LOOKING FOR ADVICES
Hi everyone, first of all, introduction:
Here is my very first algo. Please do not be mistaken, in spite of this beautiful return rate, this is a really bad algo: it is totally static, and any change in the parameters will make the returns fall dramatically.
So why am I posting it ? Because I am looking to learn from the advices of more experienced trader ;) (learning alone and so on)
About the algo:
I implemented 7 filters inspired by Benjamin Graham's criterias on value investing, to select some specific stocks. On this, very basic TA is added (it was just to add a touch of it). Here are the properties:
- Portfolio rebalanced every 6 months, fixed to January and June ;
- Equal weights for all the stocks of the portfolio ;
- Top 1500 market cap companies ;
- Close price must be under the 6 months EWMA and above the 12 months EWMA (I think I implemented it well ?) ;
- Only three of BG criterias:
- An earnings yield (1/PE ratio) at least twice the AAA bond rate, which was 3.5% last time I checked ;
- Total debt < Book value (that i coded as follow: Book value = Total assests - [Total liabilities + goodwill and other intangible assets]) ;
- Current ratio (current assets / current liabilities) > 2 ;
- Go long on the stocks that pass the filters.
My issues:
- The TA I am using is really weak, but in the meantime, if I add any RSI or Bollinger filter, I feel like my algo wouldn't be investing anymore, as it only selects 0 to 10 stocks every 6 months (usually 0, 2 or 4) ;
- The weights are all equal ;
- I only go long ;
- The algo only invests in January and in June ;
- If I apply all BG criterias, no stock is selected for the portfolio.
I have found this article, telling that nowadays, 5% of the stocks of the Asian market meet BG's criterias, for only 1 to 2% to the European market, and that no stocks in the US market meet these requirements (which seems to be what my algo found too...). So for now, I am just applying the three fundamental filters mentionned above, and let the other 4 for later.
(According to Benjamin Graham, would the US market be overvalued ?)
My goals:
- Set a better TA ;
- Set optimized weights ;
- Look for stocks to short ;
- Invest dynamically depending on the month you are starting your backtest (not only in January and July) ;
- Find out what fundamental criterias could fit more the current market.
I will post further versions (it is just a (bad, isn't it ?) beginning).
Another important part now:
If there is anything you want to recommend, are recognizing a path you walked through a long time ago, and are willing to share some advices and experienced feedback, please feel free to do so. I have been studying and reading for a while, and I start feeling really lonely I my quest for knowledge.
I really wish to learn as much as I can (this is a really addicting subject, isn't it ?).
Thanks for your help.
(It starts being late here, i'm not going to check for misspelling, please be kind, I am not a native English speaker, and do not even live in my country of birth :) )
Have a good night !