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The Zomma Directional Algorithm On Square

|About: Square, Inc. (SQ)
Summary

Algo Rules:

1. When the yellow line crosses above the green cloud, buy.

2. When the yellow line crosses back in to the top of the green cloud, sell.

The algo's goal is to go long when stocks are trending up and to move to cash before stocks trend down.

The algo is not designed to incorporate short signals. Just long and cash.

Square (SQ) is a great example of a stock where applying an algorithm to it would have saved a large amount of drawdown, heartburn, and capital.

Half the battle is staying out when things are trending down. The most innovative hedge funds may have strong fundamental views on individual stocks, but increasingly, are applying algos as a timing tool for entry and for exit. Those that do not are dinosaurs. 

We will monitor it to see if it goes long. Every merchant I've spoken to likes them. But for entry and for exit of an expensive growth stock, you need a strong algo.

Hypothetical performance results have many inherent limitations, some of which are described below. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown; in fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk of actual trading. For example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all which can adversely affect trading results.