'SPY Gopher' generated an Exit Signal at the Close on Monday 11/2/2009

• on monday 11/2/2009, 'SPY Gopher' generated an exit signal...
• the model's theoretical position posted a 2.41% loss, which is a bit greater than the average losing trade (1.79%)...
• the actual trade (ESZ09) posted a 1.54% loss...i exited a portion of the position early, which turned out to be favorable...
• this is the second loss for the model in a row...
• 'end of month/begining of month' weakness has been a theme for a few months now (august/sept, sept/oct, oct/nov) in the SPY/ES...

10/27/2009: 'SPY Gopher' generated a Long Entry Signal for Monday's Close.

'SPY Gopher' generated a long entry signal for the SPY at yesterday's Close. This is one of my favorite systems. I have been trading this model (or an earlier version of it) since the summer of 2004 (trade #65 on the above Equity Curve chart). Whenever it goes through a drawdown, it has always gone on to ultimately make new Equity Curve highs. It performed extremely well during the recent bear market, and is currently trading just below ts all time high.

Model Performance Stats:

• Model Tracking Vehicle=SPY
• Start Date=2/2/1993
• Number of Trades=96
• Average Trade Return=1.16%
• Win Rate=69%
• Ration Average Win/Average Loss (RAWAL)=1.41
• Profit Factor=3.10

The caveat with this model is its dynamic Money Management Stop is moderately high, currently 3.00%. The amount of this stop can change for each day the position is open. Historically, if I can handle risking that much capital on the trade, the performance of the model over the following year has been very good. The model generates 5-6 trades/year, which on average returns 6-7%/year. Each position is modeled to be open for 5 days unless the Money Management Stop closes the position sooner.

I usually trade this model with 4 ES contracts, however for this position, I opened 2 contracts (@ 1064.50). I am expecting another model to generate a long entry signal over the next couple of days, and I want to manage the size of my total exposure.

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 SPY, but I trade the model with the ES e-mini. Actual trading results from the ES usually differ from the model results of the SPY, with the ES showing somewhat weaker performance data. Nonetheless, I still trade this model with the ES and when executed according to the plan, it has generated consistent profitability for me.

Disclosure: Long ESZ09.

***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...trade at your own risk ***

'SPY Gopher' generated an Exit Signal for Thursday's Close, 10/1/2009

• 'SPY Gopher' got caught in today's bear raid...while up nearly 2.00% earlier in the week, it closed out down 1.91% (modeled position: SPY) and down a theoretical 2.01% on the trading position (ESZ09)...
• i say theoretical, because i did not follow the exit rules...as i mentioned yesterday, though bullish longer term on the ES and the NQ, the trading action was increasing my concern that the 1035-1065 base may not hold today....i was long 4 ESZ09 contracts, and sold 1 yesterday at 1056.50 and three more today around 3:40 pm at an average of 1032, making my average exit for the 4 contracts 1038.13 (only 3 contracts are shown on the chart because the 4th contract is traded in another account) :

• so while the theoretical trading position exit should have been at 1025.25 (4:00:00 pm price), the actual trading exit was at 1038.13...this exit, leads to a 0.78% trading loss (with commission) instead of the theoretical trading loss of 2.01%...in this case, acting on a reanalysis of the technicals and on fear saved me 1.23% on 4 ESZ09....
• the model loss of 1.91% is slightly more than 1.77% average loss...

Disclosure: Long NQZ09.

***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...trade at your own risk***

systemic trading for the discretionary trader: can it work?

