Q4 Earnings Season Update

TL;DR

• All my trading is 100% automated now, no manual watchlists or order management
• My trades have been 70% short, 30% long
• 100% day trading, no swings as there is too much risk in the current market

What’s up traders! I bet you thought that I was dead, right? Nope, I didn’t blow my account and I didn’t quit trading. I’ve just been heads down on a couple of projects.

As some of you already know, I’ve been getting deep into algorithmic trading strategies and automated scans/watchlist generation. Some tools I’ve been experimenting with are Quantopian and Trade-Ideas (For the record I ended up sticking with TI. Learn more about their automated trading here), but I haven’t found another platform besides mine that provides access to research based on historical earnings dates. Some platforms have an earnings day filter where you can say “filter out stocks that didn’t report earnings within the last 10 days”, but you can’t say “give me all the stocks within the last 10 days that reported earnings AND closed +5% on earnings day”, or “show me the symbols that opened +5% on earnings day, then closed red”.

Enter the next phase of AIR.

We already have two auto-generated lists in the app right now. The “Earnings Tracker” list, which captures all the stocks within the last 30 days that are above or within -1% of the earnings day close, and I know several of you have made some great trades using this list. A lot of my research has leveraged the earnings tracker in addition to a newer one which gathers all the stocks that closed +5% on earnings day aka “Earnings Winners”. The latter has been a major player this quarter, accounting for about 30% of my trades.

I’ll be dramatically expanding the number of lists I integrate into the next version of AIR, and I’ll also be adding a custom screener solution so you guys can build and save your own lists. More on that and other news about the app to come, but let’s get into some trading strategy.

You might notice from the picture above that both of those strategies are short biased. While last year was 99% long-biased for me (I took less than 5 shorts all year), my automated trading has been about 70% short. Another departure from last year is that 100% of my trades have been day trades, while up until now I’ve been mostly focussed on swing trading. This has primarily been due to the overall market conditions. It’s been a choppy year with a lot of uncertainty, which means risk management is more important than ever. For me, that means no holding overnight, and locking in gains quicker rather than letting it ride. I run most of my auto-trading strategies with a 5% profit target and/or a 1-3 hour max hold time.

At first, I tried backtesting/emulating my top strategies from last year and they got annihilated. In fact, it took me months just to develop a profitable long strategy. The data kept favoring the short side, so I obliged. This is what I’m running in my auto-trading platform right now:

With “EW” standing for “Earnings Winner”, you can probably guess that this morning breakdown strategy is using the automated list mentioned above. It’s shorting stocks that close +5% on earnings day, and we all know what goes up…

More to come, stay safe out there.