11/4/2009 11:30 am update: NQ

• heading into 10:30 rt, just below the 1700 whole number, and below the declining 200ma on the 15M chart, i lowered the NQZ09 1705 offer to market, and was filled at 1694.75...
• the high so far for the morning was 1700 even...
• this trade:  +6.42 NQ points/contract, 1 contract closed...
• if i am going to hold multiple contracts on a move against me, i have to get better at holding multiple contracts when the move goes in my favor...
• i only have 1 more NQZ09 contract (avg entry is 1688.33)...my current target is 1725.00...if i were to hold for this target, that would be +36.67 NQ point profit...
• before i can get good at holding multiple contracts that are going in my direction for a discretionary swing trade, i have to get good at holding 1 contract....this contract will be my practice...i am a bit better at holding multiple contracts for systemic swing trades that are going in my favor...
• bidding at 1682.50 and at 1657.50...
• FOMC announcement at 2:15 could shake things up...
• i am still wary of the intermediate term, and would not be surprised if the NQ dropped to the 1600 level and the ES drop to 980ish before thanksgiving...this is not a prediction, just a possibility....
• i am still bullish longer term...

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***

traderpsyches: “To be better risk-managers or traders, you need to become conscious of your feelings and emotions. Then, you can be aware of your biases and you’ve got a better data set.”

If anyone is interested in becoming a better trader or investor, then I highly recommend the work of Denise Shull over at traderpsyches. The following comes from a recent article:

'...Feeling and emotion are part of your analysis and decision-making,” she says. “To be better risk-managers or traders, you need to become conscious of your feelings and emotions. Then, you can be aware of your biases and you’ve got a better data set.”

She says modern portfolio theory and behavioural finance have neglected to explain how individuals’ views of the market are shaped in the first place, while context-free trading formulas and market theories fail to describe financial markets accurately.

“These are social markets,” she says. “All you’re doing is betting on what other people are going to pay for. We’ve tried to turn that into an algebra problem and it’s not.”

This is challenging stuff – not just for the male-dominated world of trading. Ms Shull suggests that what she is proposing is nothing less than “rethinking thinking” – challenging our ingrained views about how we should use our brains in the first place.

“Our psyche uses feelings and emotions as a resource, but we’ve all been brought up to think it’s not a resource,” she says. “It’s been denigrated. We’ve got to teach people how to reclaim it and analyse it. It’s always been there, colouring our perceptions of the market.”

By telling traders to set aside these emotional data, Ms Shull maintains, conventional wisdom goes against human nature. “We’re fighting the way our brains work,” she says. “Let’s start working with our brains. If you do, you’ll be able to manage risk better and read markets better – and have a chance of beating the people who aren’t.”

She is sceptical of the notion that high frequency trading has removed feelings from the activity. On the contrary, Ms Shull says, algorithmic trading strategies are stuffed full of assumptions and sensitivities – and deciding when to shut them off can be emotional...'

'...Ms Shull’s technique is founded on identifying feelings and articulating them. “Feelings and actions are separate things,” she says. “Everybody says: ‘control your feelings’. But you don’t have to control your feelings, you have to control your actions.

“However, because people haven’t been taught to deal with feelings as data, the energy of the feeling goes straight to the action – you act out the fear, the greed, the anger, because you haven’t been taught to look at fear, greed and anger as data first.”

She advises traders to identify their emotions and analyse how much they are connected to their trading positions as opposed to external influences. It helps to articulate them – if not to a psychologist then by speaking into a tape recorder or writing in a journal.

This way, traders can know if they are anxious because of something in their personal lives, or because of their feelings about the market.

Ms Shull says emotions can sub-consciously signal trading opportunities. “Your brain has been watching these markets for years,” she says. “It knows patterns you’re not conscious of, and it’s communicating that on a feelings-based level...'

