Algorithmic Portfolio

Algorithmic trading uses a computer program that follows a defined set of instructions to place a trade.

When it comes to investing, research has shown we are our own worst enemy. We buy to follow the crowd and we sell when we shouldn’t. Even the best investors can let their emotions derail their strategy.

An algorithmic model eliminates that problem.

The Capital 19 Algo Portfolio is a systematic, research driven investment system that we have coded into the computer. The system scans the market and current holdings every evening and decides if any changes are required to the present portfolio.
In this way our own cognitive bias cannot influence the buy and sell decisions.

The Algo Model has several layers of decision making.

 

      1. Market Timing

As the old saying goes “A rising tide floats all boats”. It certainly is easier to make gains when the stock market averages are heading higher. Rising stocks tend to drag others with them. Similarly, when traders decide it is time to sell, not many stocks escape and they all go down together

The first step in the C19 model is to ask the question “Is this a good time to buy stocks in general?” The model will only decide to send a buy signal when the market in general is heading higher. 

 

      2. Stock Selection

Stock prices tend to rise for a reason. Usually that reason is because the company is likely to earn more money in the future. The best way of seeing this is by looking at the fundamentals of the company. Which is exactly what the system does. It applies filters looking to reduce the possible universe of all investable US stocks down to just those that meet strict value criteria and then ranks those stocks putting the most undervalued to the top of the list. 

 

      3.Capital Protection

Even after all this consideration that has gone into timing the market and then picking the most undervalued stocks, sometimes the stock does something different to what we expect. So the system runs a trailing stop loss against each individual stock. This trailing stop loss is designed to limit how much of a loss is acceptable before the individual position is closed. 

This trailing stop loss also acts to lock in profits when stocks move higher. By trailing behind the stock it lets the stock move higher but if that stock were to turn around and fall, then the trailing stop loss attempts to lock in as much of the gain as possible and not give it all back to the market.

 

      4. Repurchases

If the system does give a signal to sell a stock based on the trailing stop loss, then as long as the market timing signal says it is ok to buy a stock, the system performs the fundament scans again and we repeat the process.

This system holds a maximum of 10 positions at any one time making it easy for anyone to follow. 

The signals generated by this proprietary Capital 19 model are available exclusively to clients of Capital 19. If you are interested in receiving these signals then all you need to do is open an account today. It is free and easy to do.

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