Somewhere back in the past I discovered that with volatile screens such as Gentle Screamers you could improve overall returns by selling a position if it shot up at least 30%. There was a good chance the price would recede, and it was better to capture the spike. Hence, a profit latch.

Recently I found myself wondering if the concept would work on less volatile screens. Not at the 30% level, obviously, but rather at a more sane 5%. The screen I chose to look at was Advanced because I knew nothing about it (no bias) and the screen picks had small spreads (on the order of 0.1% or less).

Using the top five picks with a 4-week hold, I tracked the returns beginning in 12/30/21, using the opening prices on the following Monday and assumed good-until-canceled sell orders were entered just after the purchases. The sell orders were 5% above the opening price.

The three years showed the following (compounded) returns:

             Basic     with 5%
      IWM    Screen    latch
2022 -20%    - 9%       25%
2023  17%    - 5%       13%
2024  11%      3%       14%

A promising beginning.

DB2

Mechanical Investing FAQ

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