Algorithmic Trading Strategy: 25.96% I Know First Return vs. 2.85% Stock Return

Algorithmic Trading Strategy: MU

Algorithmic trading strategy: Below we present the results of trading Micron Technology, Inc. (MU) according to I Know First basic trading strategy: buying when the signal is positive and selling short when the signal is negative on the 1 month forecast signal. The period analyzed goes from the 2nd of September 2014 to the 12th of December 2015. During this period, this strategy made a return of 25.96%. At the same time, if the investor would have bought the stock and held onto it during the whole period he would have gained a return of just 2.85%. Below we present a graph showing the comparative performance of this specific strategy and the stock performance, along with the corresponding signal for each day.

IKF Trading Strategy

Strategy Explanation

The strategy used to trade MU in the above graph is the simplest strategy the investor can implement using I Know First’s algorithm: When the signal is positive, the investor buys the stock and holds onit until the signal becomes negative or nonexistent, and when the signal is negative, the investor sells the stock short until it becomes positive or nonexistent. In the above graph, the blue line represents the return of the MU stock in the presented period, and the green line represents the return of the IKF strategy.

To understand the strategy and the graph, lets review a few trades the investor would have made if he followed the above strategy. For example, from the 2nd of September to the 29th of September the IKF signal is positive so we are in a long position, but on the morning of the 30th we have a negative signal, so we close our long position and start a short position that last for 2 days, until the signal becomes positive again. Also, for example, you can see that from the 30th of  October to the 11th of November we don´t have a signal, so as you can see, even though MU is changing it´s price the green line is flat because we are out of the market. We stay out of the market until the 12th of November when we receive a negative signal and we sell short to start a short position. We do this strategy for the whole period, and at the end we can see that the return of the strategy is much better than the return of the stock.

Why does the signal disappear from time to time?

The signal can become nonexistent for two main reasons: either the algorithm is doing well but it realized that it won´t be able to predict accurately what would happen next, so it stops sending a signal until it has a better idea, or it´s not doing so well and it decides to stop until it re-analyzes the available information in order to get a better prediction. This helps to maximize gains when the algorithm is right and minimize losses when the algorithm is wrong. As the investor can see in the above graph the results are great.

Where could I have found this forecast?

MU is a tech company and as such it belongs to our “Top Tech Stocks” Package. This package includes 20 stocks with bullish and bearish signals and indicates the best tech stocks to buy:

  • Top 10 tech stocks for the long position
  • Top 10 tech stocks for the short position

As long as MU was in the top 10 position (bullish or bearish) you would have received it´s signal on that day.

However, the best way to receive the daily forecast for a specific company during a prolonged period of time is to create a customized forecast table with I Know First. In that way the investor can receive the signals for x number of specific stocks everyday, even if the stock is not in the top 10-20 forecast of that day. In order to ask for a customized table please contact us at [email protected]

What is MU?

MU is the stock ticker for Micron Technology, Inc., an American multinational corporation based in Boise, Idaho, best known for producing many forms of semiconductor devices. This includes DRAM, SDRAM, flash memory, and SSDs. Micron Technology is ranked among the Top 5 Semiconductor producing companies in the world. As of February 2015, its market capitalization was $30.5 billion.