Annualized Returns of Trading Strategies for PDCO

The table above summarizes the results of the full range of stop-loss settings for PDCO 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 0.00 %.

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 PDCO is an exception to that rule. Both strategies offer improvement over the unadorned Buy and Hold. Using technical indicators to buy and then hold, improves on the simple Buy and Hold strategy, but is still not the best.

Strategies lacking a stop-loss policy are too dangerous, given that every stock, sooner or later, will become worthless.

From the Report Dated 11/4/2010: -12 % has been the best sliding stop-loss setting for PDCO in the past. This assumes the stops are adjusted on the week-end. This setting has produced a historical yield of 11.00 %. (The yield during the holding period is annualized to provide this figure).

How to set sliding stop limits for Patterson Companies, Inc.:

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