Free-Reprint Article Written by: Damian Campbell See Terms of Reprint Below.
***************************************************************** * * This email is being delivered directly to members of the group: * * ReprintArticles-Paradise@yahoogroups.com * ***************************************************************** We have moved our TERMS OF REPRINT to the end of the article. Be certain to read our TERMS OF REPRINT and honor our TERMS OF REPRINT when you use this article. Thank you. This article has been distributed by: http://Article-Distribution.com Helpful Link: The Digital Millennium Copyright Act - Overview http://www.gseis.ucla.edu/iclp/dmca1.htm --------------------------------------------------------------------- Article Title: ============== The Persistency Phenomena, Program Trading and the Small Caps Article Description: ==================== The concept of trading for persistency is simple. The rules are this; buy on an up day and sell on a down day. The results of this strategy have blown away buy and hold and were demonstrated in the article: - The Non-Random Walk Theory Persistency. Additional Article Information: =============================== 640 Words; formatted to 65 Characters per Line Distribution Date and Time: Fri Mar 31 06:20:38 EST 2006 Written By: Damian Campbell Copyright: 2006 Contact Email: mailto:[EMAIL PROTECTED] Article URL: http://www.cetcapital.com/blog/2006/03/the_persistency_phenomena_prog.asp For more free-reprint articles by this Author, please visit: http://thePhantomWriters.com/free_content/d/index.shtml#Damian_Campbell --------------------------------------------------------------------- The Persistency Phenomena, Program Trading and the Small Caps Copyright © 2006 Damian Campbell CET Capital http://www.cetcapital.com The concept of trading for persistency is simple. The rules are this; buy on an up day and sell on a down day. The results of this strategy have blown away buy and hold and were demonstrated in the article: - The Non-Random Walk Theory Persistency. The article also showed that the day to day upward consistency of the market deteriorated around and during the Bear Market; this could be seen in the growth of $1000 equity charts in the above mentioned article. Some people argue that this deterioration was due to program trading, I would argue that is was caused by the Bear Market and the after affects of September 11, 2001. The conclusion is persistency is an exploitable phenomena and while it may have deteriorated for a while it never disappeared in the small cap markets. Note: It is also important to remember day to day persistency is only one of the ingredients CET Capital uses in our over all methodology. First I Will Address the Issue of "Program Trading" After it is all said and done an increase in "program trading" is just another way of saying an increase of volume. When investors talk about volume they are talking about liquidity. One way to measure "program trading" is to look at the Commitment of Traders open interest. As of March 7, 2006 open interest was 695,690 contracts for the S&P 500, 74,882 contracts for the NASDAQ 100 and 34,247 contracts for the Russell 2000. The action is, has been and will be in the S&P 500. The reason why "program traders" or "big money" play the S&P is because of its attractive liquidity. Small cap stocks by their nature are illiquid. The less liquid a market the larger the bid-ask spread. Try liquidating a billion dollar position of small cap stocks. You can do it but it will take awhile and you might not get the price you like. It is the small cap illiquidity issue that deters active trading and it is the lack of active trading or volume which is one ingredient that leads indices to higher persistency. That said as long as the Russell 2000 stays small cap dominated it should remain more persistent then the larger cap indices The Golden Rule of Investing Is Preservation of Capital The easiest way to lose money in the markets is to sit on a losing position. Trading for persistency forces you to sell after one down day therefore you do not hold losing positions. The flip side to that coin is you can lose money if you are trading during choppy market conditions. For example, if you buy on an up day and the market closes down the next day forcing you to sell. Persistency Is Here To Stay Lastly I want to show you a chart of trading for persistency on the Russell 2000 vs. buy and hold of the S&P 500 from 1998 until February 2006. During this period the Russell 2000 had a 55 percent chance of closing up two days in a row. Trading for persistency during this time produced a compounded annual return of 13.27 percent with a maximum drawdown of 34.53 percent. Buy and hold of the S&P 500 produced a compounded annual return of 3.45 percent with a maximum drawdown of 49.15 percent. [IMAGE: http://www.cetcapital.com/blog/images/RUTvsS&P_POP.jpg ] There comes a point in every money mangers life when they have to take what they have been testing and trade it with real money. That point for CET Capital was in the beginning of 2003. So far our managed account performance has been good and drawdown has been low. It is also important to remember day to day persistency is only one of the ingredients CET Capital uses in our management programs. Please click this link to read our full disclosure. http://www.cetcapital.com/disclosure.htm --------------------------------------------------------------------- Damian Campbell is President and head money manager of CET Capital, a Registered Investment Advisory firm. He oversees the testing and execution of all CET Capital investment programs. Low Minimum, Low Management Fee, Small Cap Focused, No Leverage. Please visit us on the web at http://www.cetcapital.com or call. --- END ARTICLE --- ..................................... TERMS OF REPRINT - Publication Rules (Last Updated: April 7, 2005) Our TERMS OF REPRINT are fully enforcable under the terms of: The Digital Millennium Copyright Act http://thomas.loc.gov/cgi-bin/query/z?c105:H.R.2281.ENR: ..................................... *** Digital Reprint Rights *** * If you publish this article in a website/forum/blog, You Must Set All URL's or Mailto Addresses in the body of the article AND in the Author's Resource Box as Hyperlinks (clickable links). * Links must remain in the form that we published them. Clean links should point to the Author's links without redirects having been inserted into the copy. * You are not allowed to Change or Delete any Words or Links in the Article or Resource Box. Paragraph breaks must be retained with articles. You can change where the paragraph breaks fall, but you cannot eliminate all paragraph breaks as some have chosen to do. * Email Distribution of this article Must be done through Opt-in Email Only. No Unsolicited Commercial Email. * You Are Allowed to format the layout of the article for proper display of the article in your website or in your ezine, so long as you can maintain the author's interests within the article. *** Author Notification *** We ask that you notify the author of publication of his or her work. Damian Campbell can be reached at: [EMAIL PROTECTED] *** Print Publication Reprint Rights *** If you desire to publish this article in a PRINT publication, you must contact the author directly for Print Permission at: mailto:[EMAIL PROTECTED] ..................................... If you need help converting this text article for proper hyperlinked placement in your webpage, please use this free tool: http://thephantomwriters.com/link-builder.pl ===================================================================== ABOUT THIS ARTICLE SUBMISSION http://thePhantomWriters.com is a paid article distribution service. thePhantomWriters.com and Article-Distribution.com are owned and operated by Bill Platt of Enid, Oklahoma USA. The content of this article is solely the property and opinion of its author, Damian Campbell http://www.cetcapital.com --------------------------------------------------------------------- XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX --------------------------------------------------------------------- THINGS TO KEEP IN MIND WHILE USING ARTICLES POSTED ON THE GROUP: 1. Print the article in its entirety. Don't make any changes in the article . 2. Print the resource box with all articles in their entirety. 3. Send the Author a copy of the reprinted article or the URL where the articles was posted. Anything short of following these three rules is a violation of the Authors Copyright. Yahoo! Groups Links <*> To visit your group on the web, go to: http://groups.yahoo.com/group/ReprintArticles-Paradise/ <*> To unsubscribe from this group, send an email to: [EMAIL PROTECTED] <*> Your use of Yahoo! Groups is subject to: http://docs.yahoo.com/info/terms/