Annualized Returns of Trading Strategies for WYE

The table above summarizes the results of the full range of stop-loss settings for WYE 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 concept of stops does not apply to the top few entries, which are various flavors of the well known Buy and Hold strategy. Although this venerable strategy is frequently praised, in the most simple form, it failed for this company, with a loss of 0.00 %.

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. 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.

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. 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 10/15/2009: At least from the standpoint of a single company strategy, the best setting over the past 10 years has been -16 percent for WYE when adjusting stops weekly. This setting has produced a historical yield of -3.00 %. (The yield during the holding period is annualized to provide this figure).

How to set sliding stop limits for Wyeth:

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