Best Trailing Stop Loss

Best Trailing Stop Loss

The Best Trailing Stop Loss is designed to protect gains by enabling a trade to remain open and continue to profit as long as the price is moving in the investor’s favor.

This way you can let the trend continue in your favor but lock in your profits once the stock turns around.

The trailing stop is a very useful exit for traders that simplifies the process of letting winners run but keeping losses small.

The Key To The Best Trailing Stop

The key to the best trailing stop is that it needs to be loose enough that the stock has room to trend upwards. But it cannot be too loose or you will give back too much profit when the trend changes.

For example, in the Tesla chart below, you can see that the 5% trailing stop is too tight. It doesn’t allow the trend to develop and we take too many trades instead of following the trend:

Best Trailing Stop Loss 1
Conversely, the 50% trailing stop below is too loose. We don’t capture enough of the trend and end up taking a loss when we could have had a big gain:
Best Trailing Stop Loss 2
The best trailing stop loss strikes a balance between the two. It depends on the situation but the 20% trailing stop (below) often does a good job:
Best Trailing Stop Loss 3

Which Trailing Stop Loss Should You Use?

I’m going to test a selection of them on historical data going back 30 years across more than 11,000 US stocks. We are going to use a new 252 DAY HIGH as a buy signal and then see which trailing stop produces the most profit while limiting risk. The trailing stop loss options we are going to test are as follows:

  • Percent trailing stop
  • ATR trailing stop (Chandelier)
  • Moving average trailing stop
  • Parabolic SAR trailing stop

1. Percent Trailing Stop

This is the simplest trailing stop. Whenever the stock trades X% below it’s in-trade high then we will exit the stock on the next day open. For example, if we buy Apple at $100 with a 20% trailing stop and it hits a high of $200 we will exit if the stock drops back to $160. The following table shows the effectiveness of the percent trailing stop following a new 252-day high in the Russell 3000 from 7/1990 to 1/2020:

Best Trailing Stop Loss 3

As you can see, the 20% and 25% trailing stop produced the best return-to-risk scores with a reasonable win rate and profit per trade.

2. Chandelier Trailing Stop

The chandelier trailing stop uses the average true range indicator (ATR) to position the stop a certain number of points away from the action. The advantage of this technique is that it takes into account the volatility of the stock and places the stop a certain multiplier away. For example, if Apple is trading at $100 and we use a 5 x ATR(21) stop, the stop will be placed 5 times the ATR(21) below the recent high. If the ATR is $5 then the stop will be placed 25 points away (5 x 5). In this test we are going to use the 21-period ATR and vary the multiplier to test and see if it is Best Trailing Stop Loss:

Best Trailing Stop Loss 3
You can see that the results for the Chandelier stop were pretty consistent when using a multiplier of 5 or more. However, the lowest multipliers saw poor results. ATR(21) and ATR(21) * 2 produced losses.

3. Moving Average Trailing Stop

The moving average trailing stop works like this. Once we enter the trade (a new 252-day high) we will follow it with a simple moving average line. If the trend changes and the stock drops under the moving average line we will then exit the trade on the next day open. The following table shows our results across different moving average lengths:

Best Trailing Stop Loss 6
The moving average trailing stops produced a reasonable return-to-risk score in the 40-60 day range. However, it was not as strong as the percentage stop and the win rate was lower too.

4. Parabolic SAR Trailing Stop

The parabolic SAR indicator rises according to specified parameters. But unlike the usual trailing stop, PSAR continues to move higher even as the stock stays where it is or declines. This means there is an element of time involved so essentially, the stock is penalized for not continuing the trend upwards. The PSAR indicator is made up of two parameters, acceleration factor and max acceleration. These are usually set up as 0.02 and 0.2, however, I found those parameters to be too fast. The following table shows our results for various permutations:

Best Trailing Stop Loss 7

The Parabolic SAR indicator produced some good return-to-risk scores particularly with small parameters (much smaller than most traders use).

Which Trailing Stop Works The Best?

The results shown above provide some answers as to which trailing stop works best in stocks.