'BO IDX' generated a Long Entry Signal for Thursday's Close, 7/16/2007

'BO IDX' generated an Entry Signal for Thursday's Close, 7/16/2009. This model is also on the discontinuation watchlist. It's last 6 trades have stopped out. It's Money Managment Stop is small, so the stops are not so painful. However, six stops in a row suggests this model is no longer working, or the recent environment was just not conducive to it.

Here are some of the model's Performance Statistics:

• Model Tracking Vehicle=IDX
• Start Date=7/1/1994
• Number of Trades=80
• Average Trade Return=0.25%
• Average Winning Trade Return=0.68%
• Average Losing Trade Return=-0.56%
• Win Rate=65%
• RAWAL (Ratio of Average Win/Average Loss)=1.21
• Profit Factor=2.25

Disclosure: Long 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.

***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***

'SHOE July Pre OE' generated a Short Entry Signal for Thursday's Close, 7/16/2009

'SHOE July Pre OE' generated a Short Entry Signal for Thursday's Close, 7/16/2009. This model is based on the behavior of the NDX around the time of July Option Expiration. The last trade for this model generated a new equity curve high.

Here are some of the model's Performance Statistics:

• Model Tracking Vehicle=NDX
• Start Date=11/1/1985
• Number of Trades=23
• Average Trade Return=1.61%
• Average Winning Trade Return=2.28%
• Average Losing Trade Return=-0.80%
• Win Rate=78%
• RAWAL (Ratio of Average Win/Average Loss)=2.86
• Profit Factor=10.29

Disclosure: Short 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***

'BTD Index' exits with 42+ NQ points!

'BTD Index' generated an Exit Signal for Monday's Close. The Modeled position (NDX) posted a 3.05% gain, slighty better than the average winning trade return of 2.71%.

The actual Trading position (NQU09) locked in 42.25 NQ points for a 2.99% gain (including commissions).

This profitable trade created a new high for this model's Equity Curve (shown above). The position was held for 4 trading days (http://stbsmb.blogspot.com/2009/07/btd-index-generated-entry-signal-for.html). The model continues to perform in line with its historical precedents.

Unlike my other swing system models which use 50-100% of capital/position, this model only uses 10% of capital because the maximum historical open trade drawdown is 19.9%! This is much too high for use with 100% of capital, especially if there are other swing system's open at the same time.

Another swing model, 'NDX OU' generated an entry signal for today's close. I will write more about this model tomorrow.

'BTBT NDX' generated an Exit Signal for Thursday's Close, 7/9/2009

'BTBT NDX' generated an Exit Signal for Thursday's Close, 7/9/2009.

The Modeled position (NDX) posted a 0.24% gain, which is very low compared to the average winning trade return of 1.83%. The actual Trading position (NQU09) posted a 0.07% gain (including commissions), slightly worse than the model.

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

NDX peaked around 245pm, and then whipped around to close about 0.75% below that peak.

The market feels a bit heavy here, and has been trading somewhat lethargically lately. I don't believe there are an abundance of sellers, but rather the buyers have taken a step back and are waiting, waiting for some catalyst, some reason to resume the spring time rally. I do believe another rally is coming, and while it may begin from these levels, it could also commence after another 5-15% drop.

'BTBT NDX' generated an Entry Signal for Wednesday's Close, 7/8/2009

'BTBT NDX' generated an Entry Signal for Wednesday's Close, 7/8/2009. I really like this model, and there is a version for the IDX and the RUT as well. However, only the NDX generated an Entry Signal for yesterday's Close. BTBT RUT generated an entry signal this past Monday, but was stopped out shortly after the open on Tuesday (http://stbsmb.blogspot.com/2009/07/out-of-sync-modeled-vehicle-rutx-and.html).

Here are some of the model's Performance Statistics:

• Model Tracking Vehicle=NDX
• Start Date=11/1/1985
• Number of Trades=101
• Average Trade Return=0.60%
• Average Winning Trade Return=1.86%
• Average Losing Trade Return=-0.59%
• Win Rate=49%
• RAWAL (Ratio of Average Win/Average Loss)=3.16
• Profit Factor=2.98

Disclosure: Long 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***

'BTD Index' generated an Entry Signal for Tuesday's Close, 7/7/2009

'BTD Index' generated an Entry Signal for Tuesday's Close, 7/7/2009.

