Day Trading Using I Know First Signals: 7 Months – 43% Return

Day Trading: In a previous article we discussed how to find optimal trades using the 5 day average rule. In another article we also discussed a model for replacing weaker signals with stronger ones on a daily basis. Combining the two ideas we can create an allocation model which adjusts the allocation between the four stocks with the strongest signals on a daily basis. All stocks used are a part of our “Top X Stock Picks and S&P500” forecast. Below are the results when we run the system from July 1st 2014 to February 9th 2015.


In 7 months and 9 days the algorithm had a return of 43%, which translates to an annual return of 71% if the algorithm continues to perform at this rate.  All trades calculated on their daily returns had an average return of 0.219% with a standard deviation of 2.227%.

The allocation uses two variables.

1. The first variable is the simple allocation, 4 stocks receiving 25% a piece.

2. The second variable is the signal. If on a specific date the signals were 10,20,30,40 then the allocation of funds would be 10%, 20%, 30%, 40%.

We then use a weight between the two to adjust volatility, in this case the weight is 75%. This means the allocation for each stock would be 25% from the first model, and 75% from the second. This way you place a higher allocation to stronger signals, significantly increasing your expected return. Every days allocation, entry price, and change is provided HERE. The signals are based off of the 1 month table, and a stock is only considered when it is above the 5 day SMA of the closing price for long, or inverse for short.

Finally below is a chart representing the returns of every stock which was traded during the period. (Updated)


The most profitable stock over the testing period was GEL with an over all return of 14.28%. The least profitable stock was BAK with an overall return of -11.42%.



The profitable trades had an average return of 1.71% with a standard deviation of 1.74%. The total profitable trade count was 295.

The unprofitable trades had an average loss of -1.49% with a standard deviation of 1.42%. The total unprofitable trade count was 254.

*The stock “x” is not included in this analysis, although it belonged to the top x universe due to its very high volatility.