  • The best trailing stop by return-to-risk was the 20% trailing stop with a score of 0.57. This was followed by the 25% trailing stop and the 15% trailing stop.
  • The best trailing stop according to average profit per trade was the 50% trailing stop with an average profit of 82.72%.
  • The 50% trailing stop also had the highest win rate at 53.3%. However, the 50% trailing stop naturally has a high drawdown and trade duration.
  • The Chandelier trailing stop did not perform particularly well with low return-to-risk scores across the board.
  • The moving average stop was not particularly effective either.
  • The Parabolic SAR indicator put in some decent scores according to return-to-risk.
  • Overall, the 15%, 20%, 25% and Parabolic SAR trailing stops appear to work the best.

Conclusions

In this Premier Bull & Bear Blog Post, we looked at various types of trailing stops and tested them on 11,000 US stocks back to July 1990.

We found that the best trailing stop loss was the “percentage trailing stop” (particularly the 20% and 25%) does a decent job of capturing upward trends in stocks while limiting risk.

Meanwhile, the Chandelier stop and moving average line produced disappointing results and do not provide much reason to use these methods. These findings support my previous experience and it was no surprise to me that the percentage trailing stops performed strongly.

If there is a surprise in these results, it is the decent scores for the Parabolic SAR indicator. This trailing stop looks like it has some merit and can be effective with all three membership levels.

So, If you wonder how this can help your 401k, IRA, and investment accounts, we have the solution for you. We are offering all new subscribers a 25% Promo codeWealth25 that will lock in for life.

The discount is available immediately through September 2020 and has a 15-DAY FREE TRIAL.  We also include our private member’s blog.

Stocks vs Gold and Silver, Who Wins?

Stocks vs Gold and Silver, Who Wins?

Stocks vs Gold and Silver; Which was the best investment in the past 30, 50, 80, or 100 years?

These charts compare the performance of the S&P 500, the Dow JonesGold, and Silver.

The Dow Jones is a stock index that includes 30 large publicly traded companies based in the United States. It is one of the oldest and most-watched indices in the world.

The S&P 500 consists of 500 large US companies, it is capitalization-weighted, and it captures approximately 80% of available market capitalization. For these reasons, it is more representative of the US stock market than the Dow Jones.

Both versions of these indices are price indices in contrast to total return indices. Therefore, they do not include dividends.

Including dividends leads to a very different picture, which is demonstrated in the charts below:

10 Year Comparison

10 Year Chart

30 Year Comparison

30 Year Chart

50 Year Comparison

50 Year Chart

80 Year Comparison

80 Year Chart

100 Year Comparison

100 Year Chart

Gold and Silver are not an inflation hedge

As for Gold and Silver, they are often seen as an inflation hedge. However, the data challenges this opinion.  That view stems almost entirely from the very fact that gold used to be money, which could not be printed, and due to the experience of the inflationary 70s when the monetary system changed and the price of gold floated freely.

However, we live now in a completely different monetary system, which essentially explains why Gold and Silver are rather poor short-term inflation hedges. Given the opportunity costs, investors should expect only significant and lasting inflation to drive the prices up. In other words, Gold & Silver may serve as an inflation hedge only when there is relatively high inflation,.

Gold and Silver are a hedge against the Government.

The only time gold has rallied significantly is when the CONFIDENCE in government declines.

That was the case during the post-1976 era for people who saw inflation as running away. That was because of OPEC creating STAGFLATION meaning it was cost-push inflation that eventually converted to demand-push inflation by mid-1979.

I understand that all of these gold-bug analysts have been preaching hyperinflation for decades. The whole Quantitative Easing (QE) was supposed to create $10,000 gold years ago. Here, after 15 years of QE, gold still remains trapped in consolidation overall. Only recently have we seen a bump due do the effects of the attempted move to the Great Reset.

Stocks vs Gold and Silver?

Stocks as a whole, specifically the S&P 500 index, performs much better than Gold or Silver.

More importantly, you will be better diversified and can perform substantially better than Buy & Hold.

If you wonder how this can help your 401k, IRA, and investment accounts, we have the solution for you. We are offering all new subscribers a 25% Promo codeWealth25 that will lock in for life. The discount is available immediately through September 2020 and has a 15-DAY FREE TRIAL.  We also include our private member’s blog.