• now this is where things are starting to get tricky for me...
• my systemic swing trading system 'SPY Gopher', which was opened on last thursday's close at 1046.00, is due to be exited at tomorrow's close, if its money management stop is not hit...the stop is currently around 1019.00...
• all of the volatility over the past few days, especially today is making me nervous...i hate to see a position that is nicely green, move back to breakeven...yesterday's move in the ESZ09 to 1066ish, had the position up 2%, only to see it go to breakeven and then to red this am...
• i am now finding myself wanting to lock in some of the ESZ09 gains even though the systemic model is not due to be closed until 4 pm tomorrow...
• fear is leading me to change my plan...
• though today's rebound from the early morning selling appears bullish, i am afraid that this is just eom, eoq window dressing and the rug will be pulled out from the market tomorrow...i feel this way, even though i am bullish on the ES in the longer term...it seems a bit conflicted, but this is what i am feeling...
• i am long 4 ESZ09, and have put offers out at 1056.50, 1063.50, 1067.50 and 1072.50...the thing is, i am not supposed to be offering anything out until 4 pm thursday when my market orders are released...right now i almost can't help myself...the desire to lock in some gains is very strong....as i am writing this, my offer at 1056.50 has been hit...
• i am being driven by fear, by the need to be safe...
• i am also driven by the need to book some gains and pay my bills...
• good traders might seek to lock in gains...
• but great traders can deal with the uncertainty and let the market or the model tell them when its time to get out...
• sometimes i will give myself credit and say i am a good trader...
• i have never considered myself a great trader...i want to be a great trader...
• great trading will require even more emotional fortitude than i currently have...trading with real money is not an academic exercise...it is full bodied and emotional...i can only handle so much uncertainty...
• so exiting one ESZ09 contract at 1056.50 feels good, because i have booked some gains and have less exposure...however, i did not follow my systemic trading plan for this model, and this feels bad...
• like i said, this is the tricky part...
• at heart, i am a discretionary trader who trades a lot of systemic models...is this in sync? probably not...am i trying to grow? definitely...
• perhaps the next step is to really recognize that i need to generate enough money every month to pay my bills and if i have to lock in some gains on my systemic trading models to accomplish this, then so be it...
• if the emotional uncertainty of an open position is too much for me, then i have to continue to trade even smaller or lock in some gains on systemic trading models that are in the money and are getting close to being exited, until i can build my emotional fortitude back up, and then trade the systemic trading models 100% the way they are supposed to be traded...
• right now, i would say that i trade the systemic trading models the right way about 95% of the time...this is a big improvement from a few years ago, when it was perhaps 70% of the time...
• hmmm, this is a lot of obsessing regarding 5% of my behavior...

Disclosure: Long ESZ09.

***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...trade at your own risk***

9/30/2009 9:45 am update

• my systemic 'NDX 30th DoM' may generate a long entry signal for today's close...i say the odds are 50/50...my systemic 'NDX 1st DoM' may generate a long entry signal for tomorrow's close...i say the probability for this is about 98%...since at least one, if not two models, are probably going to give me a full NQ position in the market by end of today or tomorrow, i am inclined to book some gains in my discretionary swing trade of the NQ...
• during the overnight session, i lowered my offer on the 1 NQZ09 contract i am holding from 1736.50 to 1726.50...the morning economic data releases caused some volatility, and the NQ traded as high as 1726.25, 1 tick below my offer...upon returning from my morning errands, i noticed this missed offer, and sold my last NQZ09 contract at market (1722.00)...
• +7.92 NQ points/contract, 1 contract traded...
• currently flat the NQZ09...
• having said all that, i am interested in picking up some NQ if we trade down to the lower portion of the recent daily range...i am bidding for 1 contract at 1708.50, and 1 contract at 1693.50...
• i am still long a full position in the ES via my 'SPY Gopher' systemic trading model, which is due to be exited on thursday's close...since i am long the ES and it is highly co-related to the NQ, i would rather not see the NQ trade down to 1708.50 or 1693.50, but if it does, i will get back in it...
• so over the past 3 days, i have sold the 3 NQZ09 contracts picked up during late last week's downdraft, for a total of about +8.33NQ points/contract, 3 contracts held...at the worst level last week, the NQZ09 traded down to 1688.75...i was averaged in at 1714.08...at that worst level, i was down about 25 points/contract...so my return on these 3 contracts relative to my max intraday drawdown was not good...if i was not holding a full position in the ES or about to get a systemic signal to get long a full position in the NQ, i would have held these 3 contracts for a longer period of time, and ideally exited them at higher prices...this would have increased my profit relative to my drawdown...trading multiple styles on multiple time frames with limited capital sometimes leads to non-ideal entries and/or exits for my discretionary trading...
• trading with oliver at vcm today and tomorrow...

