Trading U.K stock market using Mark Minervini strategy

Friday, Dec 14 2018 by
57

Mark has been interviewed by Stocko a couple of times and from some of the comments on various threads there appears to be a few of us using his methods to trade the U.K stock market. I thought it would be useful to have a dedicated thread where we can discuss how well its working.

Personally I have been in cash at least 50% since the end of May and at 95-100% since early October. Getting out of stocks as they roll over has protected me from any real damage.

I'm struggling to find many setups I want to buy so I am developing my "sit out power"

How is everyone else doing?


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Disclaimer:  

As per our Terms of Use, Stockopedia is a financial news & data site, discussion forum and content aggregator. Our site should be used for educational & informational purposes only. We do not provide investment advice, recommendations or views as to whether an investment or strategy is suited to the investment needs of a specific individual. You should make your own decisions and seek independent professional advice before doing so. The author may own shares in any companies discussed, all opinions are his/her own & are general/impersonal. Remember: Shares can go down as well as up. Past performance is not a guide to future performance & investors may not get back the amount invested.


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744 Posts on this Thread show/hide all

HumourMe 8th Aug 705 of 744
1

In reply to post #501056

I've rerun the stop loss exercise with the missing shares now added (thanks Gromely) . So with 56 trades, still too small a sample for anything but generalisations. Also note that I've done my best to make prudent assumptions, avoid look ahead bias etc.. but I may have made an error that has slipped past me, despite several hours of aggressive staring at my code.

I used the same holding period, so the comparison doesn't include holding Burford this week (the actual cut offs were 168 days after the buy date or last Friday). This cut off artificially reduces holding periods and probably depresses gains but it does so consistently. 

I dropped trailing high and close and expanded the remaining categories:

Trailing low: None, 0.8x highest low, 0.85x, 0.9x, 0.95x

Entry stop: None, 0.9x to 0.94x entry price

Break-even stop trigger: None, 1.1x, 1.15x, 1.2x, 1.25x high reached

Profit target to trigger exit: None, 1.1x, 1.2x, 1.3x, 1.5x, 1.6x

As previously, I used the buy price identified for purchase and 'held' until stopped out (so entirely mechanical and artificial). If stopped out, or if the target was reached, the price used was the lowest of the stop/target price and the next days open. If still held on Friday the close was used.

Below are the top 20 results. The first table focuses on the expected value per trade for each strategy variant. The second focuses on holding periods. Why is the latter important? The answer is potential opportunity cost. 

Column headings are:

Neg_n and Pos_n are the number of negative and positive (>0) trades. Neg_avg and Pos_avg are the average returns for each type. Exp_val is the expected value overall or overall average return.Pc_pos is the percent of positive outcomes (it is nice, but not essential, to win more than lose).

The 'day' columns refers to calendar days held, by whether a trade outcome was negative or positive; negative trades tend to close quicker.

The top row is holding to Friday. Conclusions haven't changed. A trailing low of 10% now dominates clearly. An entry stop approx 7-8% seems a good value. Moving any stop to break even would be warranted when the high gets above 10-15% the open price - this probably only kicks in for shares with a large daily range, otherwise the trailing stop will preempt this. I'll stress again there are much better selling rules than these (such as potentially moving stops up when shares begin to enter tight consolidation regions); I was primarily interested in exploring the initial stop and the break even stop.

5d4c352dd5579top20p1.jpg


Best 20, days holding (remember the artificial cut off). Positive outcomes take ~ 3x as long.

5d4c352008b1ctop20p2.jpg

And as contrast, for those interested, the worst 20 (worst at the top). First of all the expected values. These variants all have a target of 20%. This might not be all bad though, as in the table below this one you'll see a better quicker holding period. We all know from our fundamentals that rapid stock turnover is a good thing, don't we? :-)

5d4c34d045f9eb20p1.jpg

And the final table, 'bad days'.

5d4c34ba4b0acb20p2.jpg


As to the profit targets, with frequent opportunities and a positive expected value, you may want multiple quick gains to take advantage of compounding. Those thinking of this should factor in  transaction costs and spread.

