Trading after the signal

  • 09 March 2013 |
  • Written by  Skot Kortje, Stock Trends Analyst
  • font size
  • Print

If an investor wants to replicate a published trading system, each trade should be entered tactically. Stock Trends portfolios can be emulated on a post-trigger basis, but results will depend on how the trades are executed. 

Slippage is an important issue for market timing investors. It is a costly consequence of almost all transaction-heavy trading plans – certainly more of a concern than commission costs. Briefly defined, slippage is the difference in the price at which you intend to buy or sell an instrument and the price at which the order is filled. There are multiple reasons for this divergence, including the time that passes between order placement and execution and the relative liquidity of the instrument. Closing the gap between your expectation of what price a stock will be bought or sold and the price you actually get filled should be an important part of your trading practice.

But what about the slippage that occurs between a market signal and trade order? This is an especially important consideration when following a system published by a market-timing advisory service. Can the rates of return achieved by a trading system be closely simulated? How does the model function in real trading? Readers here would ask how do the model Stock Trends Portfolio trading systems rate against actual or achievable trading results? The  signals generated by the Stock Trends trading systems are issued after the close of trading on Friday, but the model portfolios register the Friday closing price as a transaction price. Can subscribers to the service attain the same returns registered by the model portfolios by trading post-signal in the following trading sessions?
 
First of all, a clear statement can be made about exactly duplicating any portfolio: It would be highly improbable that the transactions of a trading strategy can be matched. Even high frequency trading systems generating split second orders cannot be regenerated exactly in the marketplace because every fraction of a second represents a new market for an instrument. Of course, the differences in results may tend toward insignificance when the time between signal and order execution is small, but actual order regeneration at the same price is still highly improbable over numerous trades.
 
However, we would like to see that the results generated in a particular model are reasonably simulated in actual trading. What is acceptable in terms of variance between the model results and actual results will depend upon the over-all profitability of the system. In other words, will a trading system provide returns high enough to make the differences in actual results acceptable? If a system gives you 5% returns you won’t be too happy with a 2% difference in actual results. If the system gives you 20% overall returns, 2% slippage might be acceptable.
 
Periodically, I do get asked how the Stock Trends model portfolio performance holds in a post-trigger market  - what would be the real trading results for subscribers who want to mimic the trading activity directed by the published strategies? The answer to that question depends on the trade efficiency of the investor and on the type of stock traded. Poor trade order practice and illiquid, volatile stocks make a bad combination.
 
Certainly, placing ‘market orders’ on trades in this category of stock will very often result in less than optimal results. As a point of reference I will direct readers to the Stock Trends Handbook chapter on executing trades, but there are many other sources that can educate investors on how to properly make a trade. It is important that every investor know that regardless of their source for a trade signal – whether from an advisory service, your own analysis, or your taxi cab driver’s – the responsibility is on you to execute the trade as optimally as possible. A signal to buy or sell is not a signal to go to the market unprepared. It is essential to be tactical with every trade order.
 
For now, let’s assume that trade order best practice is being used. What can we learn about the differences in trading results possible for investors who go to market after the Stock Trends Portfolio trade signals are issued? I will only do analysis of this question on the weekly data series I maintain and will only seek to approximate possible results on the assumption that the trade is executed in the following week. As a result any differences that are highlighted in this analysis may in fact be lower if the trade data was for the following trading day instead of the following trading week. Nevertheless, I believe this analysis should give us a pretty good idea of what kind of replication of trading prices is likely and whether there is a significant difference in results from the model portfolios published here.
 
How can we truly approximate actual trades made? Even if I presented trade tickets for each trade it would not be an accurate representation of the population’s (every subscriber who transacted on the signals) trade record. It is necessary to approximate as a central measure, to estimate a price at which a transaction would have tended toward. If we take the mid-point of the range of the stock price in the following period we can estimate a central point, although without actual inter-period data to see what the distribution of prices tells us it would be an imprecise estimate. For instance, a stock may have traded mostly above the range mid-point. This analysis cannot tell us how individual stocks traded on a daily or intra-day basis.
 
