February 21, 2017

A Stock Market's Driving Force

The stock market game is played under uncertainty. You are not totally certain of what the future may bring. However, if you take a long term view of things, you could look for "stuff" that does make sense, and might most assuredly continue in the future.

I do expect, with a very high probability, that tomorrow there will be more people on the planet. I can not be certain on a day to day basis, but I do know I will be right almost every day of the year since it will require a huge disaster for that statement not to hold. And those "events" do not happen every day.

World population grows by about 200,000 people per day, over 80 million per year. By 2050, it is estimated that world population should be around 9.7 billion people. Over 2 billion people that will need food, housing, education, health care, ... etc. Total, it is some 3 billion new babies. One billion people will die. We all know this. See Worldometers.

The trend is there. It is the driving force of all world economies. We have to provide a better planet and a better life for the next generation, just as our parents have done for us. The task is monumental, but all together we can pull it off.

The biggest challenge the world has ever faced. Never in the history of humanity has there been so much to be done, so many people to take care of.

In the years to come, any business trying to cater to the needs of this growing population should be bound to prosper.

As an investor in all this, the task becomes easy. You select companies capable of growing it such an environment. They grow, their price rise, you profit and build your retirement account. How complicated can it be?

I have often resumed my trading methods with: accumulate shares for the long term, and trade over the process. That is it.

When you analyze the implications of such a statement, it all becomes clear. You intend to accumulate shares of the best performing companies as they evolve and as your portfolio grows. When you see profits, you can take some of it to later reinvest in your growing companies. You get diversification and long term planning. You are buying parts of growing businesses and on occasion might even discard a none performing one.

You will be buying up stocks that are going up in price, and from time to time, take some profits to reinvest in stocks going up as well. How do you know a stock price is rising? Just look at its chart, do a little research, and you will know.

Will such a trading strategy fail? It can't. All you need to do is give it time.

Take a look at Berkshire Hathaway stock for instance. It has been going up for the past 50 years. It had its ups and downs, but it continued to grow. And it should continue to do so. I do not need convincing that Mr. Buffett's investment methodology works. He has already demonstrated that over the past 50 years.

One way to show that your trading strategy can survive over time is to show that it already can. By this is meant, having some kind of forward test. As if taking a strategy that has been frozen in time and give it what would be its future data. I have presented DEVX8 in a few articles, and the last time a simulation was done using that program was November 2016.

I intend to do another one. Just to show that the methodology did not break down. That the trading strategy held its grounds. That it continued to prosper going forward. Already, the November 2016 simulation was a walk-forward test in its own right. At the time, I mostly wanted to show its controllability. The Buy & Weak Hold article showed that quite explicitly.

Doing a new test requires a base for comparison. Performing the simulation under the same conditions (meaning the same program) using the same stocks. This time, there would be 3 added months of new price data, (some 62 trading days). I performed this backtest and will be back with the results.

See related articles:

The Buy & Weak Hold

Controlling a Stock Trading Strategy

The Deviation X Strategy


Created... February 21, 2017 © Guy R. Fleury. All rights reserved.  

Alpha Project