I did a back testing of the performance on the short term lists from March to August of this year.
In order to understand what the list is about and how the performance is reviewed for such a list go you can through below two posts.
That would also give clarity on the scenario 2 gain in the last column of below table.
The table gives the date in the first three columns and the gain that would have resulted after 10 days. To get total gain with practical assumptions, I considered April 1st week as the time when we would have realized that the market is changing trend. Note that prior to 16-March, starting from 5-March, there was nothing showing up in the list. Hence started the table from 16-March. As this data is taking lot of time, I had limited it to this window. I will post on a larger timeframe later.
If we see above table, I had picked 7-April as starting point. The last column shows that if we had started with 100% capital on 7-April, then by end of two weeks from that date what would have been our capital as per the gain based on the list of 7-April. Similarly every two weeks from that date. Some days missed here, I guess due to holidays in between.
After 9 rounds of selecting stocks and trading from April to end of August, we see compounded gain of 20% in 5 months. That is not too bad but definitely makes this whole exercise no better than sticking to long term investment. Because we had seen 26% return on stocks picked in this post, despite holding through the March crash.
The data changes a little if we were to start straight from 16-March to show 32% as shown in below table.
Now the only question is, given that short term trading requires little more time put into getting the lists and executing trades more often than long term trades, why are we not seeing significantly better return? Maybe because some more filtering is required from these lists to pick the best.
What if we already have a list of say 50-100 fundamentally good long term stocks and pick few from them every one or two weeks for short term trading? That can be a good study as long term stocks tend to recover well after a downtrend, even if they don't go back to their previous highs.
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