The last trade from this model was just just a few weeks ago, and turned out well generating a new high for the Equity Curve.

Here are some of the model's Performance Statistics:

• Model Tracking Vehicle=NDX
• Start Date=11/1/1985
• Number of Trades=120
• Average Trade Return=1.67%
• Average Winning Trade Return=2.71%
• Average Losing Trade Return=-2.51%
• Win Rate=80%
• Ratio of Average Win/Average Loss (RAWAL)=1.08
• Profit Factor=4.33

The Average Winning Trade is just a bit more than the Average Losing Trade, but this model generates 80% winners.

Disclosure: Long 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***

Out of Sync: 'Modeled vehicle' ($RUT.X ) and 'trading vehicle' (TFU09) are not exact mirrors of each other. 'BTBT RUT' Stops out.

I know sometimes the 'trading vehicle' can be a bit more volatile than the 'tracking vehicle', but this morning I was able to witness even more volatility than I had imagined.

The picture above displays a 2 minute chart of the Russell 2000 (tracking vehicle: $RUT.X) over a 2 minute chart of the Russell 2000 mini future contract (trading vehicle: TFU09). I drew some support and resistance lines which roughly outlines yesterday afternoon's base, the breakout above it, the run up into the close and then this morning's open.

As we can see, shortly after today's open we sold off. While the tracking vehicle stayed above yesterday afternoon's support line, the trading vehicle traded down to it, and then a good deal below it. I am really learning how volatile the trading vehicle can be compared to the tracking vehicle. I do recognize that TradeStation updates this trading vehicle's chart with every Tick, while this tracking vehicle is only updated every 15 seconds. Still this doesn't account for the trading vehicle trading below the support line for an extended period of time.

The frustrating part of this behavior, is that the Money Management Stop for 'BTBT RUT' system happened to be just around the support line* (see note at bottom of post). So when the TF traded down to that support line at around 945 am, the trading vehicle got stopped out. However, the tracking vehicle never traded to that level, so it didn't stop out.

This is a frustrating part of using one vehicle to model a particular market behavior (RUT), and then using another vehicle to trade this behavior (TF). Sometimes the trading vehicle gets stopped out, but the modeled vehicle doesn't. Talk about slippage when the EOD stats are totalled. I recall about 18 months ago, this happened to me. The trading vehicle got stopped out shortly after the open for a 0.50% loss, but the tracking vehicle didn't, and then it went on to post a 2-3% gain. I was so pissed that day.

So after the tracking vehicle got stopped out this am for a 0.50% loss, but the modeled vehicle didn't and then both started to bounce back up, I began to fret that another day like the one from 18 months ago was in the works.

So what did I start doing? Well, I got pissed off some more and started rooting for that damn tracking vehicle to start trading back down! And of course it didn't go down, but continued up for a bit. Then as we all know, the RUT and the rest of the major market indices put in a lower high just before 10 am, and then headed south. The modeled vehicle hit its stop just after 10 am, and I was thrilled!

The lesson here, is I need to recognize that sometimes the trading vehicle is more volatile than the tracking vehicle, especially as it relates to the TF/RUT. When I use real tight stops, like the 0.5% stop for this model, I may want to increase the stop for the trading vehicle a bit, say to perhaps 0.70%. This might help mitigate this volatility related slippage.

I wonder if the opposite has ever worked in my favor? Such that the tracking vehicle got stopped out, but the trading vehicle didn't. I do recall that within the past 6 months or so, a trading position get stopped out (within 15 minutes after a particularly volatile FOMC release) at a much better price than the modeled position did, perhaps by as much as 0.50% I have only recently begun to monitor how much of a difference there is between a position's modeled return and its actual trading return, and have discovered that on average its around 0.15% lower than the modeled return.

