8/27/2009 1 pm update

• the order to sell NQU09 limit 1626.50 was filled at 1626.50 for a 4.25 point loss/contract from the average price of 1630.75/contract...
• for my current discretionary swing trading style, i am experimenting with not using firm stops, but rather weighing my current exposure against my shorter and longer term views...longer term, i am very bullish on the NQ...shorter term, there are some signs of topping action and we are heading into the september/october period which can be very volatile...so with this set of short and long term views, i still want to have some long side exposure, but not as much if i thought that on both a short and long term basis the NQ would head higher...i will attempt to work my average price down during selloff's and then look to add more exposure if i believe the NQ is ready to reverse back up and make new swing highs...prior to today, i was long 1 contract at 1644, now i am long 1 contract at 1630.75...this 13.25 point difference only cost me 4.25 points because of the way that i worked my second entry and its subsequent exit...
• the 1626.50 sell level was selected because: 1) it is just below the 1628 pivot that had been support for the past 4 days and is now resistance; 2) just below the declining 20 ma on the 15M chart; 3) a bit below the lower red sell line on the ATR Volatiltiy Band chart...
• as the NQ began to move from the low 1620's to the mid 1620's i did start to feel some anxiety that my limit order was a bit too high and wouldn't fill...i thought to myself that i should let the order sit and if the order did not fill within a reasonable period of time, then i would lower it a bit...the order did fill within that reasonable period of time...
• i am proud of myself: even though i felt some anxiety, i did not immediately change my order, but rather i came up with a plan if the order did not fill in a reasonable period of time...
• i did lower the second exit order from limit 1646.50 to 1646.00...
• i am currently long 1 contract at 1630.75 (theoretical)...
• i do want to add a second lot, but at what price? i will add if the NQ sells of some more, at limit 1603.50...
• this 1603.50 level is derived from the following: 1) just above the whole number 1600; 2) just above above the 1600 pivot from 8/19/2009; 3) just above the rising 200 ma on the 60M chart (not shown); 4) just above the lower buy band (dark green line) on the ATR Volatility chart...
• but what if the NQ continues to rally? then, i will wait to see how the charts setup...this waiting and not knowing is a bit new for me...i need to listen to what the NQ is telling me...right now, as far as i am concerned, the NQ is not saying a thing to me about where to add if the strength continues through lunch and into the afternoon...i will be watching and waiting...
• in the mean time, i will be rebuilding the 'SB IDX' systemic swing model...

Disclosure: Long NQU09.

***remember this is an illustration of what i am trading and my thinking...my trading plan may change without notice...this is not a recommendation for you or anyone else, to buy or sell this or any other security...***

8/18/2009 pre open update

• yesterday was the crusher: SB IDX got stopped out for its largest historical loss and the NQ discretionary swing trade had a big drawdown, and FAS got hit for about 10%...
• the systemic swing trading portfolio is now down about 10% from its early july high...historically, the portfolio has experienced a max drawdown of about 15% from its recent high, so this current drawdown is within normal expectations...however, the max drawdown usually coincides with a big move down in the market, and since early july the market has not been moving down but rather has had a a big move up...perhaps extreme momentum in either direction is problematic for the systemic swing trading portfolio...
• i am giving even more consideration to rebuilding all the models in the portfolio...the rebuilding will keep the basic structure/filters of each model, and just update each filter's parameter setting to reflect the additional in sample market data that each model would now include...
• due to the way the leading indicators of economic growth are behaving (http://stbsmb.blogspot.com/2009/08/ecris-wli-growth-rate-runs-up-to-26.html) and in my belief that most money managers are under weighted equities, i believe the 'fear of missing' psychology will kick in and we will see a huge equity market runup into the end of the year...
• i have been using a very small lot size for each addition to the discretionary NQU09 swing trade because of the possibility that the bottom of the range would break and we would push down to the mid or low 1500's...i only held the position because i believe this move up is not over, not over by a long shot!
• i added another NQU09 lot (third) at 1576.00 yesterday...i am now averaged in at 1596.17...i am looking to sell the third lot at 1607.50, the second lot at 1617.50, and the first lot at 1627.50...maybe it will take a week or a month to get back to these levels, but this is my current plan..
• i am also planning on adding more NQU09 if we go lower...however since we broke the bottom of the base that dates back to 7/23, and are now testing the bottom of the base that extends back to 7/22, i will be more discriminant with my future additions...
• looking to add more FAS at 61.50...