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PhilH 10th Aug 706 of 744

Has anyone experimented identifying VCP's using Average True Range over a variety of periods?

Professional Services: Sunflower Counselling
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PhilH 10th Aug 707 of 744

In reply to post #502966

It looks promising as an approach, see chart below ADBP with 3 times periods of ATR below. I used 60 days, 25 days and 14 days. Sadly currently ...

1) You can't add more than one ATR indicator/overlay to a Stocko chart
2) You can't screen for ATR
3) You can screen for volatility but you cant change the period

c24c3aaeb6ef6b7d85d391a13f2586b8cb6367841565435655.png
Professional Services: Sunflower Counselling
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HumourMe 10th Aug 708 of 744

In reply to post #502966

Presumably you are looking for ATR14 < ATR25 < ATR60?

On a similar theme I've been thinking of keeping a running count of 'tight' days, to flag shares needing a closer look.

Indications of a lack of supply seem to be emphasised by the gurus when seeking patterns.

Currently I'm just seeking range bound shares for further inspection, over various periods.

As you say, currently the screener here, means a DIY or do it elsewhere, approach is necessary if the goal is to check fewer candidates. However, having gone down that route I'm beginning to consider that time spent on build and maintenance might be better spent on looking at more shares that pass the cruder Stocko screens.

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PhilH 10th Aug 709 of 744
1

In reply to post #503081

"Presumably you are looking for ATR14 < ATR25 < ATR60?"

Yes, I've also added ATR5 too, plus a requirement that ATR(5) < ATR(5) from five days ago.

There is definite scope elsewhere to do pick out VCP patterns using this approach and it could be that I'll need a few versions ...

One for short term VCP's and perhaps a similar scan based on weekly data for longer term patterns.

It could also be that volume characteristics could be included too.


I'm also interested in this screening approach to find candidates that fit into the Wyckoff Method. It could be that I need different screens for different phases, e.g.

1) A screen that identify Wyckoff Springs in Phase C of accumulation patterns as stocks that have been consolidating after a downtrend hit a new recent low and pullback.

2) A screen that can identify a Test after a Wyckoff Spring, i.e. a higher low after a Spring

3) A screen that can identify breakouts from consolidated trading ranges (Wyckoff
Phase D), possibly including an embedded VCP 

Imagine combining screen 2, with a Stocko screen for High Ranking Contrarian's (High QV) or a Stocko Value Trap (High V) screen where you have the potential to catch the transition into a Turnaround Stock (High VM) and possibly a SuperStock as margins improve.

Professional Services: Sunflower Counselling
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unwise2 12th Aug 710 of 744
1

In reply to post #502966

Has anyone experimented identifying VCP's using Average True Range over a variety of periods?

Mark has said on his MPA service that anyone using ATR with his method is going to go broke. He also said ATR looks good on paper but is useless in the real world ( I think the exact word he used was terrible). 

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herbie47 12th Aug 711 of 744
1

H & T (LON:HAT) as mentioned above is up over 5% today on higher than average volume, still below it's 52 week high but not by much now.

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andrea34l 12th Aug 712 of 744

In reply to post #503791

H & T (LON:HAT) perhaps up as the results are out tomorrow, and people hoping for good things

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herbie47 13th Aug 713 of 744

In reply to post #503841

It’s possible but some sell before the results, this time last year the share price fell.

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llwydiaid 13th Aug 714 of 744

Thanks unwise2 for the data on Minervini winners and losers for the first six months. It's been very informative to look at the various set-up and I'm sure we could debate the validity of one or two of them. Looking at the losers, the notable one that "got away" was London Stock Exchange (LON:LSE) . Looking more closely at the chart, had your initial stop allowed for filling the 1 March gap, and been around 5-6% rather than 3.7%, a 50% profit would have followed. Hindsight is a wonderful thing!

5d52b8fe8a927LSE.png


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unwise2 13th Aug 715 of 744

In reply to post #504226

5d52bff7b811aChart-london-stock-exchange

I agree London Stock Exchange (LON:LSE) was a real heart breaker, after setting up a normal looking handle it fell below the initial stop loss only to immediately form a deeper V shaped handle and take off from there. It would have been possible to re-enter the trade on 3rd April with a 6.4% stop loss but I doubt anyone would so soon after being stopped out, which is why it isn't in the winners list.