*i know, i know, placing a stop at support instead of under it is a recipe for whippage, but the logic of this stop is not based on previous pivots, s/r lines, etc. but rather is based on a specific % below the entry price...in today's case, the stop level and the support line just happened to be essentially the same.

'BTBT RUT' generated an Entry Signal for today's Close, 7/6/2009

'BTBT RUT' generated an Entry Signal for today's Close, 7/6/2009. I really like this model, and there is a version for the IDX and the NDX as well. However, only the RUT generated an Entry Signal for today's Close.

Some of my models use both a derivative of price and some aspect of the calendar (options expiration, Payrolls report date, Day of the Month, etc). This model just uses price action, and the logic for it may be applicable to other types of securities (commodities, Forex, etc). Using the underlying logic, and then testing it on some of theses other security types, is a good research project for me and has been put on my list.

Here are some of the model's Performance Statistics:

• Model Tracking Vehicle=RUT (Russell 2000)
• Start Date=9/10/1987
• Number of Trades=87
• Average Trade Return=0.48%
• Average Winning Trade Return=1.33%
• Average Losing Trade Return=-0.48%
• Win Rate=53%
• Average Win/Average Loss=2.75
• Profit Factor=3.17

Disclosure: Long the TFU09.

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

'Payrolls NDX' is an Express Train with NO STOPS today! The trade is still a loss though and the model remains suspect.

'Payrolls NDX' is an Express Train with NO STOPS today! However the trade is a still a loss and the model remains suspect.

The Modeled position (NDX) posted a -0.36% loss, which is better than the Average Losing Trades return of -0.63%. The actual Trading position (NQU09) posted a -0.53% loss (including commissions), somewhat worse than the model.

The position was close to getting stopped out, down about 1.5% at 1030 am. However it then based into lunch, rallied up to its gap down opening level, hit a new high for the day in the afternoon, and closed just below that high of the day. Today's action saw the NDX carve out a nice bottoming tail on it's daily chart.

However, the trade is still a loss and the model remains suspect. 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

'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***

The Crusher: Market dislikes the June Payroll report, 'NDX 1st DOM' and 'NDX Summer Rally' get stopped out

Wow, that was an ugly Open. I was dropping my son off at daycare, so I wasn't in front of my screens to watch it. My stop orders were in place and they were hit:

'NDX 1st DOM':

The Modeled position (NDX) posted a 1.12% loss, worse than the Average Losing Trades return of -0.47%. The actual Trading position (NQU09) posted a -0.90% loss (including commissions), somewhat better than the model.

'NDX Summer Rally':

The Modeled position (NDX) posted a 1.29% loss, slightly better than the Average Losing Trades return of -1.45%. The actual Trading position (NQU09) posted a -1.53% loss (including commissions), somewhat worse than the model.

Dusted myself off and I have moved on. Another model may generate an Entry Signal for today's close. If it triggers I will post about it later.

'NDX 1st DOM' generated a Long Entry Signal for Wednesday's Close, 7/1/2009

'NDX 1st DOM' generated a Long Entry Signal for Wednesday's Close, 7/1/2009. This model is based on the behavior of the NDX on the 1st calendar Day of the Month (DOM). It is due to be exited at today's (Thursday's) Close unless its Money Management Stop is hit intraday. Due to the July 4th holiday, I believe the market closes early today (1pm NY time). I have to double check on this though. If anyone can confirm this, please let me know.

The model uses a very tight Money Management Stop, currently 0.50% below the Entry Price. The pre-market futures are trading down about 0.4% right now, so we are going to need to see a positive market response to the closely watched Payroll report due to be released at 830am. A negative response to the report will probably stop this position out at the open, and quite possibly for more than then modeled 0.50%.