Disclosure: Long ESZ09.

***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...trade at your own risk***

9/28/2009 11:30 update: NQ

• wow, the bulls are back in town...i am heavily position for their return, though i did not think they would bound back in so adamantly...
• in response to their quick return, i started monkeying around with my first sell level of 1726.50...i started looking a bit closer at the 15M chart and saw a minor pivot around 1725, so changed my offer from 1726.50 to a market order when the NQ was trading in 1722/23s around 10:08 am and got filled at 1722.25...
• +8.17 NQ points/contract, 1 contract closed...
• the impetus for the order change was fear...since the run up occurred so quickly, i was afraid it could drop back down just as quick...i am also long a full position in the ES via the 'SPY Gopher' model...i guess i wanted to reduce some exposure and take advantage of the quick run up...
• it is this type of dynamic which continues to effect my game...on many occasions, i lower my offer or raise my bid because i am afraid the NQ will not move to the level that i originally targeted...sometimes it works in my favor, and sometimes it doesn't...i don't have enough stats on this to determine if this order level change, mostly influenced by fear and somewhat influenced by re-analysis, is helping or hurting my discretionary performance...
• i am not sure if i even want to commit to finding out...i feel as if i have so many trading related things to attend to, that i just don't have the time to get some stats on whether discretionary swing trading plan changes are helping or hurting my performance...maybe i am just making excuses...this is something for me to think about...
• i am currently offering 1 NQZ09 at 1736.50 and 1 at 1746.50...
• i am currently bidding for 1 NQZ09 at 1713.50...if this fills, it won't bring my avg cost immeasurably down (1714.08), it will just get me bigger for in my view, the probable move back up to new swing highs...
• both the NQ and the ES are in my view, behaving quite bullishly...both found support at the previous mentioned levels of 1690 and 1035, and have now broken above friday's high (1709 and 1049.50), firmly putting in higher highs on the 15M intraday charts...the trend up today has been so strong, i can not find any meaningful pivots or lows on the 5M or the 15M charts of the NQ or the ES!!
• this move up is also occuring on essentially no news...yeah, there is some M&A this morning, but there is no economic data and no major earnings news...the upside move in the market in the absence of any major news catalyst is quite bullish in my opinion...
• how probable is it that both the NQ and the ES will see new swing highs by the end of this week? i don't know, but today's powertrend reversal to the upside after last weeks downdraft, increases the odds...
• i can't find any freely available links to reference this, but from the research i have followed over the years, the last few days of the current month, and the first few days of the new month, tend to be the best performing days of the month...i am not sure why this is the case...perhaps it has something to do with end-of-month money manager window dressing, or mutual fund inflows being quickly put to work, or something else...
• in any case, i have noticed this end of month and begining of month bullish tendency...it factors into my discretionary swing trading as well as some of my systemic trading models...
• this end of month and begining of the month bullish tendency, combined with the upside reversal of last weeks downdraft has me allowing for the increased possibility that we will at least test last weeks swing highs, and perhaps generate new swing highs by the end of this week...
• my 'SPY Gopher' model is due to be exited at the thursday's close...if new swing highs are generated this week and can stick, this model will generate some nice performance for me...

Disclosure: Long NQZ09, Long ESZ09.

