Saturday, February 06, 2010

You can't always get what you want...

...but if you try sometimes, you just might find, you get what you need. 
   -Mick Jagger and Keith Richards, 1969, Let It Bleed

My preference would be that any trading system be perfect, triggering Buys at low tick and Sells at top tick.  Early in my trading career, I spent (read: wasted) what seems like an eternity researching and developing such systems.  Not to mention the thousands of dollars pissed away trading top ticks and bottom ticks.  Somewhere along my maturation-of-a-trader continuum  I went 180 degrees the other way, discovering that all a trader needed was an edge, an effective edge, the proverbial "something that works" and all of my research, development and system design efforts were now focused not on perfection, but on the much less elusive concept of advantage.

SPX Daily Trend Model

The above chart represents what I am suggesting is the greatest advantage I have seen in my years as a trader and system developer.  It is not perfect.  But is good.  Damn good.  The solid navy line illustrated in the above chart is my Trend Following Trading SystemIt works across any tradable and any time frame.  It generally is about 60% accurate, meaning 40% of its signals are reversed before generating profits.  But of the 60% that are profitable, the profits not only compensate for the 40% of trades that lose, but they go on to produce out-sized gains against any measure of market performance.  

Counting from the left of the chart, there are four trades on the chart, it begins with an ongoing Long (Nov 6 @ 1067), then Short (Jan 21@ 1133) then Long ( Feb 2 @ 1100) and finally Short (Feb 4 @ 1077).  That works out to 3 out of 4 winning position trades for a sum of 87 SPX points over the course of three months.   

That is a gain of 87 SPX points over a 90 day time frame where the SPX has gone down a total of one point.  That is an edge.  That is an advantage.  It's not perfect, it may not be everything we want as traders and/or investors, but I am telling you loud and clear that it is all that is needed to achieve success in trading in 2010 and beyond.  


SLV Monthly

The monthly trend models are way too slow to be very effective, but they do give a great big picture view of mega-trends.  I sold my SLV positions this week because of the Weekly Model, which seems to have exited it's congestion with a definitive thrust down:

SLV Weekly

The trade was entered back in late 2008, before I had started using these trend models, somewhere just under $10.  But the trend models were warning of a change in trend for the past several weeks, since the end of December and last week seemed to put an exclamation point on the end of the bullish trend in Silver.

As a trading vehicle, have a look at the Silver Daily Trend Model, with the most recent Daily Trend Signals annotated on the chart:

SLV Daily Trend Model

I'm working on a Weekend Update for the email list, should be out later today or tomorrow at the latest.  In the meantime, some added emphasis to the title and theme of this blog from a some old friends, below.



Anonymous said...

A -

Thanks for a very profitable few weeks. First time in a long time I am actually making money from this craziness.

Tom F.

Anonymous said...

upcoming turn dates:

Jan 27
Feb 09 (Tues) [minor]
Feb 15 (Mony) [minor]
Mar 02 (Tues) [major]

precision +/- 3 days.

East Bound and Down Jackie Gleason stars as Benjamin Bernanke

Anonymous said...

Friday's hammer candle on DJIA might have effected the Feb 09 turn date.

"Even if you are on the right track, you'll get run over if you just sit there." ~ Will Rogers (Amer. 1879–1935)

Anonymous said...

my comment on the silver charts is the same as the EUR/USD..... silver has corrected only to the september 2009 low.
the correlation from the past year is not the same anymore.

I wouldnt be surprized to see a 'timing' correlation though, between the EUR/USD hitting march bottom at 1.24 at the same time silver hits 12 and the july bottom,and S+P hits july bottom around 990,970, 930 whatever it is.