Average Holding Periods (Stocks) - Aussie Stock Forums

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  1. #1

    Default Average Holding Periods (Stocks)

    I found this chart very interesting.

    Are we all greedy speculators now days?


  2. #2
    The Contrarian Averager So_Cynical's Avatar
    Join Date
    Aug 2007
    Sydney - Muntinlupa

    Default Re: Average Holding Periods (Stocks)

    Quote Originally Posted by Modest View Post
    I found this chart very interesting.

    Are we all greedy speculators now days?

    People do what is easy, very very easy to buy and sell now.
    Statistics: 172 Closed Trades since July 07, Trades: Winners 135 - Losers 37, Expectancy/$1 Risked: $0.78

  3. #3

    Default Re: Average Holding Periods (Stocks)

    On some comments I read on TheAge or HotCopper, it seems like their timeframes are days / weeks, not even months and complain when one day the SP doesn't follow something that happened 2 hours ago.

    And even broker reports timelines are for no more than 6 months or so. In fact I don't think I've ever read one that suggests a 5 year time frame, even though most financial products on the ASX (Funds, Stocks, ETFs etc...) suggest 5+ years.

    I've also read a financial advisor say, it's unusual for them to advise clients to do nothing for a while.

    Having said all that, I'm happy that's the case as it's harder to beat someone over 5+ years, when more people want to win every week or month or 6 months.

  4. #4
    Value Collector's Avatar
    Join Date
    Jan 2014

    Default Re: Average Holding Periods (Stocks)

    I couldn't tell you the last time I bought a stock where the plan was to hold it for less than 3 years, I generally buy with the hope that the company is going to continue producing good returns for the more than a decade.

    I think my shortest holding period for a stock in recent years was about 12 months, and I regret selling it.

  5. #5

    Default Re: Average Holding Periods (Stocks)

    I have done a lot of research into the relationship between the risk of a trading system and the profit potential of that system.

    Every trader has a personal risk tolerance, and can define a statement of personal risk tolerance. For example:
    "I am trading a $100,000 account, and will forecast two years into the future. I want to hold the probability of a drawdown greater than 20% of the value of my account to a chance of 5% or less."

    Position size is very important in achieving maximum account gain. For systems that have a positive expectation (and all of the systems we trade have a positive expectation -- we would not trade them if they did not), account growth increases as position size increases. Drawdown also increases as position size increases. It is possible to compute the maximum position size for a given risk tolerance (for a specific trading system or even a hypothetical set of trades). I call that position size "safe-f." When comparing two alternative uses of funds -- such as two alternative trading systems, compute the safe-f position size for each. The two results are then "risk-normalized." Since the risk is the same, we should prefer the one with the greatest profit potential. A useful metric of profit potential is the compound annual rate of return taken at some point in the distribution of profit -- say the 25th percentile -- where we can call that metric CAR25 (Compound Annual rate of Return at the 25th percentile). If CAR25 is less than the return that could be achieved from a risk-free use of the funds, the system is not worth trading.

    All of that is in preparation to explain the results I have found. Risk-normalized profit potential decreases as:
    trading accuracy decreases
    holding period increases

    The sweet spot (highest risk-normalized return) for most trading systems is high accuracy -- 65% or higher -- and short holding periods -- a few days.

    So the results shown in the chart reflect the behavior of traders as the methods they use reward trading methods that are most profitable for a given level of risk.

    One of my YouTube presentations is "The Four Faces of Risk":

    Best regards,

  6. #6

    Default Re: Average Holding Periods (Stocks)

    Quote Originally Posted by Modest View Post

    Are we all greedy speculators now days?
    Short holding period simply mean that information are now cheaper to obtain and that the market is more liquid.

  7. #7

    Default Re: Average Holding Periods (Stocks)

    I'm probably the opposite, I look far into the future, and end up in these places for some mental stimulation to pass the time.

    I've been waiting out stocks and strategy for 2-3 years (triggers like Interest Rates, Australian Housing, U.S Valuations etc) and am anticipating it may take another similar period of time before I can pull the trigger.

    If my research and gameplan tells me it's not the right time, then I'm happy to delay gratification for 5 years, to make a decision that will last me 50 years.
    Last edited by shouldaindex; 10th-November-2015 at 05:25 PM.

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