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

Here are some of the model's Performance Statistics:

• Model Tracking Vehicle=NDX
• Start Date=11/1/1985
• Number of Trades=113
• Average Trade Return=0.40%
• Average Winning Trade Return=1.24%
• Average Losing Trade Return=-0.46%
• Win Rate=51%
• Average Win/Average Loss=2.7
• Profit Factor=2.85

The win rate is only 51%, but the average winning trade (1.24%) is nearly 3x as large as the average losing trade (-0.46%).

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***

'NDX 30th DOM' generated an Exit Signal for Today's Close, 7/1/2009

'NDX 30th DOM' generated an Exit Signal for Today's Close, 7/1/2009.

The Modeled position (NDX) posted a 0.27% gain, below the average trades return of 0.7%. The actual Trading position (NQU09) posted a 0.12% gain (including commissions), slightly worse than the model.

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

The position was nicely green early on, up nearly 1.4% around 1030 am. However it slowly bled away its gains during the rest of the trading day. It wound up filling its opening gap up, and closed around the low tick of the day. A bit frustrating, but there is nothing I can do about it, except to faithfully follow the model's Entry and Exit signals.

The position was held for 1 trading day (http://stbsmb.blogspot.com/2009/07/ndx-30th-dom-generated-long-entry.html ).

'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).

White Knuckle Day!!

Last Wednesday, 'SPY Gopher' generated a Long Entry Signal, which made me 100% Long the ES (http://stbsmb.blogspot.com/2009/06/spy-gopher-generated-entry-signal-for.html).

Yesterday, 'NDX 30th DOM' generated a Long Entry Signal, which made me 100% Long the NQ (http://stbsmb.blogspot.com/2009/07/ndx-30th-dom-generated-long-entry.html).

Yesterday, I was able to get into the 'NDX Summer Rally' Model at the original Entry Price that was generated last Thursday, and this made me another 100% Long the NQ(http://stbsmb.blogspot.com/2009/07/asleep-at-switch-ndx-summer-rally.html).

So right now I am about 300% Long (200% Long NQ, 100% Long ES). White Knuckles Baby!!

This is the riskiest aspect of my style of System Trading. I will have a few days/year where I might have three or more models open in the same direction. Today is one of those days.

So how am I handling it emotionally/psychologically? I did what I could to relax my body and my mind so I can be at full mental strength for today's trading. Yesterday, shortly after the market closed and I was 300% Long, I went to the gym and did my usual cardio routine. Since my positions are in the ES/NQ Futures, I could check to see how they were trading in the after hours session, but I didn't look. I don't know what good it would do me. Instead, we had our family dinner, then I took my 2 1/2 year old son on his new bike to the local park, read some books to him before bed, and then had a chance to spend some time with my wife. In bed and asleep on earlier side for me around 11pm.

Today, I awoke around 730 am well rested. I reduced my usual AM coffee intake. I have been at my desk and in front of my screens monitoring what is going on since about 830 am, one hour before the NY open. Though I have been keeping an eye on my Futures positions, I have also been monitoring a potential trade setup for my daytrading activity at VCM, posted 3 notes to the Blog, spent some time with my family, caught up on some email, and did some bookkeeping.

I am aware of what is happening in my positions, but I am trying to keep busy so I don't obsess over every tick that goes out of my favor. So far so good, but there is still about 2 hours to go before the closing bell, the ES and the NQ are barely hanging onto their lunchtime bases, and the closely watched Payroll Report is scheduled to be released before tomorrow's opening bell, which might cause some EOD volatility. As we all know, anything can happen in this market.

Oops, the ES and the NQ just broke down through the lunchtime base.

Asleep at the Switch: 'NDX Summer Rally' generated a Long Entry Signal on 6/25/2009 and I missed it!

My 'NDX Summer Rally' System Trading Model generated a Long Entry Signal on 6/25/2009 and I missed the original entry. How did this happen? This model can only generate 1 signal/year, and while I have fully automated the Entry Signals for models that may generate multiple entries/year, I have not done so with models that only generate one signal/year. I manually review the once/year models weekly and noticed my error yesterday afternoon.