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llwydiaid 13th Aug 716 of 744

In reply to post #504246

With regards London Stock Exchange (LON:LSE) . When the handle is tight e.g. < 4%, as in this case, is there an argument for putting the stop lower than the bottom of the handle? An initial 6% stop would have kept you in for the ride.

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unwise2 13th Aug 717 of 744

In reply to post #504271

6% seems like no mans land, you couldn't know what was going to happen. The only other logical place to put a stop would have been below the 1st March low, which would have been 8-8.5%.

A staggered stop would have kept you in half the position.

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unwise2 13th Aug 718 of 744
1

In reply to post #504226

It's been very informative to look at the various set-up and I'm sure we could debate the validity of one or two of them.

I would be interested if you or anyone else who has looked at the lists (winners and losers) to comment on which setups look the most questionable and the reasons why. I think it would be helpful to all of us to consider the pros/cons of setups that are not obvious/textbook.

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llwydiaid 14th Aug 719 of 744
1

In reply to post #504291

I would be interested if you or anyone else who has looked at the lists (winners and losers) to comment on which setups look the most questionable and the reasons why. I think it would be helpful to all of us to consider the pros/cons of setups that are not obvious/textbook.

A few comments on improving performance:

1.  Rising 200d MA.  Minervini notes - at least 1 month and preferably 4-5 months minimum.  The following losers were dubious  DFS Furniture (LON:DFS), Duke Royalty (LON:DUKE), GB (LON:GBG), Ideagen (LON:IDEA), Pets at Home (LON:PETS), Topps Tiles (LON:TPT).  On the other hand, you would have missed Anglo Pacific (LON:APF), Impax Asset Management (LON:IPX), Intermediate Capital (LON:ICP).  It might be useful to stick to a black and white rule e.g. at least 3 months?

2.  Beware of deep cups with sharp right hand sides.  GB (LON:GBG), Greene King (LON:GNK), Pearson (LON:PSON), had already risen sharply by 30-40% from the bottom of their deep cups.  Unrealistic to expect a further powerful breakouts.

3.  When looking at each chart, I tried to pick out the buy points without refence to the dates in your table and some were certainly more ovious than others.  It's clearly subjective, but I got the impression that the more obvious ones worked best e.g. I didn't really see clear breakouts with Admiral (LON:ADM), £AUST, DFS Furniture (LON:DFS) .  Perhaps the lesson is - if in doubt, don't buy it!

Thanks again for the data.  It's been a useful exercise for me.

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sharesurfer 14th Aug 720 of 744
1

HI,

RM (LON:RM.) looked interesting a couple of days ago. It went up 4.5% on Monday on something like a massive 35x normal volume. This after a nice long base. Also, it is showing both revenue and profit acceleration, broker forecasts are up. I reckoned it might be a pivot point on Monday but didn't follow through next day (Tuesday). In fact, it was down 2.5% on again massive volume. That was very odd. I was hoping for a low volume pullback. Today (Wednesday), its flat with hardly any volume at all. Don't know what to make of it. Appreciate any thoughts. Thanks.

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unwise2 14th Aug 721 of 744
2

In reply to post #504621

I've been watching RM (LON:RM.) it's a difficult one to call. It created a flat base and broke out to 268p only to fall back quickly into a similar trading range. I don't see a obvious pivot point yet.

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PhilH 14th Aug 722 of 744

. (wrong thread)

Professional Services: Sunflower Counselling
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herbie47 15th Aug 723 of 744

Ab Dynamics (LON:ABDP) has had a sudden fall, can’t see any news but does have history. H & T (LON:HAT) has hit new 52 week high following interim results.

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llwydiaid 15th Aug 724 of 744

In reply to post #502116

Spirent Communications (LON:SPT) broke out of its cup and handle last week (see herbie47 and unwise2 posts of 8 Aug.). Looking at the monthly chart it's now trying to break out into a new 10year high. During the last few days it's been spiking up each morning which I take to be a positive sign.

5d55114771ddeSPT.png


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