'Payrolls NDX' Generated an Entry Signal for Thursday's Close, 7/2/2009; however its robustness in realtime trading is unproven.

'Payrolls NDX' Generated an Entry Signal for Thursday's Close, 7/2/2009. This model is based on the behavior of the NDX on the day the Payroll report is released. It is due to be exited at today's (Monday's) Close unless its Money Management Stop is hit intraday.

This model of market behavior is unproven in real time trading. Prior to Thursday's Entry Signal, the model has produced only 18 trades within a 24 year window. The first 17 were used to build the model and trade #18 was the first one that was executed in real time. It was subsequently stopped out, and that was the only stop out in the 18 trade history. At the time of writing this post, the current trade is down about 1.25%.

This is one of the risks of system trading. Even when building a model with in-sample data, testing it on out-of-sample data, and approving it for trading (because the model appears to be robust), there is no guarantee the model has correctly identified a type of predictive market behavior that will generate profits going forward. If the model gets stopped out today, then we will have a situation where the only two stops in the 19 trade history of the model, are when it began to trade in real time. This does not inspire confidence. In the case of a stop out today, I will have to re-evaluate the robustness of this model and make an adjustment to my trading plan:

• reduce the position size for future entry signals
• rebuild the model
• stop trading the model

Here are some of the model's Performance Statistics:

• Model Tracking Vehicle=NDX
• Start Date=11/1/1985
• Number of Trades=18
• Average Trade Return=0.94%
• Average Winning Trade Return=1.39%
• Average Losing Trade Return=-0.63%
• Win Rate=78%
• Average Win/Average Loss=2.23
• Profit Factor=7.80

Disclosure: Long the NQU09.

Disclosure: The performance results shown above are for Model analysis purposes and do not include commission or slippage. The model is built on data from the NDX, but I trade the model with the NQ e-mini. Actual trading results from the NQ usually differ from the model results of the NDX, with the NQ showing somewhat weaker performance data. Nonetheless, I still trade this model with the NQ and when executed according to the plan, it has generated consistent profitability for me.

***remember this is an illustration of what i am trading and my thinking...it is not a recommendation for you or anyone else to buy or sell this or any other security***