In this system, we have tested waiting for a pullback after a strong move to limit our risk. The benefit of this algo over the trend-following system is that our win rate increases to nearly 60%; however, it has the drawdown of not getting the amount out of your winners as you do with pure trend following.

Buying pullbacks allows us to increase the size and apply some more discretion as we watch the levels noted as the stocks pull back into them.

This algorithm will work best in ranging and markets pulling back.

The algorithm is tested using the following rules:

1. Buying at the level noted by the algo (Most will not trigger, so we will use alerts for this instead of orders that will take buying power)

2. Buying 1/10th of your portfolio into each stock

3. Hold for a week with a stop under the prior week’s low

As always, we emphasize the crucial role of human knowledge and analysis in our system. We never want to follow a system mindlessly. Instead, we apply our understanding by waiting to ensure the stock will hold the noted level before buying. This approach may vary for each individual, but knowing that these stocks have a proven chance to run puts the odds in our favour.