A Simple Monthly Trading System for ASX Investors
In this article I’ll describe a simple monthly trading system for ASX investors. Monthly meaning it trades just once a month. Monthly strategies are great for anyone who is time poor, has trouble accessing the internet to place trades or who works away.
Let’s face it; we all aspire to have the track record of Warren Buffett, Ray Dalio or Bill Dunn.
And yet our behaviour suggests otherwise.
In today’s ‘social media’ world we get pressured and focus more on short term outcomes. In turn we tend toward sub-optimal strategies (if any) rather than taking the long term view like those investors we aspire to.
If you know expected return is proportional to time, aka “slow and steady wins the race”, like Buffett, Dalio and Dunn, then perhaps you’ll be interested in this…
Outline:This strategy uses the simple yet robust anomaly of momentum; a price in motion tends to stay in motion. Momentum is pervasive across stocks, indices, foreign exchange and commodities. The strategy also measures the trend strength of the individual security and the broader market. Take the signal when both those trends are positive. Else it reverts to cash. Called ‘dual momentum’ this is the cornerstone of all our trend style systems.
1.Using a simple moving average ensure the trend of the security AND the underlying market is up.
2. Calculate the Rate of Change over the last 200-days for each security, then rank the strength of each from strongest to weakest.
3. Buy the top five in equal weights. Sell those that fall out of the top five.
4. Repeat after the close of each month.
We use the last 20-years using Norgate Data to remove survivorship bias – specifically delisted stocks and historical constituents of the ASX-100 – there are 353 stocks that are in, or were once in the ASX-100.
Commissions have been included. Dividends have not been included. Trading the top 100 stocks, dividends will add about 20% – 25% to the bottom line.
[+] Trades once a month: put it in your diary and take the rest of the month off.
[+] Uses a concentrated portfolio: low commission drag.
[+] Trades the ASX-100: benefits from dividends (not shown here).
[+] Keeps you on the right side of the market: beats buy and hold on both return and drawdown
[+] No fancy order types: use any broker.
“I want to thank you…for the fantastic programme you have created. As you know I’ve been around the markets for years and spent considerable time and money looking into many trading methods. This without a doubt is the most honest and complete programme I have ever come across. This is University for traders. I cannot recommend it highly enough to anybody who seriously wants learn how to trade.” – Michael H (Cairns, Australia), Trading System Mentor Course student
P.S. Join hundreds of other traders who took the first step. Click here to get started.