Mechanical Trading For The Intelligent Investor

Mac Murray 上宣帝
Copyright © 2007-2020 by Mac Murray All Rights Reserved

The Research

The Research
• Mechanical Trading Systems

The Research
• Identifying Long Term Trends

The Research
• Emerging Markets

The Research
The Data

The Research
The Data
• 6000 Years Raw Price Data

The Research
The Data
• World Federation of Exchanges

The Research
The Data
• World Federation of Exchanges
• PSE

Mechanical Trading System

Determine In Advance:

• Entries: How and When to get in.

• Exits: How and When to get out.

• Position Size: How much to buy/sell.

• Position Size: How much to buy/sell.
• Index / Market Sector / Industry

“The greatest benefit
of mechanical trading
systems is their
ability to reprogram
traders away from
destructive types of
behavior in favor of
successful trading
habits.”
Richard Weissman

Long-Term

Long-Term
• Parable of the Stewards

Long-Term
• Seedtime and Harvest

Long-Term
• Cycles:

Long-Term
• Cycles:
oEconomic Cycles: Economic Cycle
Research Institute, Geoffrey H. Moore.

Long-Term
• Cycles:
oEconomic Cycles: Economic Cycle
Research Institute, Geoffrey H. Moore
oExo-Economic Cycles: Foundation
for the Study of Cycles, Edward H. Dewey

Findings

Findings
Are there non-random price patterns
which precede all long-term trends?

Findings
YES.

Findings
YES.
• 1st : Distinct. Easy to spot. Best seen on
larger time frames.

Findings
YES.
• 1st : Distinct. Easy to spot. Best seen on
larger time frames.
• 2nd : Recurring. Always occurs at the
inception of long term trends.

The Flag Formation

The Flag Formation
Occurs approximately 3 times
every 10 years.

• 3 Moving Average Crossover
The Flag Formation

• 2 or 3 times every 10 years.
The Flag Formation

• 2 or 3 times every 10 years.
• >50% 1+ year long trends
The Flag Formation

Intelligent Investor

Intelligent Investor
Why I am a reluctant “technician”.

The CFO Study

The CFO Study
2011: Largest CFO survey in history.

The CFO Study
• Nearly 400 American CFOs surveyed.

The CFO Study
• Findings: 1 in 5 U.S. corporations
intentionally misrepresent earnings.

The CFO Study
• Findings: 1 in 5 U.S. corporations
intentionally misrepresent earnings.
• U.S.GAAP allows for intentional earnings
misrepresentation by both public and
private companies.
--Ilia Dichev, John Graham, Campbell R.Harvey, and Shiva Rajgopal, “The
Misrepresentation of Earnings” , Financial Analysts Journal, Volume 72
·Number 1, ©2016 CFA Institute.

What This Means

What This Means
As far as the investing public is concerned,
the truth or falsehood of an earnings
statement is impossible to know.

What This Means
Value Investing stands or falls on the
trustworthiness of the earnings number.

What This Means
Value Investing stands or falls on the
trustworthiness of the earnings number.
Publicly available earnings data simply
cannot be trusted.

What Can I Do?
Source: Tradingeconomics.com

Intelligent Investor Entry

Intelligent Investor Buy Signal

Look For Flag Formation

YES

Buy On Next New
Monthly High
YES

Buy On Next New
Monthly High
YES NO

Buy On Next New
Monthly High
Wait For Flag
Formation
YES NO

Intelligent Investor Exit

Either:

Either:
• Hold ‘til you die.

Either:
• Hold ‘til you die.
• Use MA to dictate your
exits.

Consider a variation of:
• Sell 50% when short-
term MA crosses below
mid-term MA
• Sell 50% if mid-term
crosses below long-term
MA

Mechanical Trading For
Intelligent Investors?

How might we
harmonize the best
of Technical
Analysis with the
best of classic
Value Investing?

How might we
harmonize the best
of Technical
Analysis with the
best of classic
Value Investing?
Simple: Make your Value Investing purchase
within the 3 months following the Flag
Formation. You’ll be very happy you did.

MECHANICAL
TRADING
FOR THE
INTELLIGENT
INVESTOR

Mechanical Trading For The Intelligent Investor

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