Wednesday, May 18, 2011

Another (better) way to trade Google

We talked yesterday about our less-than-stellar results trading Google since 2007, but before we move on to another stock, let's take one more quick look at Google and see if we can do better.

For a number of reasons, the most important being my desire to follow long-term trends and trade less frequently, I trade on weekly price data. 

But what if we traded Google on a daily basis?

For reasons that will be obvious (the significantly larger number of trades), I'm not going to cover the daily results on a trade-by-trade basis like I normally do. I'm just going to provide a summary for each time frame (weekly vs. daily), and we'll see how they compare.

Total # of trades: 9
Winning Trades: 6 | 66.7% | $71.29/share avg.
Losing Trades: 3 | 33.3% | -$64.87/share avg.
Average Trade: Gain of 7.6% | $25.90/share | Reward-to-Risk Ratio (R): 0.36 
Total Return on Investment: 68.3% 

Total # of trades: 51
Winning Trades: 23 | 45.1% | $63.91/share avg.
Losing Trades: 28 | 54.9% | -$23.03/share avg.
Average Trade: Gain of 3.9% | $16.18/share | Reward-to-Risk Ratio (R): 0.68
Total Return on Investment: 335.7%

So there you have it. To make a long story short (not sure if that's a trading joke?), we could have made 3.5 times more money while taking just 1/3 of the risk trading Google daily instead of weekly.

So going forward, obviously I'm going to start trading Google daily, right?


I'm going to stick to trading on weekly information. It's just a much better fit for my own personal mental approach to the game.

By the way, if anyone wants my daily trading worksheet for Google, just let me know, and I'll be happy to send it by email in an MS Excel format. After all, I'm not using it.

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