New Housing Bubble

New Housing Bubble

A new housing bubble is clearly visible when the real home price takes into account the effects of inflation and therefore allows for better comparison over time.

The ratio in the chart below divides the Case-Shiller Home Price Index by the Consumer Price Index (CPI). The Case-Shiller Home Price Index seeks to measure the price of all existing single-family housing stock.

Based on the pioneering research of Robert J. Shiller and Karl E. Case the index is generally considered the leading measure of U.S. residential real estate prices and reveals a new housing bubble.

Market Cap -GGP Ratio

When inflation is high, prices as measured by the CPI increase, and the purchasing power per unit of currency decreases. The Case-Shiller index has a base of Jan 2000=100 while the CPI has a base of 1983=100. Therefore, it is the trend over time that is significant and not the absolute ratio values.

As you can clearly see in the chart, when the ratio gets near .6 a new housing bubble is achieved and real estate prices head down. The higher the ratio, the faster prices they head down.

Just look at the prices and how they have risen…

housing-bubble-2-0_orig

The charts above and the one below are clearly telling you that a new housing bubble is closing in on us now and is ready to pop.

housing-bubble-2-0_orig

Do you remember what hit in 2008, because this one will be much larger with sustained reach?

The Case Shiller Index is now 160% higher than in January of 2008. And as history showed us, since 1890, a decline of biblical proportions is coming.

When you add the New Housing Bubble to the Money Supply Chart, to the Market Cap to GDP chart, to the Dividend Yield Ratio, to the Market Cap to GDP Ratio,  to the Screaming S&P500 Dividend Yield, and to the current S&P500 P/E Ratio, you better be prepared for a long-term sustained deep economic crash. This will be a stock market and real estate crash will dwarf 2008.

No one can afford to live through a 7 to 15-year depression, so please prepare now because the warning signs are now clear.

We are so concerned that is coming or may have already started, that we are offering all new subscribers a 25% Promo codeWealth25” that will lock in for life. The discount is available immediately and includes our private member’s blog.

Money Supply Vs. Inflation

Money Supply Vs. Inflation

The Money Supply Vs. Inflation historical chart below can save your family if you follow its revelation.

The “M2 Money Supply”, also referred to as “M2 Money Stock“, is a measure for the amount of currency in circulation.

M2 includes M1 (physical cash and checkable deposits) as well as “less liquid money”, such as saving bank accounts.

The chart below plots the yearly M2 Growth Rate and the Inflation Rate, which is defined as the yearly change in the Consumer Price Index (CPI).

When inflation is high, prices for goods and services rise, and thus the purchasing power per unit of currency decreases.

Historically, M2 has grown along with the economy (see in the chart below). However, it has also grown along with Federal Debt to GDP in times of war.

In most recent history, M2 growth surpassed 10 percent in recessions, during which an expansionary monetary policy was deployed by the central bank, including large scale asset purchases. According to Bannister and Forward (2002, page 28), Money supply growth and inflation are inexorably linked.

The chart below is that of the M2 Money Supply Vs. Inflation:

Market Cap -GGP Ratio

The chart above is telling you what is coming very soon.

Inflation is tied to the money supply and every single period of time that the money supply expanded,  inflation soon followed with a market crash.

Now, when you look at the current money supply, on the far right, you can clearly see that it has exploded beyond reason just within the last few years. This is leading to a MASSIVE MARKET CRASH followed by RAPID INFLATION.

However, you have time still to prepare. As of today, inflation has not yet started but it will come soon.

Do you know which assets you should own, hedge, or sell immediately?

As the Money Supply Vs. inflation adjustment appears we will tell our members precisely what assets to buy, keep, and sell within the Members Blog.

 

 

Market Cap to GDP Ratio

Market Cap to GDP Ratio

Market Cap to GDP Ratio is a long-term valuation indicator for stocks. It has become popular in recent years, thanks to Warren Buffett.

Back in 2001 he remarked in a Fortune Magazine interview that “it is probably the best single measure of where valuations stand at any given moment.”

