Sunday, March 01, 2009

Simple weekly trading system

At 4:00pm on July 17, 2007, Robert R. Prechter, Jr. sent out a special Interim Report telling his subscribers to, "....Return to a fully leveraged short position now."

At 3:25pm on February 23, 2009, Prechter sent out his monthly Elliott Wave Theorist, saying in relevant part, "I recommend covering our short position at today's close."

This trade lasted about 20 months and earned 800 S&P points over the course of the trade. Based on a single S&P mini futures contract, those 800 points earned $40,000. Depending on your brokerage rules, about every $4,000 placed in this trade earned $40,000, or about 1,000%.

A once in a lifetime call, or something you can do at home on your own?

Below is a screen shot of my trend following system based on Weekly trading bars. All of the automated trades made from these weekly bars are printed on the chart. You can always click on the chart to enlarge it.

There were seven trades between July, 2007 and February, 2009. Five of the trades were winners and two were losers. Adding up all the points gained by the five winners and subtracting from that sum all of the points lost in the two losers, for the same period that Prechter earned his 800 points on a single short trade, this trend following system gained 766 points.

Unlike Prechter, this system is still Short.

Also unlike Prechter, this system runs on my MacBook Pro.



Edwardo said...

I find it most amusing that just as selling is about accelerate in the greatest bear market of our (and perhaps all) time, that Robert Prechter, the man who has been calling for the Grand SuperCycle crash for several generations, says close short positions.

Well, guru Prechter has always been, um, a tad early with his calls, and here is early again. Quel Suprise!

Anonymous said...

Allan, if I count it correctly, I only get 519 points instead of 776

1) sell 1505.07 buy 1495.17 + 10
2) buy 1495.17 sell 1502.19 +7
3) sell 1502.19 buy 1370.15 +132
4) buy 1370.15 sell 1345.07 -25
5) sell 1345.07 buy 918.03 +427
6) buy 918.03 sell 810.62 -107
7) sell 810.62 current 735.09 +75

for a total of 519, am I missing something ???

Anonymous said...

Edwardo: he did cite counterparty risk as a downside to shorting. This clearly implies he expects more downside, to put it mildly.

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