Disclosure: Long NQU09, long FAS.

***remember this is an illustration of what i am trading and my thinking...my trading plan may change without notice...this is not a recommendation for you or anyone else, to buy or sell this or any other security...***

'SB IDX' gets stopped out for its largest historical loss.

'SB IDX' gets stopped out for its largest historical loss.

The Modeled position (IDX) posted a 2.59% loss, which is worse than the average losing trade return of -0.62%. The actual Trading position (EMDU09) posted a 2.67% loss (including commissions), slightly worse than the model.

This was the largest single trade loss for the model. Is the model broken or just going through a rough patch? I don't think this question can be answered yet. Still the loss was ugly and disappointing for a model that has performed so well historically.

'SB IDX' generated a long entry signal for today's close, 8/14/2009.

'SB IDX' generated a long entry signal for today's close, 8/14/2009. It is due to be exited at Monday's Close unless its Money Management Stop is hit intraday.

The model is currently trading just below its all time high. This is the third entry for the model in the past 2 weeks. With a bit of luck, this one will be the charm. Today's late day rally continued past the 4pm close all the way to the 415 futures close. The lot I purchased at 4pm rallied +0.63% to the 415 close. I am hoping that this end of day strength will continue on Monday. Its been nearly 6 weeks since a decent size gain has been booked by the systemic swing trading portfolio.

Here are some of the model's Performance Statistics:

• Model Tracking Vehicle=IDX
• Start Date=7/1/1994
• Number of Trades=50
• Average Trade Return=0.41%
• Average Winning Trade Return=0.77%
• Average Losing Trade Return=-0.62%
• Win Rate=74%
• RAWAL (Ratio of Average Win/Average Loss)=1.25
• Profit Factor=3.55

A strength of the model is the win rate of 74%. A weakness of the model is the Money Management Stop can be pretty high, currently 2.6%.

Disclosure: Long the EMDU09.

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 IDX, but I trade the model with the EMD e-mini. Actual trading results from the EMD usually differ from the model results of the IDX, with the EMD showing somewhat weaker performance data. Nonetheless, I still trade this model with the EMD 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...my trading plan may change without notice...this is not a recommendation for you or anyone else, to buy or sell this or any other security...***

8/14/2009 post close update

• in my view the bulls are still in charge...the markets negative reaction to the lower than expected michigan consumer confidence, took us below 1600 on the NQ...however some mid afternoon nibbling by the longs led to what looks like a big squeeze of the shorts into the 4pm close, which then continued into the 415pm futures close...
• i remain long the NQU09 at avg price of 1606.25/contract...it closed at 1615.50...the position is currently +9.25/contract unrealized...
• i am still looking to sell the second lot at limit 1622.50, and the first lot at limit 1627.50
• if these levels get hit, i will then determine at what levels i will look to re-enter the NQU09 discretionary swing trade...
• FAS also showed late day strength, putting in a nice bottoming tail on its daily bar for the second day in a row...
• 'SB IDX' generated an entry signal for today's close...i will post a separate entry for this later...
• did some work testing the 'SB IDX' discretionary swing model on intraday time frames...nothing robust was found...
• next week i will test the 'SB SPY' and the 'SB NDX' models on intraday time frames...
• my fingers are crossed for JE as he starts trading his intraday ES model in realtime (http://myestradingjournal.blogspot.com/2009/08/off-hours-return-to-live-trading.html)

Disclosure: Long NQU09, long FAS.

***remember this is an illustration of what i am trading and my thinking...my trading plan may change without notice...this is not a recommendation for you or anyone else, to buy or sell this or any other security...***

'SB IDX' generated an Exit Signal for this past Monday's Close.

'SB IDX' generated an Exit Signal for this past Monday's Close.