However, the NDX traded back down to its original entry price yesterday, so I was able to enter it then.

The concept for this model is the NDX tends to put on a rally starting sometime towards the end of June and finishing somewhere in the middle of July. Why does this happen? Who knows. Perhaps it has something to do with EOM and EOQ window dressing and then perhaps a run up into Q2 earnings announcements. In any case I have modeled it.

One of the things I really like about this model is that its Money Management Stop is very tight, currently at 1.3% below the Entry Price. If the supposed summer rally fails to happen or peters out quickly after it begins, this stop protects me from the big loss.

The trade generated from this model in 2008 was stopped out, so the model is trading just below its all time high (see Equity Curve chart above).

Here are some of the model's Performance Statistics:

• Model Tracking Vehicle=NDX
• Start Date=11/1/1985
• Number of Trades=23
• Average Trade Return=2.50%
• Win Rate=48%
• RAWAL (Ratio of the Average Win/Average Loss)=4.7
• Profit Factor=4.34

Notice the Win Rate is less than 50%, currently at 48%. How can a Strategy that is profitable less than half the time make money? The RAWAL is huge at 4.7. This means the Average Win is 4.7x the Average Loss. Every loss the model generated is from the tight stop.

In addition to the Money Management Stop, this model also has a Trailing Stop, which has been hit once during the life of the model. JE (http://myestradingjournal.blogspot.com/) and I talked last week about using Trailing Stops. Two of my models utilize them and perhaps more would benefit from them. Testing the other 33 strategies to see if they would benefit from a Trailing Stop is a reasonable Research Project.

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***

'NDX 30th DOM' generated a Long Entry Signal for Yesterday's Close

The 'NDX 30th DOM' System Trading Model, generated a Long Entry Signal for yesterday's (Tuesday's) Close. This model is based on the behavior of the NDX on the 30th calendar Day of the Month (DOM). It is due to be exited at today's (Wednesday'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=NDX
• Start Date=11/1/1985
• Number of Trades=38
• Average Trade Return=0.70%
• Win Rate=79%
• Average Win/Average Loss=1.1
• Profit Factor=4.15

The caveat with this model is its Money Management Stop can be pretty high, currently about 3%. The size of the stop for this model can vary greatly, as it is derived from a proprietary calculation that factors in the ATR (Average True Range) among other things. Currently the stop is the largest it will ever be. Over the life of this model, the Money Management Stop has been hit twice (5.3% of the time), and when it was hit, it was in the 1.4%-1.9% range.

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***

'Trading Systems that Work'

'Trading Systems that Work' is the title of a great book by Thomas Stridsman. He outlines how to 'Build and Evaluate Effective Trading Systems'. I have used his concepts extensively when building, testing and optimizing my 35+ Systemic Trading Models.

TradeStation, the platform I use to model and autotrade my Systems, offers online tutorials (for subscribers) on the following:

• Introduction to Strategy Trading
• Strategy Testing and Optimization
• Strategy Automation
• Introduction to EasyLanguage

Learning how to build robust trading models and then learning how to technically execute them takes a lot of time. And this is just the cognitive part. Learning how to emotionally trade them takes time as well. It doesn't matter if we are discretionary traders or system traders, pressing the buy or the sell button when we are supposed to is a skill set in and of itself.
For anyone interested in using TradeStation, Wealth-Lab or any other platform to build Systemic Trading Models, or even to just build an Indicator, please understand that these platforms are like rocket ships in their capabilities. Let us learn how to effectively use their functions before we take off. We don't need to crash and burn to learn a lesson!
Do your research and testing before putting your hard earned capital on the line. In my view, 'Trading Systems that Work' and the TradeStation online Tutorials are a good place to start.
http://www.amazon.com/s/ref=nb_ss_gw?url=search-alias%3Daps&field-keywords=stridsman
http://www.tradestation.com/default_2.shtm