Trading Strategy Analysis of SII

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Annualized Returns of Trading Strategies for SII
Best Returnat StopEpisodesLength Best +10at Stop -5 to -25
Buy and Hold11.91 %0.211201.00
Buy On Rise Hold14.79 %0.221146.30
Buy On Dip Hold27.12 %0.32774.02
Signal and Hold12.64 %0.221128.22
Stops Only36.77 %-0.211.00419.3236.77 %-0.2123.52 %
Sell Signal Trim Stops38.24 %-0.320.00692.3138.24 %-0.3212.88 %
Buy Signals87.73 %-0.0411.0023.0948.14 %-0.1144.89 %
All Methods86.66 %-0.0415.0016.9154.73 %-0.1239.37 %

These figures represent the annualized yields from several strategies for SII, conducted mechanically for 10 years. The concept of stops does not apply to the top few entries, which are various flavors of the well known Buy and Hold strategy. This much used strategy yielded 12.00 %.

The most basic flavor of the Buy and Hold strategy is tested by buying on every day of the period, then holding all the way to the present date. A less simplistic version might involve the momentum investor's ploy of buying only on rising prices, or the more contrarian tactic of buying on the dips.

Generally, we have found the Buy-On-Dip policy to offer better returns than the Buy-On-Rise. That is true in this case, indicating some of the benefit of betting against the crowd when investing. 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.

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 8/27/2010: -21 % has been the best sliding stop-loss setting for SII in the past. This assumes the stops are adjusted on the week-end. This setting has produced a historical yield of 37.00 %. (The yield during the holding period is annualized to provide this figure).

SII:  Sliding Stops Reset Daily

How to set sliding stop limits for Smith International, 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.

Sliding Stops Reset Weekly of Smith International, Inc.


Some would advise you to set the stops at what you feel to be an acceptable loss. However, "feeling" is an extremely misleading guide. These charts are the output of a "brute force" calculation giving results for every stop loss setting from one percent to fifty percent on every trading day of the past ten years.

The bars represent the annual percentage appreciation achieved for each stop loss setting. This percentage is numbered on the right (blue) axis. The purple line depicts the number of "stop outs" on average per year at each stop loss setting . Transaction costs directly relate to this number on the left (purple) axis.

Sliding Stops Reset Monthly of Smith International, Inc.

These charts represent different strategies for "sliding" the stops to lock in gains. The first simply moves the stop up every day to the pre-determined percentage below the close price. The others move the stops up at the end of every week, and at the end of every month. Generally speaking, it seems better to move the stops less frequently than daily.

General Market Conditions

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SII:  Sliding stops trimmed by sell signals
SII:  Buy Signals and sliding stops
SII:  Buy Signals and sliding stops




Technical Buy Signals and Trailing Stop-loss

Trailing stops set at -18.00 %
StartEndBuy InEnd PriceDifTotalTypeSessions
4/4/20016/21/200116.0715.61-0.46-0.46154
6/21/20017/12/200115.6112.64-2.97-3.43114
9/23/20029/15/200613.5635.3921.8318.4011003
11/21/20029/15/200615.9235.3919.4737.871960
12/6/20029/15/200616.1335.3919.2657.131950
1/14/20039/15/200614.0835.3921.3178.441925
5/5/20049/15/200625.0335.3910.3688.801596
1/5/20059/15/200624.4935.3910.9099.701427
5/20/20059/15/200626.8535.398.54108.241333
10/28/20059/15/200630.5035.394.89113.131221
7/5/20069/15/200642.7735.39-7.38105.75151
9/21/200611/12/200735.2457.1121.87127.621287
9/29/200611/12/200737.1257.1119.99147.611281
1/11/200711/12/200734.7157.1122.40170.011211
4/16/200711/12/200750.1357.116.98176.991147
10/19/20071/17/200861.3358.40-2.93174.06161
2/5/20089/2/200853.7063.9810.28184.341145
9/5/200810/2/200861.5248.67-12.85171.49119
2/18/20095/21/200920.8825.504.62176.11165
3/2/20095/21/200918.4625.507.04183.15157
11/17/20095/20/201026.5839.2712.69195.841126
12/16/20095/20/201027.1339.2712.14207.981106
2/19/20105/20/201037.4839.271.79209.77163


Total Session Units Invested 7102
Sessions In Time Span 2398 Avg. Units Invested 2.96
Unit SharesMarket Order CommissionsStop Order CommissionsProfit
10023 at $5.009 at $15.00$20,727.00
10023 at $30.009 at $30.00$20,017.00
100023 at $5.009 at $15.00$209,520.00
100023 at $30.009 at $30.00$208,810.00


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