Intelligent Investing
Backtest: Can you make money doing day trading based on The Edge Daily's Stock Pick of the Day?
I have been reading a lot lately how some people are claiming that a good writeup by some of the prominent blogger on i3 will normally causes the share price of that stock to jump substantially on that following day.
Therefore I decided to do some backtest to see if this is true. Instead of taking the data from i3, which is messy and doesn't have long enough historical record, I decided to use The Edge Financial Daily's Stock Pick of the day. And I believe The Edge Daily has at least the same amount of readers as i3 (or even more) but definitely not less. Although the results below might not represent what is happening on i3, but it is the closest proxy to backtest.
If you don't already know, The Edge Daily has a section that featured stock pick of the day. They wrote a positive review about a stock for 2 consecutive issues before moving to a new one. So I am curious to find out - If you buy based on that recommendation, and sell it by close of trading day, will you make money?
Before looking at the results and coming up with conclusion, there are something you need to know.
1. This is based on if you can buy at the open price of that day and sell at the closing price of that same day
2. The sample size might not be large enough to have any meaningful conclusion
Sample size: 89
Median return: 0.35%
Mean return: 1.44%
Number of stocks that return negative: 25
Number of stocks that remain unchanged: 18
Number of stocks that return positive: 46
Total trading gain: 128.24%
Inconclusive Conclusion
We can look it from frequency and magnitude. Frequency wise, you will make money on 46 of the stocks, that is 51.6% of the total. For stocks that are unchanged, you will lose money on all of them if you factor in brokerage fees. So you make money on 46, lose money on 43.
That's 51.6%. Your chance of randomly picking a stock that return positively. Close to tossing a coin.
Magnitude wise, there's better news, you still gain 128.24% because there are a few outliers that gain double digits and there are more stocks that gain than stocks that lose.
But you do need to take notice the median return is only 0.35%, while mean return is 1.44%. If you exclude Esceram 32% gain, the mean return falls to 1.07%.
Based on this test, yes you can make money, but the spread is so thin, theoritically you can make money, practically, I am not sure. And at the end of the day, any trading strategy is only as effective until it becomes so popular that popularity will render it useless.
|
Name |
Open |
Close |
Change % |
|
Esceram |
0.550 |
0.485 |
-11.82% |
|
Apollo |
5.250 |
5.000 |
-4.76% |
|
APTB |
2.360 |
2.320 |
-1.69% |
|
Perstim |
5.310 |
5.230 |
-1.51% |
|
UTDPLT |
26.800 |
26.400 |
-1.49% |
|
YOCB |
1.010 |
0.995 |
-1.49% |
|
SKPRES |
1.410 |
1.390 |
-1.42% |
|
Oceancash |
0.360 |
0.355 |
-1.39% |
|
Oceancash |
0.365 |
0.360 |
-1.37% |
|
SCC |
1.560 |
1.540 |
-1.28% |
|
SCGM |
2.530 |
2.500 |
-1.19% |
|
Cocoaland |
2.235 |
2.213 |
-1.01% |
|
Carlsberg |
12.500 |
12.380 |
-0.96% |
|
Haio |
2.360 |
2.340 |
-0.85% |
|
Prlexus |
2.590 |
2.570 |
-0.77% |
|
LTKH |
5.050 |
5.020 |
-0.59% |
|
Uchitec |
1.730 |
1.720 |
-0.58% |
|
Imaspro |
1.760 |
1.750 |
-0.57% |
|
UOA |
2.130 |
2.120 |
-0.47% |
|
LTKH |
5.020 |
5.000 |
-0.40% |
|
Magnum |
2.680 |
2.670 |
-0.37% |
|
Kim Loong |
2.800 |
2.790 |
-0.36% |
|
Inari |
3.270 |
3.260 |
-0.31% |
|
Pintaras |
4.030 |
4.020 |
-0.25% |
|
Globetronics |
4.880 |
4.870 |
-0.20% |
|
Star |
2.300 |
2.300 |
0.00% |
|
YTLE |
0.545 |
0.545 |
0.00% |
|
Uchitec |
1.730 |
1.730 |
0.00% |
|
Imaspro |
