Hi! I thought about shorting... but, although I'd love to short IPOs as well, I decided to not even backtest that. That's because shorting IPOs is difficult. Sometimes not even possible... when possible, the cost of shorting is usually high. To create a good backtest, I would need to know if the IPO was available to short, and at what cost... and I don't have this data. Assuming 100% availability and no cost would be a mistake imho...
I didn't think about shorting SPX...
But just talking here to you, I had an idea: for each IPO, short the worst performer within the sector of that IPO. The economic reason is that if there's a newcomer within that sector, the older players will suffer. Need to test this hypothesis, though... what do you think?
I have a question because there is something I do not understand.
1. The profit target of 20% and stop loss of 10%
Is the standard the highest closing price?
Or is it the opening market price on the next day?
2. If the highest price is renewed, the stop loss will be trailing and increased, but the target P will remain the same as the initially set value, right?
Thank you for the great research! I have some questions around the execution of the strategy I hope you can clarify:
- Do all trades occur exclusively during regular trading hours?
- Is the strategy only trading at open and close or would you have limit orders that can fill intraday?
- If a stock has gapped through the profit target/stop loss I assume you would be exiting at the open; however if it opens lower than lets say our profit target, do you keep the position open until it hits the 20% target intraday?
- I also struggle to understand the big DJT trade. Isn't the breakout only happening on Oct 21?
have you tried a long/short market neutral version of this? how about shorting just spx?
Hi! I thought about shorting... but, although I'd love to short IPOs as well, I decided to not even backtest that. That's because shorting IPOs is difficult. Sometimes not even possible... when possible, the cost of shorting is usually high. To create a good backtest, I would need to know if the IPO was available to short, and at what cost... and I don't have this data. Assuming 100% availability and no cost would be a mistake imho...
I didn't think about shorting SPX...
But just talking here to you, I had an idea: for each IPO, short the worst performer within the sector of that IPO. The economic reason is that if there's a newcomer within that sector, the older players will suffer. Need to test this hypothesis, though... what do you think?
Thanks!!
Do you buy 1 tick higher than the all time high or a close above all time high? Same with stop loss / profit target -close above/below?
Whenever it closes at an all-time high, I buy using a market order at the next day's opening. All orders are at the openings
thanks!
I am conducting a real test.
I have a question because there is something I do not understand.
1. The profit target of 20% and stop loss of 10%
Is the standard the highest closing price?
Or is it the opening market price on the next day?
2. If the highest price is renewed, the stop loss will be trailing and increased, but the target P will remain the same as the initially set value, right?
All the signals are computed based on the closing. All the trades are executed at next day’s opening if the signals trigger a buy or a sell.
I’m performing a standard trailing stop loss: the percentage is fixed, but the value is renewed every time the price reaches new highs.
Hope it helps! Cheers!
Thank you for the great research! I have some questions around the execution of the strategy I hope you can clarify:
- Do all trades occur exclusively during regular trading hours?
- Is the strategy only trading at open and close or would you have limit orders that can fill intraday?
- If a stock has gapped through the profit target/stop loss I assume you would be exiting at the open; however if it opens lower than lets say our profit target, do you keep the position open until it hits the 20% target intraday?
- I also struggle to understand the big DJT trade. Isn't the breakout only happening on Oct 21?
Thank you in advance!
Hi Klim! Thanks!
- Yes, all trades occur in regular trading hours;
- The strategy only trades at market opening, assuming market open price + 1bps of slippage
- Yes, positions keep opened until the target is hit during the day
- Need to double check this one about DJT, I don't remember the details by heart...
Cheers!
Carlos
Thanks for the interesting articles. What minimum market cap cut off or trading volume do you use?