Quote Originally Posted by kimmd View Post
Mike-
Are you using a hard intraday stop of 7% loss or 25% gain or do you sell the next day based on the closing price violating the stop?
I enjoy your work!
-kim mcmorries
Kim,
This analysis uses a hard stop of -7% and +25% profit. In some cases stocks that are exhibiting really strong gains (up 20% in less than 3 weeks) the profit target is raised. Also, if a stock subsequent to purchasing breaks out of a new base the profit target is raised to 25% above the buy point in that base. An additional stop loss is used in the analysis if the case of a 50-day moving average failure. If a stock closes below the 50-day the intraday low of that day becomes a hard stop.

The 50-day moving average break rule actually reduces performance but this was adopted because in real life stocks that fail the 50-day causes many investors to cut and run. Pascal has noted that buying at 50-day bounces has reduced performance. I actually do well with my own purchases at 50-day bounces. I suspect the simple buy rule used in the analysis is too simple. When I buy at the 50-day I am looking at the total market and making a decision as to whether the pull back to the 50-day is likely to be met by a bounce or is the general market giving clues that the whole market has an issue.