Trading Strategy for STLD |
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Annualized Returns of Trading Strategies for STLD
These figures represent the annualized yields from several strategies for STLD, 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 31.00 %. The naïve interpretation of the Buy and Hold strategy is tested by buying on every day of the period, and evaluating the value of the accumulated holdings at the end. 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. The best of these strategies trigger the buy on technical indicators. The worst defect of the various Buy and Hold strategies is that they do not offer a methodology for cutting losses. From the Report Dated 11/5/2010: For purposes of setting stop loss limits, the best setting is -44 percent when the stops for STLD are reset weekly. This setting has produced a historical yield of 66.00 %. (The yield during the holding period is annualized to provide this figure).
How to set sliding stop limits for Steel Dynamics, 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.
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.
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. |  Subscribe More than 70 Hi-Rez charts daily for Steel Dynamics, Inc.: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Technical Buy Signals and Trailing Stop-lossTrailing stops set at -18.00 %
Total Session Units Invested 3491 Sessions In Time Span 2398 Avg. Units Invested 1.46
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