If we take a sample (data, csv) of over 5,200 transactions directed by the six active Stock Trends model portfolios currently published and extract trading data for the following week after trade signals (both buy and sell), we get the following statistics of the results for post-trigger trades made at the midpoint of the weekly range :
 
Mean of the difference between the post-trigger price change (%) and the published price change (%): -0.18
Median of the difference between the post-trigger price change (%) and the published price change (%): 0.19
Median Absolute Deviation of the price difference from the published trigger price: 3.84
 
This tells us that approximately 50% of the transaction prices obtained in the post-trigger period (the following week) at the midpoint of the price range had overall trade results within the range of 3.65% lower and 4.03% higher than the published trade price changes. Roughly restated, if an investor bought or sold the stocks posted in the Stock Trends portfolio transaction reports the week following, and obtained a price near the midpoint of the weekly price range, the overall results of the trades would differ only marginally from the posted results.
 
Of course, there will be varying experiences on individual trades, and some traders will obtain better or worse prices than the midpoint of the range. A mythical trader who somehow managed to enter each position at the lowest price and exited at the highest price post-trigger would have experienced a 47% improvement in overall returns. Conversely, a mythical trader who somehow managed to enter each trade at the highest price and exited at the lowest price post-trigger would have experienced a 44% drop in overall returns.
 
These two highly improbable scenarios only serve to expose the range of experiences that are possible given the broader parameter of this analysis – that the trade takes place within the following trading week of a buy/sell signal. The ranges expressed here would likely be tighter if the analysis were done solely on trades the day following the buy/sell trigger. One hopes that the typical trader would tend toward the midpoint (although it would also be a mythical trader who makes all trades at the midpoint of a range) and the results experienced over an extended period would be in line with that published in the model portfolio reports.
 
This exercise serves two purposes: first it reaffirms that post-trigger trading can simulate the model performances. But more importantly, it reminds us that investors trading their own account should be certain to always engage the market tactically, use limit orders regularly, and to make every effort to exact the best price possible in every trade. 

 

back to top

Subscriber Testimonials

  • There is a lot to be gained from comparing trends of how individual stocks are doing within a sector, as well as how the sector is performing relative to the broad market.

    Dudley R., Subscriber

  • Stock Trends information is part of the base information I review before making a trade.

    Subscriber
  • Stock Trends analysis quantifies nicely the movement of individual stocks. I’ve found that if the technicals are out of synch with fundamental analysis, it is a wake-up call to make a decision. The Stock Trends Bull/Bear Ratio is useful in identifying major market bottoms and tops. It has always presented a good buying or selling opportunity.

    Charles G., Subscriber
  • I find your website and research very helpful in my stock trading. I have subscribed to several related services in the past and none present their work with “just the facts” as you. Please keep up the great work so that I can continue to learn! 

    Bryan E., Subscriber
  • I very much like the systematic approach to analyzing stock data, it fits my approach.

    Subscriber
  • Thank you for your excellent work and kind approach to your customers.

    Odette C., Subscriber

  • I am just writing to tell you of my appreciation of your service! It makes so much sense to me. You seem to be an oasis of stability and sensibility in a stockmarket jungle.

    Adrian S., Subscriber

  • I use Stock Trends to help direct my stock picks. Also, following the advice of Stock Trends I have religiously used stop-loss orders and have avoided hanging on to losing stocks for emotional reasons.

    John B., Subscriber
  • I want to thank you for posting such an excellent guide to technical analysis on the web. You have provided a great service to all of us novice investors.

    Michael C., Stock Trends user
  • Your report is an impressive, excellent tool and I have recommmended it to friends.

    Colin E., Subscriber

  • Just thought I'd call to thank you, Skot. Stock Trends Weekly Reporter helped pay for my daughter's education!

    Peter H., Subscriber

  • An admitted cynic, it's obviously very high praise when he says he likes StockTrends because of its "simplicity, utility, openness, [and] honesty," and in addition to having "no hidden agenda" is "understandably documented [and] historically verifiable." And, he adds, "It lets me see a lot of things without doing a lot of work." Globe and Mail

    Paul W., Subscriber

  • I am fascinated with your service and methodology - it is very impressive. [...] Over the years I have concluded that there are many ways to approach stock investing, but once one has chosen a path, one is better off sticking to it.

    Bob E., Subscriber

  • I've followed your recommendations since reading your columns in the Globe & Mail, and finding they published Stock Trends arrows in their financial listings. I do find them a guide to the general market and what I should be avoiding for declining chart trends.
    Has probably saved me the subscription by not rushing into hot stocks!

    Anthony D., Subscriber
  • I am something of a momentum investor. I find Stock Trends useful as I can look at my portfolio as a “watch list” and quickly see where trends are declining in strength or reversing, so it is particularly useful as a tool in portfolio management regarding sales.

