Author: Mitch Jones
Covestor model: Price Momentum
2011 was a good year for my model, returning 36% for the 12 month period. This was slightly above my expectations due to a run of favorable trades in the last quarter. Based on backtesting of my model, I had expected to return around 25-30% annually. Looking forward to 2012, I am hopeful to achieve similar results.
Some of my best trades of 2011 were on small cap stocks with lower than average daily volumes. I will continue to invest in these types of stocks, which are often neglected by hedge funds and institutional investors due to minimum requirements. My model will also continue to be based on making a large number of short-term trades for small gains.
However, I do plan to make some tweaks. Buying a stock at the right time is the easier part — knowing when to sell is harder. I have noticed this common investor’s quandary proves true even in my automated trading. This year, I plan on slightly adjusting my sell side algorithm. Most of my past analysis has focused on the best time to buy, but this year I will focus on determining the best time to close out trades. Aside from this tweak, I plan to leave the rest of my strategy intact at this time.
