Introduction to SMTP

SMTP is an Engineering approach to algorithm-based Stock Market trading

• SMTP is a 100% automatic stock market trading and analysis process.
• Based on NYSE & Nasdaq markets only.
• Developed in Excel, over a total of 10 years.
• Technique founded on Engineering problem solving experience.
• Emphasis on disciplined reaction to existing market conditions, filtering out the noise and focusing on data-driven outcomes.
• Cautious approach using stop losses, trailing stops.
• Two trading algorithms in use, currently outperforming S&P 500 by 4% and 6% ytd.

Traditional Approaches to Stock Market Trading

• Much emphasis is on prediction, second-guessing.
• Single variable decisions are frequent (P/E, cash flow etc).
• Decisions tend to be opinion based.
• Traders latch on messiahs (Warren Buffett, George Soros, analysts etc)
• Tendency to jump around from one investment strategy to another, based on the many sources of “advice”.
• Investors look for the “next big thing”.
• Underestimating the difficulty in identifying long-term trends.
• Overestimating the value in drilling down into balance sheets, earnings reports, 10-Ks etc.

• Need a systematic approach to trading and analysis.
• Design uses elements from Six-Sigma, Experimental Design, TRIZ, Full-Factorial, Taguchi.
• Repeatable and data-based to facilitate Continuous Improvement.
• Change emphasis from prediction to measurement.
• Identify the start of short-term trends.
• US markets have 5000+ securities – reduce this to a watchlist.
• Backtest S&P 500 to identify the key experimental parameters.
• Automatically track this data in real-time. Organize for clarity and accessibility.
• Use that data to create trading algorithms.