    William C., Subscriber
  • Hence, anyone who had followed the "Stock Trends" line should have sold their Bre-X shares and, with the windfall, paid for a lifetime subscription to The Globe and Mail and more. Talk about return on investment!

    Muni P., Subscriber

  • I have had the good fortune to be reasonably successful and enjoy the investment process. Your process would be recommended for both experts and those who are new to investing.

    Frank I., Subscriber
  • Stock Trends Weekly Reporter is an easy way to pick up equities that represent an upward trend.

    Subscriber
  • I've followed a number of Stock Trends picks, and the methodology is solid.

    Doug B., Subscriber

  • You have created and maintained an amazing, highly educational program and I am grateful for your part in getting our retirement funds to the good place they are.

    Karin M., Subscriber

Subscription Plans

Subscription Plans

STWR - Monthly

$19.95

Monthly subscription plan to Stock Trends Weekly Reporter - pay your monthly subscription fees by having them automatically charged (PayPal only). Free 7-day trial period. Subscribers may cancel before the end of any subscription month.

STWR - 1 Year Prepaid Subscription

$199.00

1 Year Prepaid subscription to Stock Trends Weekly Reporter. Save 16% off monthly rate!

STWR - 2 Year Prepaid Subscription

$299.00

2 Year Prepaid subscription to Stock Trends Weekly Reporter. Save 37% off monthly rate!

STWR - 3 Year Prepaid Subscription

$399.00

3 Year Prepaid subscription to Stock Trends Weekly Reporter. Save 44% off monthly rate!

Stock Trends Editorial

  • Long and strong - Bullish trends in specialized retailers
    Long and strong - Bullish trends in specialized retailers Amidst a market still digesting the Federal Reserve’s first rate cut in nine months, one theme stands out in the latest Stock Trends dataset: the remarkable resilience of retail leaders. While thousands of common stocks across NYSE, Nasdaq, and TSX are posting Strong Bullish signals, three consumer-facing companies — TJX Companies, O’Reilly Automotive, and Dollarama — hold the longest uninterrupted Bullish runs on their exchanges.…
    Read more...
  • From Banks to Bytes to Uranium: Strong Bulls Align with ST-IM Signals
    From Banks to Bytes to Uranium: Strong Bulls Align with ST-IM Signals On September 17, 2025, the U.S. Federal Reserve delivered its first interest rate cut in nine months, lowering the federal funds rate by 25 basis points to a new target range of 4.00%–4.25%. This was a response to clear signs of a cooling labor market—slower job growth, shorter workweeks, and rising unemployment in several cohorts. Although inflation remains above the Fed’s 2% target, policymakers signaled…
    Read more...
  • Money management and trading psychology: building a resilient trading plan that integrates with the Stock Trends decision-tree framework
    Money management and trading psychology: building a resilient trading plan that integrates with the Stock Trends decision-tree framework Financial markets are unpredictable. Even when a trading strategy has a positive expectancy, a few bad trades can wipe out an account if position sizes are too large or emotions override discipline. Academic studies show that how much capital is allocated per trade is more influential on long‑term returns than the specific trading system used. For example, research cited by position‑sizing specialist Van Tharp found that…
    Read more...
  • Stock Trends: The Human Side of Market Trends
    Stock Trends: The Human Side of Market Trends Markets don’t move on math alone—they move on people. The screens light up because millions of humans react to news, stories, and each other. Behavioral economics is the field that studies those reactions. This article introduces the big ideas, then brings the story up to date with automated bots and AI trading—and explains how the Stock Trends framework helps you navigate it all.
    Read more...
View all Stock Trends Editorials
 
 

Subscription Plans

STWR - Monthly

$19.95/Month

Monthly subscription plan to Stock Trends Weekly Reporter - pay your monthly subscription fees by having them automatically charged (PayPal only). Free 7-day trial period. Subscribers may cancel before the end of any subscription month.

STWR - 1 Year Prepaid Subscription

$199/Year

1 Year Prepaid subscription to Stock Trends Weekly Reporter. Save 16% off monthly rate!

STWR - 2 Year Prepaid Subscription

$299/2 Years

2 Year Prepaid subscription to Stock Trends Weekly Reporter. Save 37% off monthly rate!

STWR - 3 Year Prepaid Subscription

$399/3 Years

3 Year Prepaid subscription to Stock Trends Weekly Reporter. Save 44% off monthly rate!