- Analysis of Algorithm 1.1 Profit Targets and Trailing Stops based on data collected from July 23, 2021 to July 22, 2022
This analysis is to determine what profit target and trailing stops may be profitable for Algorithm 1.1.
The current profit target is stated as "3% to 7%" above the trade alert price. After analyzing a years worth of data and real world trading Algo 1.1, it's my position now that the profit target should be increased.
MODEL #1
Uses $1,500 positions ($1,500 was the most common answer in the poll on the Telegram channel). There is no compounding of the gains into subsequent trades. Uses the results of 1,312 trades produced by Algorithm 1.1 for 1 year between July 2021 and July 2022. The dollar figures are the total profits at the end of 1 year after trading last year's data using the various profit targets and trailing stops. Of course, future data will be completely different and so these models only give an approximation to what profit targets and trailing stops may be better to use compared to others.
Color codes used in the data tables:
Red: Numbers are achievable in real-world trading, but too small to make it worth your time.
Blue: Very unlikely in real-world trading (ie. bigger trailing stops would be needed to get larger profits, otherwise the trade gets stopped out).
Green: Possible to achieve if losses are controlled.
Yellow: These appear to be the most realistic profit target and trailing stops for Algorithm 1.1 from July 2021 to July 2022. Whether or not these profit target / trailing stops should be used in the future is for you to decide.
Right-click any image and select 'open in new tab' to enlarge
MODEL #2
Uses $4,000 positions and does not compound the gains into subsequent trades. Uses the results of the 1,312 trades produced by Algorithm 1.1 for 1 year between July 2021 and July 2022. Includes trailing stops between 7% and 23% instead of 9% to 25% as in Model #1. Smaller trailing stops are not included because they would not be reasonable for most traders and would result in too many trades stopped out too early.
MODEL #3
Starts with $150 position and compounds the profits and losses into subsequent trades over 1,312 trades. It was developed using a combination of profit target and trailing stop that is found within the yellow-green zone of Model #1. This model is not intended to suggest that you can get to $10 trillion within a year by trading Algorithm 1.1. It's to show the power of compounding profits and show the periods of negative growth (many of which are shown in the red boxes) which account for more than half the chart. The stocks in Algorithm 1.1 are not liquid enough to move billions or trillions of dollars, but there is enough liquidity to grow an account from $100s to $1,000+ to $10,000+ to $100,000+ within 1 year if you can control your losses and target profits above the median.
Those negative growth periods (in the red boxes) lasted multiple weeks sometimes. Fortunately, the adjustment I made in 2021 appears to have improved the system and we should see less severe negative periods. Notice that there are two major trends on the chart. The first 2 month trend (orange trend line, approx July 2021 through August covering 300+ trades) grows at a slower rate, then after I made an adjustment, there were less trade alerts that were focused on a better selection of stocks, and the growth rate accelerated (green trend line). Keep in mind, the models above were produced by including the period before the adjustment was made, this means that the data tables will be showing smaller numbers, and if the green trend continues, you can expect that it is possible to achieve better results than shown in the data tables.
What happens if you subscribe for only one month and it happens to be during a period in a "red box" negative zone? Are you going to be frustrated and quit OR will you consider the bigger picture and strive and endure to the end? You may need to give it two months or three months to fairly determine if this is the right path to continue. No matter what trading system you use, and no matter what you do in life that has big potential rewards, you need to devote extended time and energy (and usually money) towards reaping the rewards. One or two or three months is really not a long time to devote to anything with big potential rewards. Consider another path some people take to earn money...
The above chart shows the average tuition of $10,388 being paid each year for four years and then assumes the college graduate has a job ready to go on the day they graduate, earning an average starting salary.
SOURCE: Average tuition $10,388 https://www.usnews.com/education/best-colleges/paying-for-college/articles/paying-for-college-infographic
Best average case scenario for a college graduate is they will break-even after 5 years after investing more than $40,000 for a college degree.
But you want to invest only $40 to $50 for this subscription and give it only 1 month?! That's not reasonable and you are doing yourself a huge disservice by giving up on yourself so quickly.
This next chart is a histogram showing the number of Algorithm 1.1 trade alerts that increased between a certain range. As example, there were more than 160 trade alerts that increased between 4.01% and 6%. Another example, there were more than 20 trade alerts increasing between 28.01% and 30%.
CONCLUSION: The current profit target range stated in the system is "3% to 7%" above the alert price. After doing this analysis and real money trading, it appears that targeting profits above 7% and especially above the median will result in faster account growth. Taking profits above the median helps to offset the losses more quickly. Based on real world trading of Algorithm 1.1, my estimate is that most traders will have an average loss above 9%, so rather than requiring multiple smaller profits to offset a loss, the data shows that there are plenty of 12+% winners that can offset a loss with one trade. Currently, more than 50% of the trades increase more than 12% within 1 day, with the average near 20%. See the Track Record page for the current statistics.
LIMITATIONS OF THE MODELS:
Some trades will be closed with a smaller gain instead of a bigger gain AND some trades may be closed as a loss instead of a gain.
As example, if a trader has a profit target of 15% with a 10% trailing stop, and the stock increased 14% and closed at that level. In real-world trading, you might sell it at a 14% profit, but in this model, since the profit target was not hit, the model assumes the worst and uses the 10% trailing stop loss to close the trade with a 4% gain (ie. 14% minus 10% = 4% gain).
Some trades will be closed as a gain even if it should have closed as a loss. This is due to the model not using intraday data. When considering the data tables below, YOU MUST DISREGARD the extreme numbers (color coded in blue in the tables above) that use small stop losses. As example, the column with a 9% stop loss and large profit targets would, in real-world trading, often result in trades being stopped out before reaching the profit target. In real-world trading, you often need trailing stops greater than 15% to 30% to stay in a trade that increases 20% to 100+%.
DISCLAIMER: Historical or hypothetical performance is not indicative of future performance. The profit targets and trailing stops used for these models may or may not result in any profit when used in real-world trading, and may result in losses. Don't trade with money you can't afford to lose.
Bilo Selhi is not registered as a broker-dealer or investment adviser. Any stock, option or crypto assets mentioned on the site or any emails or any communication from Bilo Selhi represents his own opinions and should not be relied upon for purposes of effecting securities transactions or other investing strategies, nor should they be construed as an offer or solicitation of an offer to sell or buy any security, nor does it constitute investment advice. Stock/options/crypto trading / investing involves large risk and may result in 100% losses of capital. Don't trade with money you can't afford to lose. Bilo Selhi does not verify the results of any members trades. The member testimonials, tweets and comments represent their own opinions. Read more DISCLAIMER.
