Originally Posted by
Pascal
Selection is sometimes difficult.
If you are too restrictive, then you end up with too few candidates to be able to operate a good selection.
The fact that there are few long candidates could indicate that funds are not buying leaders for now.
What I observed in the past days however is that the number of shorts candidates is decreasing, which could mean the opposite: funds are not shorting!
I back tested the number of possible candidates related to the average returns but could not find a clear correlation.
What I however found is that when you try to get for example 10 positions, if your selection is too strict, you often end up with being under invested. This means that you miss some of the up/down side.
I hence prefer a larger selection coupled to a system that only crops the five or ten best candidates... or I operate a manual selection, which is my preference, because I like to feel more clever than a computer (in hindsight it is seldom the case.)
Pascal