Automating the Courage to Pull the Trigger

quantitative growth

quantitative growthOne of the most common lines that stock traders like to throw around is that you should be greedy when everyone else is fearful, and fearful when everyone else is greedy. The problem is, I get scared quite easily. When everyone else is fearful, I am usually hiding under my bed waiting for things to clear up. That’s just my personality.

In order to make my trading profitable, I needed to find a way to make sure that I wouldn’t wimp out and avoid pulling the trigger at the exact moments when I most need to. The only way for me to outwit my internal Resistance and be able to execute the tough trades was to make everything part of a system. I am just following the rules, and any violation of the rules is even worse than losing money.

With that in mind, Friday’s action scared me. If it was up to my judgement, I wouldn’t be buying anything right now. I’d probably dump everything and wait for better conditions. But that’s not what my system says to do here, and my primary responsibility is to trust the system.

Overall Fund Performance

The DTAYS Quantitative Growth Fund exited a bunch of its stocks last week. That left it a little less than 50% invested when the market put together a string of solid days this week. Being less than half invested during the up days was frustrating, but it was quite nice to only be half exposed when things got bad on Friday.

As of this weekend, the QG Fund has a value of $94,779.73. That means we are down 5.22% on the year. While being down for the year after three full months really sucks, 5% is still a good ways off from anything that could remotely be considered a serious drawdown. With all of the changes that I have implemented based on the backtesting research of Cesar Alvarez, I expect the fund to perform very well over the rest of the year.

Here are the current holdings of the DTAYS Quantitative Growth Fund as of this weekend:



Stocks Leaving the Fund

Last weekend’s post noted that an order had been placed to sell BIIB on Monday morning. After that order was executed, everything looked good for the QG Fund for the rest of the week…..until Friday.

While the broad market tanked on Friday afternoon, both UA and LPLA closed beneath their 5-ATR stops. That means that the QG Fund has already placed orders to sell both of those positions on this coming Monday morning. At -9.26%, it is probably time to say goodbye to LPLA anyways, but UA was one I really wanted to see do well. I thought it really had potential, and it still may, just not in the QG Fund right now.

In addition to those two exit orders, we will also be watching KORS very closely this week. At -10%, that position is getting dangerously close to our 12% maximum loss stop.

Stocks Entering the Fund

This is where the rules of the QG Fund force me to have the balls to keep playing. After Friday’s action, I don’t see how taking new positions could be a good idea. However, the QG Fund doesn’t give a shit about my opinion, and the SPY is still trading above its 100-day moving average. So I had to run my weekly scan of the IBD 50 to see if any new buy signals showed up.

Here is what I found when I scanned this weekend’s IBD 50 for stocks making new 20-week highs:


To my surprise, four different stocks closed the week at a new 20-week high. However, when we take a closer look at these four stocks, we find that CLR doesn’t meet the minimum ROC requirement, and neither MYGN or HOLI fall below Cesar’s Historical Volatility Filter. That leaves us with CAR as the only buyable stock, and the fund already holds a position there.

So it looks like the DTAYS Quantitative Growth Fund won’t be taking any new positions this week. It is important to remember that the fund is not entering an positions because the rules don’t advocate doing so. It has nothing to do with my own personal judgements and opinions. That is a critical point.