1.750 |
1.750 |
0.00% |
|
AJINOMOTO |
6.240 |
6.240 |
0.00% |
|
AJINOMOTO |
6.240 |
6.240 |
0.00% |
|
Fareast |
7.270 |
7.270 |
0.00% |
|
Fareast |
7.270 |
7.270 |
0.00% |
|
Kim Loong |
2.800 |
2.800 |
0.00% |
|
Perstim |
4.590 |
4.590 |
0.00% |
|
Teoseng |
1.480 |
1.480 |
0.00% |
|
Mikro |
0.335 |
0.335 |
0.00% |
|
Georgekent |
1.370 |
1.370 |
0.00% |
|
SCC |
1.540 |
1.540 |
0.00% |
|
Suria |
2.320 |
2.320 |
0.00% |
|
Suria |
2.320 |
2.320 |
0.00% |
|
Haio |
2.360 |
2.360 |
0.00% |
|
Pintaras |
4.020 |
4.020 |
0.00% |
|
DLADY |
47.700 |
47.720 |
0.04% |
|
PWROOT |
2.860 |
2.870 |
0.35% |
|
Hexza |
0.925 |
0.930 |
0.54% |
|
Kawan |
2.760 |
2.780 |
0.72% |
|
Magnum |
2.670 |
2.690 |
0.75% |
|
Rexit |
0.645 |
0.650 |
0.78% |
|
United Malacca |
5.930 |
5.980 |
0.84% |
|
Perstim |
4.550 |
4.590 |
0.88% |
|
UOA |
2.110 |
2.130 |
0.95% |
|
Liihen |
1.337 |
1.350 |
0.99% |
|
Pohuat |
1.930 |
1.950 |
1.04% |
|
United Malacca |
5.980 |
6.050 |
1.17% |
|
SCGM |
2.500 |
2.530 |
1.20% |
|
Globetronics |
4.870 |
4.930 |
1.23% |
|
Oceancash |
0.360 |
0.365 |
1.39% |
|
Oceancash |
0.355 |
0.360 |
1.41% |
|
Rexit |
0.650 |
0.660 |
1.54% |
|
Supermax |
2.910 |
2.960 |
1.72% |
|
Perstim |
5.230 |
5.320 |
1.72% |
|
Star |
2.300 |
2.340 |
1.74% |
|
Kawan |
2.710 |
2.760 |
1.85% |
|
YTLE |
0.535 |
0.545 |
1.87% |
|
UTDPLT |
26.300 |
26.800 |
1.90% |
|
YOCB |
0.990 |
1.010 |
2.02% |
|
SKPRES |
1.380 |
1.410 |
2.17% |
|
Liihen |
1.350 |
1.380 |
2.22% |
|
DLADY |
47.720 |
48.820 |
2.31% |
|
YTLE |
0.565 |
0.580 |
2.65% |
|
Cocoaland |
2.175 |
2.235 |
2.76% |
|
Mikro |
0.335 |
0.345 |
2.99% |
|
Pohuat |
1.870 |
1.930 |
3.21% |
|
YTLE |
0.580 |
0.600 |
3.45% |
|
UPA |
2.100 |
2.180 |
3.81% |
|
Carlsberg |
12.380 |
12.860 |
3.88% |
|
PWROOT |
2.750 |
2.860 |
4.00% |
|
Apollo |
5.000 |
5.210 |
4.20% |
|
Teoseng |
1.420 |
1.480 |
4.23% |
|
Inari |
3.130 |
3.270 |
4.47% |
|
Prlexus |
2.470 |
2.590 |
4.86% |
|
Hexza |
0.880 |
0.925 |
5.11% |
|
Supermax |
2.760 |
2.910 |
5.43% |
|
Georgekent |
1.280 |
1.370 |
7.03% |
|
Magni |
3.460 |
3.733 |
7.89% |
|
Magni |
3.140 |
3.460 |
10.19% |
|
APTB |
2.040 |
2.360 |
15.69% |
|
Esceram |
0.410 |
0.550 |
34.15% |
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Discussions
1 person likes this. Showing 4 of 4 comments
Interesting study, but I think in practical we might not able to buy at the open price and sell at the close due to high queuing, not even talk about emotional factor.
2015-12-30 22:15
I think the methodology of your study is a bit flawed because the time period you used is only 1 day. In the short term, stock prices move randomly, due to human emotions and market risks. I think The Edge articles are based on fundamental approach.
If you trade for a living, you should look at technical charts and monitor sentiments towards the broader markets, rather than looking at The Edge articles to form your trading strategy.
2016-01-18 11:44
ideally the back test should include at the end of T, T+1 till T+4, here would be able to see the short term reaction of the write up among the FA ,TA ,the contra players ,and share price
2016-02-10 09:53
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CS Tan
4.9 / 5.0
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
Protectcap
Hi Mr Yeo,
you must be then hard working & smart (at your young age) able to do the back test...i heard in one share talk by Singaporean some where about back testing of technical indicator for reliability by Sing Exchange..could not find the article.....you may wish to check it out for sharing or do the back the your self from the soft ware..
..i not so good at IT :(..
Appreciate share the outcome
Thank you.
2015-12-30 21:20