The first follow up

This entry will be dated on the 9th, but is being written as a summary of activity on the 8th:

I'm still figuring out how to optimally use Hurwitz System Alpha. The quantitative part of the trading program uses past price movements to tell me investors in a security are likely to be anxious. When I've run historical data experiments to test the program, I've depended solely on the quantitative portion of the program. But I think there needs to be a qualitative decision making framework superimposed on the quantitative selections. That is part of the point of this blog. To track the development of this framework.

Today, the program selected nothing to buy. This is quite common.

Yesterday, I detailed the decisions surrounding 7 equities. Here are the results:

Google: not a buy. Next day: +0.32%
Ebay--barely a buy. Closing price:39.93 Next day: +1.40%
Yahoo--no Next day: -0.06%
Red Hat--purchase. Closing price: 27.04 Next day: +1.18%
Pan American Silver--no Next day: -0.26%
Harmony Gold--purchase. Closing Price: 16.9 Next day: +1.66%
BHP Billiton--purchase. Closing Price: 37 Next day: 1.65%

To simplify trading decisions for this blog, we will assume that all buys and sells happen at the close. This is a reasonable simplification because the trading program takes advantage of athe tendency for traders to avoid purchasing securities before the close. Furthermore, we will assume that all sells happen at the close too. If the stock goes up a reasonable amount, say 1%, we'll sell it after a day. Otherwise, we'll hold it for one more day. After a second day, the security will be sold no matter what.

Of the four purchased securities, three were sold today. Only BHP carries over to tomorrow. The average return of the three completed trades is 1.41%. BHP will be sold tomorrow and it's return will be included at that time.

It is interesting to note that of the 4 stocks purchased, BHP is probably the stock with the least percentage of its float in the hands of short-term emotional traders.