System FAQ’s

This is a basic list of some of the common questions that a blog visitor may have about the blog and the Kona Delight System.

1. What are the entry parameters of the system?

Each day I will post a spreadsheet with the entry price for each symbol that is within the parameters of the system. The price is always BELOW the closing price of the previous day. Essentially the price generated is a derivative of recent volatility subtracted from the closing price.

2. What is the exit criteria of the system?

The exit is very simple. If the close of any day is above the entry price then that is the exit. There is also a 5% stop loss in place once the position is entered. I originally mentioned that the stop would be put in place the day after entry but I have decided to allow same day exits based upon some testing John Standerfer helped me run. If after being in the position for 9 days (previously I mentioned 10) an exit has not been triggered then I will exit at the end of that 9th day.

3. How many positions does the portfolio hold?

The portfolio is an eight position portfolio that in market weakness can hold 16 positions. Effectively we can ratchet up to 2 times leverage. There are a couple reasons I am doing this. One being I know the historical drawdowns for the system and feel comfortable with 2 times that amount and the other being I want this live trade experiment to have some volatility.

4. How was this system developed?

I believe that I am one of the most experienced traders and developers in this category of “dip buying” systems. Over the last 8 years I have refined the systems to account for size of watchlist and the number of holdings needed for a balance between return/risk. Having developed this system with these parameters in mind I thought it would be a great opportunity for blog readers to see one of these systems in action. Development of “dip buying” systems was pushed by the hard work of many coders over at the wealth-lab site back before they were purchased by Fidelity. Dr Koch in Germany was one of the original few that I followed closely. My good friend John Standerfer was very helpful in coding and late night discussions trying to reach that elusive “balance” that I hope to expound upon as this blog develops legs and followers.

5 Do you trade this system?

I do trade a system that does this concept. I literally have hundreds of variations of this system cataloged and I trade a variation of all of these.

6. What sort of historical performance have you seen with this system?

Let me just say very good. I will begin to do some posts with backtest data and of course we will have the data from this live trade experiment.

Being a long only system doesn’t this system have poor performance during bear markets?

The performance during bear markets should outperform the bear as well as make a few bucks in prolonged bears. We will explore this concept further in future blog posts.

8.What stocks does this system trade?

Presently it trades the upper half, in terms of price, of the SP500 stocks. This will leave about 250 stocks that we will be monitoring. The reason I use the higher priced stocks  is so that when we incur transaction costs based upon the number of shares traded, we can keep our commissions to a minimum.

I need some more questions from you the blog reader. Let me know at konadelight@gmail.com