Much has been made of the recent surge in volatility and how it has caught
many institutional investors by surprise. Wall Street’s biggest investment banks
and a number of well known hedge funds have reported substantial losses after
their quantitative trading systems went awry.
Recently, Goldman Sachs (GS | news | PowerRating | PR Charts ) led a group of investors that injected $3
billion to prop up one of its funds that had lost 30%. Even the
legendary Jim Simons, founder of Renaissance Technologies, was forced to
write a “Dear Investor” letter explaining recent losses.
The Wall Street Journal reported the global head of quantitative
equity strategies for Lehman Brothers (LEH | news | PowerRating | PR Charts ) as saying, "Events that
models only predicted would happen once in 10,000 years happened every day for
three days."
While that sounds like the type of news to put investors off quantitative
investment strategies for life, it’s important to point out that not everyone
using these methods lost money. At TradingMarkets, we have many different
quantitative investment strategies, each designed to capitalize on different
market conditions.
One of our systems, Raptor II, is designed to take advantage of
precisely the type of conditions witnessed recently. Raptor II is
designed to capture stocks that have fallen too far, too fast, often resulting
in an explosive upside reversal.
Our real money Raptor II trading account hit equity highs last week (8/13/07)
and is currently up more than 29% since inception.
If you would like to learn more about Raptor II, join TradingMarkets
CEO and Founder Larry Connors for a special presentation on Wednesday, August
22, 04:30 PM ET.
Click
here to learn how to trade our best performing system.
Recent Trades
U.S. Cellular (USM | news | PowerRating | PR Charts ) triggered a Raptor II buy signal on 8/9/07
at $77.19. Two days later, we exited the trade at $94.95 for a gain of 23%.
Verigy (VRGY | news | PowerRating | PR Charts ) signaled a Raptor II buy signal on 8/1/07 at
$22.50. We exited the trade six days later at $24.86 for a gain of 10.5%.
Obviously, not all trades work out this well but the actual performance of
our account shows the strength of this trading system. There are several reasons
for this, but the main one is that we were able to quantify the characteristics
common to stocks that drop rapidly and then snap back to the upside.
To find these stocks on a daily basis, Raptor II applies 7 filters using
trend, volatility, maximum excursion (what we also call "stretch"), liquidity
and other key characteristics. While each one of these filters provides a
potential edge, we believe the statistical edge increases exponentially when all
7 are present in a stock.
Ashton Dorkins is Editor-in-Chief of TradingMarkets.com.
Sign-up for a 14-day free trial to the Raptor II Trading Signals.
