LottaBits is a system for trading stocks in U.S. Stock markets including NASD and listed stocks.
LottaBits, as the name implies, relies on a computer program to select stocks and generate trading signals. Stocks are selected from lists that define each system. Both long and short trades are signaled depending on market conditions. Signals are delivered the day before and executed on the market opening. All trades are inter-day (no day trading) with trades entered by limit orders and exited with market orders.
Depending on the system (NASD, SP-500LO, HiVol or Whole Market), a limited number of stocks are selected for trading. Each day's stock picking signals are ranked. This allows smaller or less diversified portfolios to select stocks to trade working from the top of the list to the bottom. In this manner it is possible to scale trading up or down depending upon the user's portfolio size and risk tolerance.
Stop loss orders are not used. Extensive testing shows that stops do not reduce drawdowns nor improve overall performance when used with LottaBits systems.
Based on extensive back-testing, duration of the average trade is 10 days. For NASD-1 the average winning trades gain about 15-16% and average losing trades are down about 11-12%, leaving an edge of 4-5% per average trade. We expect to have just over 51% of trades successful. All of this, of course, depends upon market conditions and the system selected.
Successful trading, regardless of the system used, requires careful management of capital to reduce risk. By far the most important risk reduction method is diversification -- not putting too many eggs into one basket. The LottaBits system can be used with diversifications from 20% down to under 1% depending on the user's risk tolerance and profit objectives. Our signals are scaled so that no more than 5% of a typical, model portfolio will be committed to a single position.