The Wilshire 5000 Index is widely accepted as the definitive benchmark for the U.S. equity market and is intended to measure the total market capitalization of most publicly traded companies headquartered in the United States.

The chart below is that of the Wilshire 5000:

Market Cap -GGP Ratio

The S&P 500 to GDP Ratio

For comparison purposes, the S&P 500 to GDP ratio is shown below as well. The S&P 500 consists of 500 large US companies. Just like the Market Cap to GDP Ratio and is a capitalization-weighted index.

It captures approximately 80% of the available total market capitalization. For these reasons, it’s a much better measure for ‘market cap’ than the Dow Jones – however, the two charts look very similar.

 

 

S&P500=GDP Bubble

The charts clearly illustrate that the total US Markets are well above their 2000, 2008 and although we have a bit to go, we are quickly reaching the 1929 bubble. Thus, it is safe to assume we are in Market Cap to GDP bubble territory.

Over the next few weeks, we will show you a few more charts that are a bit concerning. Our Wealth Preserver members are protected just in case the Unthinkable occurs.

 

 

The S&P 500 Dividend Yield Is Screaming

The S&P 500 Dividend Yield Is Screaming

The S&P 500 is the most widely cited single gauge of large-cap equities on U.S. stock exchanges. Standard & Poor’s estimates that more than $7.8 trillion is benchmarked to the index, making it one of the most influential figures in the world of finance. To be included, a company must be publicly traded in the United States and report a market capitalization of $5.3 billion or greater.

According to Mike Maloney, the S&P 500 Dividend Yield is the second-best way to measure a market value (after the Price Earnings Ratio).

The dividend yield indicates how much a company pays out in dividends each year relative to its share price. In other words, it measures how much “bang for your buck” you are getting from dividends.

In the absence of any capital gains, the dividend yield is effectively the return on investment for a stock. The lower the dividend yield, the less you get for your investment, and hence the more overvalued a stock.

The historic S&P 500 Dividend Yields were deducted by Robert Shiller and published in his book Irrational Exuberance.

S&P 500 Dividend Yield

As you can clearly see in the chart, The S&P 500 Dividend Yield Is Screaming and telling you that it is well into bubble territory and will eventually correct. When it does correct or crash, will you be prepared or warned, or will you just go down with the markets?

 

 

S&P500 P/E Ratio

S&P500 P/E Ratio

The S&P500 P/E Ratio shows whether the stock market is overvalued or undervalued. It’s not a matter which Stocks you own in your portfolio because when the P/E Ratio turns EXTREME, VIRTUALLY ALL STOCKS Crash.

The price-earnings ratio is calculated by dividing a company’s stock price by its earnings per share. In other words, the S&P500 P/E ratio shows what the market is willing to pay for a stock based on its current earnings.

Yale professor Robert Shiller, the author of Irrational Exuberance, has reintroduced this adjusted ratio to a wider audience of investors. The P/E Ratio is illustrated below and is extremely simple to understand with a quick view of the chart.

So, is it under or overvalued?

S&P500 P/E Ratio

Today the P/E Ratio is sitting at 28 and is in Extreme Bubble Territory and getting higher!

All you have to understand from the chart is that since 1880,

“Every single time the S&P500 P/E Ratio rose above 20, the stock market crashed; Every Single Time!”

You know what to expect, right?

Tomorrow we will show you an entirely different chart that will simply stun you.

Expanding Socialist Authoritarianism

Expanding Socialist Authoritarianism

Expanding Socialist Authoritarianism is getting far worse by the day and it appears that our Algorithmic Cyclical Models on War & Civil Unrest are simply on target, have started, and are expanding rapidly.

India is becoming confrontational against China and oppressing its own people which appears to be in a secret agenda with the Globalist Socialism Crowd trying to isolate China and force them to surrender their sovereignty to their new world order.

We see Germany moving to prohibit any more demonstrations which embarrassed the government in Berlin. In Greece, we have deep concerns that they are criminalizing free speech and authorizing the arrest any anyone who goes against COVID restrictions. Greece has banned international flights with the United States trying to put pressure on for the elections to also overthrow Trump which has become a European agenda. The US Embassy in Athens has warned Americans about travel to Greece that “Travelers should be prepared for the possibility that additional travel restrictions could be implemented by the Greek government with little or no advance notice.

