Annualized Returns of Trading Strategies for BGG

The table above summarizes the results of the full range of stop-loss settings for BGG when applied to several different mechanical trading strategies over every trading session during the past 10 years. These results for sliding stop strategies are obtained by resetting the stop loss after the weekly closing. The top lines of the table show results from several variations on the classic Buy and Hold strategy, for which the concept of stops does not apply. Although this venerable strategy is frequently praised, in the most simple form, it failed for this company, with a loss of -1.00 %.

Buy and Hold strategy in the most simple form is exercised by buying on every day of the test period, and holding the issue to the end . Many people practice some of the more realistic versions of Buy and Hold, for example, Momentum Investors might buy on rising prices and then hold. A speculator with a bit of sophistication might buy on dipping prices, while a technician might wait for technical signals to buy and then hold.

Our tests show it is generally better to buy on the dips rather than trying to follow the momentum of the market. But BGG is an exception to that rule. Both strategies offer improvement over the unadorned Buy and Hold. Some stocks just do not seem to respond in a normal way to the usual technical signals. Here a signaled buy and hold offers no improvement at all!

All the buy and hold strategies suffer from a dangerous defect, as they do not cut losses. The statistics underestimate the harm of this defect, because market statistics are based on companies that survive. Doctors bury their mistakes, but Exchanges de-list them.

From the Report Dated 11/4/2010: For purposes of setting stop loss limits, the best setting is -4 percent when the stops for BGG are reset weekly. However, setting stops this close can result in excess transactions. The best stop wider than 10 percent is -11 percent. This has historically produced a yield during holding periods that annualizes to 9.00 %.

How to set sliding stop limits for Briggs and Stratton:

Stop loss limit orders would appear to be almost always desirable. But where to set the stop limit is controversial. Setting to limit too low may allow for too great a loss. But setting the limit too high may cause the trade to "stop out" prematurely, perhaps missing a rally and also incurring an unwelcome brokerage fee.

Two issues need to be settled in arriving at a stop limit strategy. The first is to determine the price to position the stop loss at a percentage below the buy-in price. The second is to determine a strategy for raising or sliding the stop to lock in gains without undue risk of prematurely "stopping out" on some insignificant dip in price.

Technical Buy Signals and Trailing Stop-loss