• The Modeled position (IDX) posted a 0.67% loss, which is slightly worse than the average losing trade return of -0.61%. The actual Trading position (EMDU09) posted a 0.28% loss (including commissions), 0.39% better than the model.
• Part of the reason for the better trading result versus the modeled result is that I purchased the trading position in the sunday night session at a better price (651.20) than the friday 4pm price (652.50).
• Another reason is that the EMDU09 moves faster than the underlying (IDX), and on friday at 4pm, the futures were selling off while the underlying wasn't.
• Prior to this loss, this model had 12 consecutive winners. The previous loss occured on 9/19/2006.

8/8/2009

• back from vacation, semi rested...
• looking forward to trading on monday...
• no systemic swing entries generated for the 4pm friday close...however, i noticed that a signal ('SB IDX') was generated at 415pm...not sure why it was then and not at 4pm when the trading behavior was essentially the same...i need to look into this...in any case, i am going to enter the order in the EMDU09 when the sunday night session begins...
• i am going to try something new...a blend of systemic trading and discretionary trading...for my money management stop, instead of using the fixed percentage size that the model ('SB IDX') calls for (2.6%), i am going to use the 15 minute pivots carved out over the past week or so during the regular and the overnight session...i have identified 4 pivots, where 1/4 of the total position size will be stopped out if that pivot gets taken out...i will hold all the non-stopped lots until closing time on monday...i will be getting smaller if the position goes against my entry price, but staying large if it goes in my favor....
• this blend of systemic and discretionary trading, with this level of detail is new for me...i am not sure if this will help my trading by fine tuning the systemically modeled stops to the current environment, or if i am just playing games and looking for a reason to change the systemic trading plan which is not supposed to be changed...i am not clear on this...however, the above plan came to me last night when i was reviewing the systemic models signals...i haven't made any decent money in nearly 40 days, so perhaps i am trying to mix things up a bit....somehow this adjusted trading plan feels right, but who knows, i could just be playing games and breaking the primary rule of systemic trading: always take each and every signal exactly as prescribed...
• had some seasickness while on vacation...spent some time chilling and conceptualizing how markets move...this led to an insight for the systemic intraday ES trading model...i am looking to begin coding this up on monday...
• sold one of nine IRA/custodial FAS lots on thursday 8/6, booking 75% on that lot...8 more lots to go (currently up 40-82% on them), with sell limit orders in the mid 80's, 90's and 100's...

Disclosure: Long FAS.

***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***

August 3, 2009

• checking in from bermuda
• fridays 'SB IDX' closed positive for the tiniest of gains...
• no systemic swing trade entries generated today...

'SB IDX' generated a Long Entry Signal for Thursday 7/30/2009's close

'SB IDX' generated a Long Entry Signal for Thursday 7/30/2009's close. This model is based on the trading behavior of the IDX over the past X number of days. It is due to be exited at today's (Friday's) Close unless its Money Management Stop is hit intraday.

As we can see from the Equity Curve chart shown above, the model is currently trading at it's all time high.

Here are some of the model's Performance Statistics:

• Model Tracking Vehicle=IDX
• Start Date=7/1/1994
• Number of Trades=48
• Average Trade Return=0.44%
• Average Winning Trade Return=0.79%
• Average Losing Trade Return=-0.61%
• Win Rate=75%
• RAWAL (Ratio of Average Win/Average Loss)=1.29
• Profit Factor=3.86

When building and testing the model, the out-of-sample test results were actually better than the in-sample construction results. Since I started trading this model in the fall of 2007, all of the trades (6) have been profitable, further enhancing the notion that this model is very robust. There is also a version for the SPY ('SB SPY') and the the NDX ('SB NDX'), though neither of them generated an entry signal on Thursday's close.

A strength of the model is the win rate of 75%. A weakness of the model is the Money Management Stop can be pretty high, currently 2.6%.

Disclosure: Long the EMDU09.

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 IDX, but I trade the model with the EMD e-mini. Actual trading results from the EMD usually differ from the model results of the IDX, with the EMD showing somewhat weaker performance data. Nonetheless, I still trade this model with the EMD 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***