Flipper System : Introduction

Having introduced the Hitcher and the Random system, I thought maybe a third system with a very different methodology might make a nice counterpoint for comparative purposes.

In his book "Unholy Grails" Nick Radge compares and back tests a number of systems that are all over the internet in one form or another.  To get the full flavor of this type of trading I urge you to buy this book.  I don't receive any fee for endorsing anything I mention in this blog but I'm happy to recommend things that have been significant in my trading journey.  If I could go back in time and only buy 10 trading books rather than the 100 or so I have read then this would be one of them.

One of the systems in Unholy Grails is the 20% flipper.  Quite simply if a stock rises 20% from a low, it's a buy and if it then falls 20% from a high you sell it.  The aim is to hold 20 stocks.  There is an on/off version which gives a smoother equity curve but the raw flipper contains very little in the way of rules.  Hilariously it was one of the best performing methods in the book in terms of outright return, but it also has a fairly significant draw down occasionally which would make it hard for many people to trade in real life.

Here is a quick look at one stock over a period of time.  You can see that the profitable trades outweigh the losing ones but you can also sense the frustration available to the people who need to be right.  In the back tests Nick Radge did, the Flipper had a win rate just over 40% so we need to remember that trading isn't about being right - it's about making money!

Chart courtesy of www.IncredibleCharts.com

As I am not trading with my money here I will run my version of the 20% flipper over the ASX 101 - 300 with no on/off switch.  The money rules have to be a little different because I don't think it's a system suited to using leverage (at least not at the rates my CFD provider charges) so I will pretend I have a $100,000 account with a normal broker and that I am paying $20 a side brokerage.  I will still hold a maximum 16 stocks and start off buying $6,000 at a time.  I will also go all in and buy flat out until the book is full.

27th April 2014 - In an effort to stop the Flipper buying so many dogs I have amended the universe from the ASX 101 to 300 to anything in the All Ords with a minimum turnover of $500,000 a day and a minimum price of 25 cents.  I then amended the maximum (currently $10) price until I got a universe of 200 shares