***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...trade at your own risk***

Sell Rosh Hashanah, Buy Yom Kippur

• there is an old wall street adage: 'sell rosh hashana, buy yom kippur'...
• stock trader's almanac performed a study on this concept, using DJIA from 1970-2008, concludes that this tendency yielded an average trade return of +0.80%...i don't believe this includes commisions, etc...
• the max closed trade drawdown is 3.90%...their study does not include a max intraday drawdown figure...
• this is a behavioral tendency that i can attempt to model for a possible systemic trading system to be in place for september 2010...i would probably substitute the SPY or the NDX for the DJIA...
• some of the trading patterns that stock trader's almanac has highlighted over the past 10 years, i have been using as starting points for modeling stock market behavior...ultimately, some of these initial behavioral models have become full fledged systemic trading models...'SPY Gopher' is one of them...

9/25/2009 1035 am update

• NQ and ES are both trading today within the base that has forned since the low of yesterday morning...
• i am currently long 3 NQZ09 for a discretionary swing trade...
• my average price is 1714.08...
• currently offering out 1 NQZ09 contract at the following 3 levels: 1726.50, 1736.50, 1746.50...
• while i am bullish on the NQ longer term, i would be surprised if any of these offers were taken today...however they are out there because one just never knows, does one?
• i am also long ESZ09 via my 'SPY Gopher' systemic trading model...
• ES appears to be showing a bit more RS than NQ today...it is trading closer to the top of the range than the NQ is...i imagine the negative reaction to the RIMM announcement is influencing this...i will be watching RIMM today as a potential tell for the NQ...right now RIMM is sitting at the $70 support level and hasn't moved much (up or down) since its opening gap down...i will be watching it for a break above or below its morning base...
• trading the odds posted some studies last night...these studies suggest bullish behavior for the ES today...Setup 3 in particular intrigues me, and i will model it myself for some more detailed analysis...
• jason goepfert at sentimentrader performs and posts very informative technical studies, primarily involving sentiment analysis...i have been following his work for most of this decade and it has been a significant input into my market analysis and directional bias...he offers monthly and annual subs at very reasonable rates for the retail trader...i highly recommend his work...

Disclosure: Long NQZ09, Long ESZ09.

***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...trade at your own risk***

9/24/2009 415 pm update: 'SPY Gopher'

'SPY Gopher' has generated a long entry signal for the SPY at today's Close. This is one of my favorite systems. I have been trading this model (or an earlier version of it) since the summer of 2004 (trade #65 on the above Equity Curve chart). Whenever it goes through a drawdown, it has always gone on to ultimately make new Equity Curve highs. It performed extremely well during the recent bear market, and is currently trading at its all time high.

Model Performance Stats:

• Model Tracking Vehicle=SPY
• Start Date=2/2/1993
• Number of Trades=95
• Average Trade Return=1.19%
• Win Rate=69%
• Ration Average Win/Average Loss (RAWAL)=1.41
• Profit Factor=3.21

The caveat with this model is its Money Management Stop is moderately high, currently 2.43%. Historically, if I can handle risking that much capital on the trade, the performance of the model over the following year has been very good. The model generates 5-6 trades/year, which on average returns 6-7%/year. Each position is modeled to be open for 5 days unless the Money Management Stop closes the position sooner.

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 SPY, but I trade the model with the ES e-mini. Actual trading results from the ES usually differ from the model results of the SPY, with the ES showing somewhat weaker performance data. Nonetheless, I still trade this model with the ES and when executed according to the plan, it has generated consistent profitability for me.

Disclosure: Long ESZ09.

***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...trade at your own risk***

9/24/2009 1050 update: NQ, ES, 'BTD Index', 'SPY Gopher'

• wow, volatility is back...
• the NQZ09 contract i purchased around yesterday's close at 1722.50 i sold this morning around 9am at 1736.50...the high for the swing move up was 1736.75...my analysis suggested that the NQ could trade up to this area, and i think i also got a bit lucky as the swing high was 1 tick above my target...
• +16 NQ points/contract, 1 contract traded...
• because of this show of strength, i was willing to re-enter at a higher level then the last entry (1722.50), so i began bidding at 1727.50...
• i was filled at 1727.50 @ 936 am...however, the NQ had some other things on its mind and then traded just below the support area at 1711.75...i was bidding at 1708.50 and was afraid that i might not get filled, so i put in a market order and was filled right at 1711.75 (right at support)...
• a few minutes later, the NQ traded below support and down to 1704...
• i am currently long 2 contracts at an average price of 1719.63...
• i am bidding for a 3rd contract at 1693.50...
• i don't think i will be bidding for a 4th NQ contract for a discretionary swing trade below 1693.50...my 'BTD Index' systemic swing trading model will be looking to get long the NQ if the NDX closes below the lower bollinger band (in the low to mid 1680's today)...i hope this model generates an entry today...since june this model has generated 4 out of 4 winning trades:

• i believe this is just a bout of profit taking and the NQ and the ES will be making new swing highs in october...however, i still want to manage my open trade drawdown, so i will be more conservative with adding to the size of the NQ discretionary swing trading position...
• the NQZ09 has now traded down to 1696, and i am hoping for more weakness...i am bidding at 1693.50...
• my 'SPY Gopher' systemic swing trading model is also generating a pending long entry signal for today's close...i hope the NQ and the ES just continue to selloff today..
• the 1035 level on the ES looks like a strong support level, and i would be expecting a bounce there:

Disclosure: Long NQZ09.

***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...trade at your own risk***

'SPY Gopher' generated an Exit Signal for Wednesday's Close, 7/1/2009

'SPY Gopher' generated an Exit Signal for Wednesday's Close, 7/1/2009.

The Modeled position (SPY) posted a 2.45% gain, nearly twice the average trade return of 1.2%. The actual Trading position (ESU09) posted a 2.48% gain (including commissions), slightly better than the model.

This profitable trade created a new high for the model's Equity Curve (shown above).

The position was held for 5 trading days (http://stbsmb.blogspot.com/2009/06/spy-gopher-generated-entry-signal-for.html).

Odds and Ends

• a very big shout out to Eric and Becky for hosting a great BBQ on sunday for VCM traders and all the other traders Eric is connected with...it was great to meet/see Eric, Becky, Dave, Ralph, Jackie, Jed, Tom, Brian, Eden, Bill and Joey...
• the July 2009 edition of Technical Analysis of Stock & Commodities (TASC) has a very good interview with Ernest P. Chan regarding how to construct System based Trading Models...
• took my own advice, and this past thursday instead of watching my 'SPY Gopher' (http://stbsmb.blogspot.com/2009/06/spy-gopher-generated-entry-signal-for.html) position minute by minute, i went out and had lunch with my wife and son...we had a great time...even shopping at Target was a refreshing change of pace from my usual midday activity of screen staring...
• 150 years for Bernie Madoff is not enough...
• Texas Holdem is a very interesting poker game...just started playing

'SPY Gopher' generated an Entry Signal for Wednesday's Close

'SPY Gopher' has generated an Entry signal for the SPY at yesterday's Close. This is one of my favorite systems. I have been trading this model since about Trade 65 (Equity Curve chart above). Whenever it goes through a drawdown, it has always gone on to ultimately make new Equity Curve highs. And it has just generated another entry signal.

Model Performance Stats:

• Model Tracking Vehicle=SPY
• Start Date=2/2/1993
• Number of Trades=94
• Average Trade Return=1.2%
• Win Rate=69%
• Average Win/Average Loss=1.4
• Profit Factor=3.18

The caveat with this model is its Money Management Stop is very high, currently about 3.5%. Historically, if I can handle risking that much capital on the trade, the performance of the model over the following year has been very good. The model generates 5-6 trades/year, which on average returns 6-7%/year. Each position is modeled to be open for 5 days unless the Money Management Stop closes the position sooner.

Disclosure: Long the ESU09.

Disclosure: The performance results shown above are for Model analysis purpsoses and do not include commission or slippage. The model is built on data from the SPY, but I trade the model with the ES e-mini. Actual trading results from the ES usually differ from the model results of the SPY, with the ES showing somewhat weaker performance data. Nonetheless, I still trade this model with the ES 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***