What is really frightening is that the Democrats are taking on the policies advocated by Nazi-style views of Elizabeth Warren. It is one thing to read in history books about how oppressive governments became which led to World War II and to see it unfolding before our eyes.

The Socialists have created such a divide among the people this is doing monumental damage to the population turning brother against brother. In California, a woman threw a hot cup of coffee in the face of a man on the street who was not wearing a mask. This entire issue of masks and social distancing has created a mindset that being even close to anyone is dangerous. Many no longer shake hands.

This Expanding Socialistic Authoritarian is the very essence of how to destroy a working economy and a civilization.

Presidential Stock Market Direction

Presidential Stock Market Direction

The Presidential Stock Market Direction will be determined by who enters the White House. The “WHY  & HOW” is clear…

Presidential Stock Market DirectionThe recent MMT implies that a Presidential Stock Market Direction win by Biden will prove to be a complete joke. This would be much WORSE than Jimmy Carter who inspired the collapse of confidence in the dollar and government leading to the 1980 gold high. Capital will flee public assets and shift into private.

One the other hand, the worse of the economic crisis is external to the USA became many countries like Germany depend on selling to consumers outside their own country. The likelihood of a breakup of the EU and their idea of canceling currency and moving to perpetual bonds that would even wipe out pensions in Europe will push capital outside and into the US stock market.

Keep in mind that this is a Monetary Crisis Cycle intermixed with a Sovereign Debt Crisis and this entire coronavirus nonsense has so accelerated the debt crisis that now the politicians fear what will happen if they lift the restrictions on paying rents and mortgages.

The politicians around the world have responded in such an exaggerated manner to this virus that they will NEVER admit a mistake. Thus, they must oppress the people and hence we have entered into rising authoritarianism for the next decade.

Although the US Market will have a Slingshot move will occur no matter the Presidential Stock Market Direction, US retirement shares market will follow Europe, so be prepared. Stay close to your Wealth Preserver and Maximizer Signals to prevent a potential retirement account wipeout as this election will become the most violent in our countries history, and it will continue to escalate through 2032.

Lockdown Tsunami

Lockdown Tsunami

Lockdown Tsunami #2 has just begun, and that is really bad news for the U.S. economy.

Lockdown Tsunami #1 resulted in the permanent closing of more than 100,000 U.S. businesses, colossal lines at food banks around the nation, and the loss of tens of millions of jobs.  Needless to say, this new wave of lock-downs will make things even worse, and some are speculating that this is precisely what Democrats want.

If the U.S. economy continues to fall apart as we approach the election in November, the thinking is that this will make President Trump look bad and will make it more likely that people will cast votes for Democrats.  But there is also the possibility that this could backfire in a huge way for the left.  If millions of Americans start to identify the Democrats as “the party of the lock-downs”, that could actually greatly help President Trump in November.

At this point, the battle lines are becoming quite clear.  President Trump and other top Republicans are strongly against more lockdowns, but Democratic politicians in many areas of the country are starting to institute them anyway.  In fact, we just learned that all schools in Los Angeles, San Diego, Atlanta and Nashville will be closed at the beginning of the new school year…

“Resisting pressure from President Donald Trump, three of the nation’s largest school districts said Monday that they will begin the new school year with all students learning from home. Schools in Los Angeles, San Diego and Atlanta will begin entirely online, officials said Monday. Schools in Nashville plan to do the same, at least through Labor Day.”

Other major cities are expected to follow suit.  Of course considering the quality of the education in most of our public schools, most of those kids won’t exactly be missing too much.

Ultimately, closing the schools won’t have too much of an economic impact, but shutting down most of the businesses in our largest state certainly will.  On Monday, California Governor Gavin Newsom announced a comprehensive lock-down for 30 California counties which account for “about 80 percent of California’s population”

“Newsom, a Democrat, announced during a press briefing that all bars across the state must close up shop and that restaurants, wineries, tasting rooms, family entertainment centers, zoos, museums and card rooms must suspend indoor activities.The governor also announced that all gyms, places of worship, malls, personal care services, barbershops, salons, and non-critical offices in counties on the state’s “monitoring list” had to shut down under the new order. The order affects more than 30 counties which are home to about 80 percent of California’s population.”

