Strategy Session: Take Advantage of Other Traders’ Fears
Strategy Session: Take Advantage of Other Traders’ Fears
Oct 25, 2006
“Greed for a lack of a better word is good.” — Gordon Gecko, Wall Street (1987), Director: Oliver Stone
Change greed to fear and we get an equally motivating factor in others that can mean big opportunity. Fear is good because it kicks in among people who panic the self preservation instinct that we as ‘efficient market predators‘ love to see.
Take for example this strategy called, Buy Gap Up Reversals. Several candidates in this strategy do not look good on a chart.
What do we see?
All the stocks in this strategy gap up at least $1 dollar and then retrace 75% of the gap. It looks like the bears have you in their claws right? Time to panic? Many would – and they would be wrong. When we applied The Odds Maker to this strategy we found that the 75% pullback on these gap plays is a nice entry point giving us the following readout:
38 winning trades out of 62 total trades (over the past 3 weeks) = 61.29% success defined as all results up at least $0.01 and exiting the position at the close; Average winner = $1.1192, Average loser = $-0.7087, Net winnings = $26.23, Best = $4.73, Worst = $-2.67; Casino Factor = 99.09%
Making 26 points in 3 weeks is not too shaby – considering an average of 4 trades a day with this strategy.
For more details on the terms used in The Odds Maker summary, see them defined in the manual.
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