One-Trick Pony Trading
Using only one indicator to pick a winning stock was an interesting strategy I used to compete in a recent Share Picking Competition. I called it the ‘One-Trick Pony Trading’. Merriam Webster dictionary defines one-trick pony as ‘one that is skilled in only one area’. My one-trick pony was the application of the Guppy Multiple Moving Average, an indicator used to identify the trend direction of a stock and a potentially profitable trade.
The Share Picking Competition was an Australia wide event for members of the Australian Technical Analysts Association. It was a game run over the course of a year and each participant had to choose one stock to hold for an entire month. Buying or selling occurred only at the beginning of each month. Similar to a rotational strategy, participants could choose a different stock each month or continue to hold the same stock. Starting capital was $10 000 and any profits were added onto the base amount to be reinvested entirely into the next stock. If a stock was not chosen by the deadline no profit or loss was recorded for that month.
These were the stock picks over 2019 and 2020.
It is beyond this article to show every single stock I traded each month. You are welcome to overlay a GMMA indicator onto any of the stocks in the table to see the GMMA features at the time of opening the position. I will share some of the more interesting stock picks.
Kogan – KGN exhibits the ideal features I like to see in the short-term GMMA (blue lines) and the long-term GMMA (red lines). The short-term GMMA sits above the long-term in the order of an uptrend. Widely separated moving averages indicate strong support for the dominant uptrend by both the short-term trader group and the long-term investor group. This was my stock pick for May 2020.
Archtis – AR9 exhibits the same features as KGN. Widely separated moving average lines in the short-term trader group and the long-term investor group. Strong support for the uptrend is in place as the lines turn upwards. A smooth ride to the high before a rocky rollercoaster movement of price moving down then up and down again. This was my stock pick for August 2020.
Novonix – NVX shows the short-term GMMA sitting above the long-term GMMA as seen in the previous charts. A slight dip in the short-term GMMA was my entry point. Price rose for a few days before starting to trend downwards. Notice the short-term GMMA compress and turnover, crashing into the long-term GMMA as price plummeted 21% in one day. This was my stock pick for September 2020.
The loss from NVX was an unusual one. It is a rare event to see a stock down 39% in one month.
At the end of this year long game, the original theoretical capital of $10 000 turned into
$16 272. All thanks to my one-trick pony called GMMA. After leading the competition for much of the year, the one major event of bad luck caused me to end the game in second place.
The GMMA indicator alone was used repeatedly on different charts, resulting in an overall successful outcome. One-trick pony trading was an interesting way to approach a trading game but for better trading in the real markets we need to incorporate more than just one indicator.