Friday, May 13, 2011

Riverbed Technology (RVBD)

Unlike Akamai Technologies and Apple, where a simple buy-and-hold strategy would have slightly outperformed the trading system we're using in terms of total return, I think we've traded Riverbed Technology pretty well. 

From November 2007, when we made our first trade at $13.66, through the end of last week, Riverbed Technology is up 151.4%. 

Trading the Volatility System, our total return on investment is 509.3%. I'm going to give this one an A+.

1. SHORT the week of 11.5.07 at $13.66. Using $24.09 for my stop, the initial risk (R) on the trade was $10.43. Stopped out and reversed to long the week of 3.30.09 at $7.98. The percentage gain on the trade was 41.6%, and the reward-to-risk ratio was $5.68/$10.43 = 0.54.

2. LONG the week of 3.30.09 at $7.98. My stop was $4.73, so the R was $3.25. Closed last week at $34.34 with a $32.38 stop. The percentage gain on this trade is 330.3%, and the reward-to-risk ratio is $26.36/$3.25 = 8.12.

Bottom Line:
Winning Trades: 2 | 100.0% | $16.02/share avg.
Losing Trades: 0 | 0.0% | -$0.00/share
Average Trade: Gain of 186.0% | $16.02/share | Reward-to-Risk Ratio (R): 4.33


  1. Can you explain how you personally trade the volatility system? Thanks

  2. Thomas,
    I use the system exactly the way Welles Wilder lays it out in his 'New Concepts in Technical Trading Systems' book.

    First I calculate True Range (TR), then Average True Range (ATR). I multiply the ATR by an Average Range Constant (ARC) of 3.0, and that determines my Stop-and-Reverse (SAR) price. Then I use the variance between the SAR and the current price to determine whether I should be long or short. With a positive variance (price above the SAR), I'm long; and when the price crosses below the SAR I reverse to short.

    I use it as a true reversal system, meaning I'm always in a stock either long or short.

    But here's probably the most important thing about how I use the system: I use weekly price data. I'm trying to follow long-term trends, and I don't want to trade a lot. In fact, I only place trades at the close on Fridays and sometimes at the open on Mondays.

    I hope that answers your question? If not, just let me know where I need to give more details.