February 1, 2008
Update on AYI and Preliminary January Box Results
The two Box ideas for yesterday, both shorts, were losers (suffering the dreaded same-day stop-out) which added another 2R to the negative column for January. The only open position is a long in AYI, which I’ll talk about below. The results for the month are less than inspiring.
The Box generated 36 ideas, 22 of which triggered and filled. 17 of those 22 were losers, 2 were scratches, and 3 were winners (including AYI). You may ask, “Chairman, how are you supposed to make money when 77% of your ideas are losers?” The answer is, “it’s possible, but it’s tough!” One or two big winners can wipe out 17 small losers, but I just didn’t happen to have any big winners in January.
I’m never going to feed you a line of bull or try to distort the Box’s returns — I just report the results good and bad. Once AYI closes I will send all list members the January spreadsheet with all the month’s details. If you’d like to join the list to receive these free (until March 1) trading ideas, just email me.
AYI, the idea for Wednesday, January 23, hit Target 1.0 on Thursday. Following the ABC stop trailing method, you should move your stop to below Thursday’s low at 42.07.
Now what’s interesting is that by looking at the Volume-at-Price chart for AYI below, you can see that most of Thursday’s trading happened between 45 and 46, so you wouldn’t expect price to go back down to 42ish where the stop sits. There is no such thing as a “smart stop,” but you have to wonder how dumb my stop placement is here. Comments welcome!
February 1st, 2008 at 12:27 pm
i am not on the list, and if i was i would be too lazy to do the work. But I am curious, how many of your stops have resumed in the winning direction after being stopped out? and how does moving the stop to break even affect such behavior?
In other words, what’s the impact of the ABC system on the overall expectancy of the system?
February 1st, 2008 at 3:11 pm
Born2: I have no idea because I’m too lazy to do the work too. :-) Seriously though, the premise of every single trade is the difference between the maximum expected loss and minimum expected gain, so the initial protective stop is inviolate. As far as moving to breakeven when initial risk is covered, this is simply habit based not on rigorous number-crunching but a deep understanding of my own mental health.
I’ll have a close look at those things that stopped out at breakeven to see how many reversed afterwards instead of going down and hitting the original stop — my suspicion is that precious few, if any, reversed.