Newsom is a political opportunist, and I guarantee you that he wouldn’t be doing this unless he truly believed that it would help Democrats in November.

But I think that Newsom and other top Democrats have greatly underestimated how much the American people detest COVID-19 restrictions at this point.  We have been witnessing a huge backlash all over the country, and even though California is far more liberal than most other states, a backlash has been brewing there as well.

If the Democrats are not very careful, they are going to lose an election that they could have very easily won.

First of all, they should have never nominated Joe Biden.  It is obvious to everyone that he is physically and mentally declining at a very rapid pace, and videos of him “acting creepy” will be viewed millions upon millions of times over the coming months.  Democrats have known about Biden’s creepy behavior for many years, but they decided to give the nomination to him anyway.

Secondly, most top Democrats have refused to strongly denounce the rioting, looting and violence that have happened around the nation, and this is going to push a whole lot of people toward the Republicans.

Thirdly, the backlash against these new lockdowns is going to be directed primarily toward Democrats.  If Democratic politicians push too far, this will be an issue that deeply hurts them in November.

But despite all of these mistakes, it is possible that the Democrats could still come out on top, because Trump and the Republicans are making lots of political mistakes as well.

If Trump wants to make a comeback in the polls, he really needs to fully embrace an anti-lock-down message, because that would strongly resonate with tens of millions of voters.

The first wave of lockdowns certainly didn’t stop the spread of the virus, and more lockdowns will not stop it from spreading either.  And now three separate scientific studies have shown that COVID-19 antibodies disappear very, very rapidly, and that means that a vaccine is not going to end this crisis and we will never reach a point of “herd immunity”.  So we are going to have to find a way to function effectively as this virus circulates around the globe year after year, because it isn’t going to go away.

We simply cannot shut down the economy every time the number of cases starts to surge again.  The damage that we have already done to the U.S. economy has been incalculable, and now these new lockdowns will do even more damage.

But the WHO continues to insist that more restrictions are needed in Lockdown Tsunami #2…

“Let me be blunt, too many countries are headed in the wrong direction, the virus remains public enemy number one,” WHO Director General Tedros Adhanom Ghebreyesus told a virtual briefing from the U.N. agency’s headquarters in Geneva. “If basics are not followed, the only way this pandemic is going to go – it is going to get worse and worse and worse.”

What would the WHO have us do?

Would they like us to all lock ourselves in our homes indefinitely?

The WHO keeps touting a future vaccine, but if COVID-19 antibodies disappear after just a few months, there is no way that a vaccine is going to end this pandemic.

And many Americans will never, ever take any COVID-19 vaccine under any circumstances.

As I discussed in an article that I posted earlier, it looks like we are just going to have to accept the fact that COVID-19 is going to be around year after year.

It is easy for the “experts” to tell us that everyone should just stay home, but the price tag for the first wave of lockdowns was astronomical.  Thanks to all of the emergency measures that Congress passed, the U.S. government ran a budget deficit of 864 billion dollars in the month of June…

The US budget deficit surged to a record-breaking $864 billion in June, the Treasury Department said on Monday. The increase is the product of the federal government’s efforts to combat the corona-virus pandemic and its economic fallout. The government collected about $240 billion in tax revenue in June, the Treasury said, and federal spending overall reached $1.1 trillion.

To put that in perspective, it took from the founding of our nation until 1980 for the U.S. government to accumulate a total of 864 billion dollars of debt.

And now we have added that much to the national debt in just one month.

We simply cannot keep doing this.

No matter what we do, COVID-19 is going to keep spreading, and we are going to have to learn how to deal with this virus for a very long time to come.

Lockdown Tsunami #2 is definitely not the answer, but unfortunately many of our politicians are convinced otherwise. So U.S. economic conditions will continue to deteriorate, and the economic depression that began earlier this year will continue through the end of 2020 and beyond. We encourage wealth and retirement account protection immediately because when the economy turns down, your retirement account will get wiped out but you family can be safe from collapse.

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