotational Trading
Trend Trading Australian Shares
Peter Aubourg
Review of “ Finding Trending Shares”
• The Edge -> Long term UP trend.
• Weekly Timeframe ( not daily )
• Measure Long term UP trend -> ROC of a MA -> Long Term RSI
• Rank shares -> Watch list High Momentum Shares
Rotational Trading( Simplified)
Week 1. Buy top 10 shares in the trend Ranking.
Week 2. Own top 10 shares in the trend Ranking.
( Sell shares not in top 10, Buy shares new to top 10)
Week 3. Repeat
Week 4. Repeat
Week 5. Repeat
etc, etc, etc
Ranking Changes over 20 days
Ticker Start +1 Day +2 Day +3 Day +4 Day +5 Day +6 Day +7 Day +8 Day +9 Day +10 Day +11 Day +12 Day +13 Day +14 Day +15 Day +16 Day +17 Day +18 Day +19 Day +20 Day
OMH.au 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1
KGN.au 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2
A2M.au 3 3 3 3 3 3 3 3 3 3 3 4 4 4 4 4 4 4 4 4 3
BAL.au 4 4 4 4 4 4 4 4 4 4 4 3 3 3 3 3 3 3 3 3 4
ALU.au 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 6
KDR.au 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 7 8 8 8 8
RBL.au 7 7 7 7 7 8 8 8 8 8 8 9 9 9 9 11 11 12 12 12 13
LOV.au 8 8 8 8 8 7 7 7 7 7 7 7 7 7 7 8 8 7 7 7 7
APX.au 9 9 9 9 9 9 9 9 9 10 10 10 10 11 11 10 10 10 9 9 9
NEC.au 10 10 10 10 10 10 10 11 11 12 12 12 12 12 12 12 12 11 11 11 11
NEA.au 11 11 11 12 13 13 13 13 13 14 14 14 14 14 14 14 14 14 15 15 16
BUB.au 12 15 16 16 16 17 17 17 17 17 17 16 16 17 17 17 17 17 18 18 18
MP1.au 13 14 15 15 15 15 15 15 15 16 16 17 18 18 18 19 19 19 22 23 26
LYC.au 14 13 13 13 12 12 12 12 12 11 11 11 11 10 10 9 9 9 10 10 10
BVS.au 15 12 12 11 11 11 11 10 10 9 9 8 8 8 8 7 6 6 6 6 5
PPH.au 16 16 14 14 14 14 14 14 14 13 13 13 13 13 13 13 13 13 13 14 14
NEU.au 17 17 18 18 18 19 19 19 19 19 20 20 20 21 21 21 20 21 21 21 22
NCZ.au 18 19 19 19 19 18 18 18 18 18 19 19 22 23 23 23 25 28 32 34 35
PNV.au 19 18 17 17 17 16 16 16 16 15 15 15 15 15 15 15 15 15 16 16 15
NWH.au 20 20 21 22 24 24 29 31 36 36 38 41 43 45 45 54 56 62 65 74 79
SVW.au 21 21 20 20 20 20 20 20 20 20 21 21 19 22 22 22 21 20 20 20 21
IMD.au 22 22 22 21 21 21 21 21 21 22 22 22 21 20 20 20 18 18 19 19 19
NXT.au 23 23 23 23 22 22 22 23 23 23 24 24 24 24 26 26 25 28 30 30 28
Ranking Changes as a Chart
5
1
10
25
15
20
Ran
kin
g
Sell
BuyBuy
Sell
10 Positions
Week 2 Week 3 Week 4 Week 5Week 1
Rotational Trading
Is not “Normal” Trading
What is the System Trying to Do?
A means to:-
• Exploit the “Trending Anomaly”
• Catch and hold the BIG wins
• Focus on the Marlin, but keep the Minnow
• Not lose our Capital
Monthly Rotational Example( Concept only, Do Not Trade )
• Calculate a Trending Score -> All tradable shares All Ords.
• This example -> Trending “Score” = Weekly RSI
• Start of each month -> Rank shares and select 10 with the highest scores.
• Buy an equal value of each of these 10 shares. e.g. $100k trading capital; buy $10k’s worth of each share.
• End of the month -> Sell all shares. …… Repeat
Start of Month: Buy 10 Shares with the Best Trending Score
Month 1 start
Month 2 start Month 3 start
A2M price chart
Date of Scan: 4-Sep-17
A2M % Change chart 200 days
Date of Scan: 4-Sep-17
A2M % Change chart 20 days
Date of Scan: 4-Sep-17
Sep-2017
Oct-2017
Nov-2017
Dec-2017
Jan-2018
Feb-2018
Mar-2018
Apr-2018
May-2018
Jun-2018
Jul-2018
Aug-2018
Cumulative Change
Equity Curve from Jan-2011 ( Uncompounded )
Start Trading August 2016
- $27,000
Equity Curve updated to 11-Apr-2019
How Does This Work ?
No Stops
• Stops -> Burning in the Noise
• Stops -> Trading weekly / Stopped daily
• Don’t Stop It - > Swap It !
( For something better )
All In !!
Averaging
Trade 1
Trade 2
Trade 3
Trade 4
Trade 5
Trade 6
Trade 7
Trade 8
Trade 9
Trade 10
Exploiting
the
Statistical
Edge
Similar Styles of Trading
• Trading the ASX200 Index. The index has periodical rebalancing
• Trading a portfolio with periodical rebalancing
• Trade our own IndexHighest Long Term Momentum shares
Always In
• Capture Big UP moves
• Independent of TA Signals
Can you pick the winners ?
How Often to Rotate ?
• “sweet spot“ - Weekly rotation
• Monthly systems still work
The Whole Market Drops !
• What happens when the whole market drops, taking our “best 10” with it ?
Aug-2011 ( Bad day month at the office )
• Create a “System OFF” switch based on the underlaying index (All Ords XAO)
Turn the System OFF when the Whole Market goes Down
Weekly Chart of All Ords (XAO)
Turn System OFF ( Sell All)
MACD
Re-Start System
• A Blunt Instrument
• Oscillator
• Balance: Reactive vs Stable
• False Positives vs Big Drawdowns
Having your cake and eating it too
Trade a number of Systems differently
Summary
• Rotational Trading -> Always own shares with the highest long term momentum
• No stops -> Don’t Stop it; Swap it ! Swap poor performers for better performers
• Always in the market -> Catch the UP runs
• Safety in Numbers -> Manage risk with the averaging effect
• Long Term -> Weekly momentum; NOT daily noise
• Big market down turns -> Turn the system OFF with a market filter
• Very easy to trade !
Where to from here ?
• Amibroker
• Norgate data – Survivor bias free
• Back test
• Trade
Amibroker – ATAA Rotational Template
• Basic code and setup to get started
• The code works
• Not a tradable system !!!
• Has all the system components
• Adjust, change, modify, optimize
• Rotational is only one way to trend trade.
• There are many other methods
• However, All use
“finding long term trending shares”
Trend Trading Options
Level 1: Use the monthly scan lists on the website and use discretionary methods to trade.
Level 2: Run scans yourself and use discretionary or systematic methods to trade.
Level 3: Use Amibroker to design and test your own system. Trade that system.
Thankyou for your attention