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Trading Strategy of the Week: MomentumInvesting UCGG

Any results mentioned or shown are based on simulated or hypothetical performance that have certain limitations. See bottom of this post for full disclosure and important warnings. Past results are not necessarily indicative of future results. Most people lose money when trading. These results are based on statistics that were current as of April 7, 2017, when this profile and article were edited.

Next up in our Trading Strategy of the Week (TSOW) series, we talked with Collective2 Trade Manager Roland Manuhutu about his “MomentumInvesting UCGG” strategy — a stocks-only strategy based on strict statistical rules. View strategy performance, including hypothetical monthly returns and subscription costs, inside Collective2. 

Roland Manuhutu combines momentum and value approaches to achieve long term profits.

Stocks Only

“I only buy stocks, because I don’t like the risks associated with forex, futures and options. (*Editor’s note: Stock trading can be risky, too. There is no such thing as risk-free trading.) My approach is long term. I run my analysis once each month, and then buy and sell stocks. This doesn’t provide the adrenaline rush of daily trading but, as the Nobel prize winning economist Paul Samuelson said, “Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas”.

It feels good when I look at returns of big hedge funds,
and see that I beat many of them almost every year.

A Strategy Based on Rules

“The MomentumInvesting UCGG strategy — UCGG stands for USA, Canada, Great Britain and Germany — is based on the principle that recent winners will also do well in the coming period. To that core tenet, I add some quality-related criteria. For example, I pick stocks that increased the fastest compared to all other stocks. Then I apply two more filters:

     1. Business criteria indicating whether the stock is relatively cheap or expensive.

     2. Whether or not the stock itself is in a rising trend.

I sell when the biggest rise of a stock is over and I use a stop-loss for that. No strategy is perfect, so a stop-loss ensures I lock in profits and get out quickly enough to avoid a possible big loss. (*Editor’s note: stop losses may not limit losses in all market conditions.) In my experience, humbleness pays off.

Momentum UCGG scans all stocks, not only large caps. For this reason, I limit the number of Collective2 subscribers to 150.”

Summary Statistics. All results are hypothetical. Trading is risky. Most people who trade lose money.

How I Got Here

“I was born in Rotterdam, in the Netherlands, and studied business informatics at the Technical University of Applied Science in Eindhoven. After losing a lot of money in the market crash of 2000-2002, I decided to focus on researching scientific investment strategies.

Initially, I developed a strategy based purely on technical analysis, resembling the approach of Alexander Elder. I did all right, even beating the Dutch AEX-index, but I still wasn’t satisfied. My background as an engineer led me to continue to refine my approach. I was willing to look at any strategy that could be scientifically validated — regardless of the technique or philosophy behind it. After a lot of complicated research, I came to the simple conclusion that long-term profits are best achieved by combining momentum and value approaches.

I enjoy the analytical part of trading. The best part of my job is the feeling I have when  I earn strong  returns. It feels great to look at the returns of big hedge funds and see that I beat many of them almost every year. At the same time, every good strategy has periods of underperformance, and I do get nervous and frustrated when that happens. It helps to know that my strategy is scientifically researched and that history has shown that success can be achieved by sticking to this strategy for at least five years. Historically, this has been the case during every downturn since 1998. The best advice I can give to readers is that you should choose a strategy that has proven itself, and stick with it for at least five years.

I now run my own investment research company, Rolucoman, in addition to serving as an information management manager with a Dutch university. 

In my spare time I like to cook, spend time with my family, walk with the dog. I intend to start playing badminton again. Besides all that, I like to visit restaurants and cafes, and to enjoy life with people who are close to me.”

His Thoughts on Collective2

“I am always looking for better investment opportunities. During one of my  searches I stumbled upon Collective2. I love the promise of Collective2, which boils down to this: if you are able to find a good trader on the platform, then you can latch on to him or her, and achieve the same results in your own brokerage account… without doing any of the work.

I also like that Collective2 lets you choose an investment strategy that fits your personal risk profile. Generally speaking, stock-based strategies have a lower risk profile than strategies based on forex, futures and options. (*Editor’s note: Stock trading can be risky, too. There is no such thing as risk-free trading.) To my knowledge, Collective2 is the only major social trading platform that offers stock-based strategies in addition to forex, futures, and options.”

Past results are not necessarily indicative of future results.

These results are based on simulated or hypothetical performance results that have certain inherent limitations. Unlike the results shown in an actual performance record, these results do not represent actual trading. Also, because these trades have not actually been executed, these results may have under-or over-compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated or hypothetical trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to these being shown.

In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk in 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 of which can adversely affect actual trading results.

Material assumptions and methods used when calculating results

The following are material assumptions used when calculating any hypothetical monthly results that appear on our web site.

  • Profits are reinvested. We assume profits (when there are profits) are reinvested in the trading strategy.
  • Starting investment size. For any trading strategy on our site, hypothetical results are based on the assumption that you invested the starting amount shown on the strategy’s performance chart. In some cases, nominal dollar amounts on the equity chart have been re-scaled downward to make current go-forward trading sizes more manageable. In these cases, it may not have been possible to trade the strategy historically at the equity levels shown on the chart, and a higher minimum capital was required in the past.
  • All fees are included. When calculating cumulative returns, we try to estimate and include all the fees a typical trader incurs when AutoTrading using AutoTrade technology. This includes the subscription cost of the strategy, plus any per-trade AutoTrade fees, plus estimated broker commissions if any.
  • “Max Drawdown” Calculation Method. We calculate the Max Drawdown statistic as follows. Our computer software looks at the equity chart of the system in question and finds the largest percentage amount that the equity chart ever declines from a local “peak” to a subsequent point in time (thus this is formally called “Maximum Peak to Valley Drawdown.”) While this is useful information when evaluating trading systems, you should keep in mind that past performance does not guarantee future results. Therefore, future drawdowns may be larger than the historical maximum drawdowns you see here.
Trading is risky

There is a substantial risk of loss in futures and forex trading. Online trading of stocks and options is extremely risky. Assume you will lose money. Don’t trade with money you cannot afford to lose.


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