Volatility overbought oversold, this is my understanding of a pairs system. Perhaps I will change the name. It's getting its ass kicked today.
So, the market has risen for 12 straight trading days. Something my systems were never built for. PTQQS crashed this week a bit, and I'm getting different results from wl4.wealth-lab.com when I run my program than from within WLP which is the actual program. If I was following the websites signals, I would not have traded at all since May 11th of this year, and saved myself a good 25% drawdown. I feel like I keep stopping and starting at 130k. That's about the floor for my signals. Around the time I reached 130k I started to see a pickup in interest in my systems. No trades from cash cow this week. I noticed it submitted a measly 3 share order and I can't see where in the code it would do that and I certainly didn't place any order for it. On top of all that, my desktop computer crashed, leaving me with my laptop and my server based files to work with. It's been a great year for my investment advising clients. Most have beaten the S&P 500 by wide margins, but that says more about their age than about their relative performance. Cash Cow is -$300 on $10,000 presently with a win percentage equivalent to its forward tested percentage. I think it will catch a big move soon enough. Most of the problem with using Cash Cow is that it attempts to time the market when the move has started with momentum. The catch is that it only comes after 10 pm but I've noticed most market moves happen in the first 30 minutes of the day so this doesn't benefit the cash cow system.
http://www.bloomberg.com/markets/ecalendar/index.html From bloomberg this week I'm anticipating sharply worse than expected results. Bloomberg marked GDP on friday as a market moving event, and will most likely be so. It mentioned a shift from 2000 chain dollar calculations to 2005 chain dollar calculations. This will undoubtedly make the GDP worse than expected.
Apparently Windows Vista is a real piece of junk and will not run WL5 properly. So I won't have any validated trades to report on cash cow for some time, at least two weeks. Cash cow would have had another 2 cent losing trade from 10:30 to 11:30 today. The market reversed after the entry and there was some positive MFE but quickly crossed over the 20 Stoch 14,1,3. Market is currently trading in a fair value range, at least for the NDX. I think we're taking a breather before a larger move higher. Still on SPX 1000 by year end. Wouldn't be surprised to see a higher level but 1000 is pretty likely.
Volatility is currently narrowing for the last 15 trading days. It is my belief we are waiting to see tomorrows GDP number as it will be a market moving event. The data particularly will give a slight indication of how much of a recovery there has been since Q1. I'm expecting a marked rally, but if the data comes in worse than anticipated we'll sell off. The unemployment numbers were a bit better than expected, and it is possible we will see a full recovery by year end. We are emerging from this period of reckless leverage with a much stronger financial system. Specifically the expansion of the use of the discount window has greatly improved the flow of credit for the individual and corporation alike. I wrote on my blog about the book Street Fighters and was able to pinpoint the one solitary saving factor for our economy being the acceptance of AAA CDO's as collateral for the fed discount window. It appears the Fed has found a willing buyer for the CDO's they took on, especially the swaps. Our sell off toward the end of the day was hedging and lightening up for tomorrows GDP number. There will be a large move most likely to the upside on tomorrow's number. I'm currently right in the middle of a fair value range, and the market predicted value is about 5% higher on QLD, or about 2.5% more upside to an overbought level. More continued strength will indicate more upside is likely. The Cash Cow system has not traded in some time.
So I spoke with Fidelity's Wealth Lab Pro data team and apparently WL's datafeed for SPX is currently broken. I have no ETA on when this will be fixed, but it appears the Cash Cow system might be on a temporary hiatus. This is unfortunate, because I've found the data to be inconsistent in WL, from the first page, you can see where I started with for the Cash Cow. The current version, which hasn't changed but for the time frame that now has more data in it, I have a much more robust, enticing backtest to show for Cash Cow. All Trades Starting Capital $10,000.00 Ending Capital $103,039.39 Net Profit $93,039.39 Net Profit % 930.39% Annualized Gain % 547.74% Exposure 20.69% Total Commission ($656.00) Return on Cash $0.00 Margin Interest Paid $0.00 Dividends Received $0.00 Number of Trades 41 Average Profit $2,269.25 Average Profit % 3.15% Average Bars Held 18.46 Winning Trades 34 Win Rate 82.93% Gross Profit $109,809.09 Average Profit $3,229.68 Average Profit % 4.40% Average Bars Held 18.29 Max Consecutive Winners 15 Losing Trades 7 Loss Rate 17.07% Gross Loss ($16,769.70) Average Loss ($2,395.67) Average Loss % -2.89% Average Bars Held 19.29 Max Consecutive Losses 1 Maximum Drawdown ($10,834.52) Maximum Drawdown Date 5/7/2009 Maximum Drawdown % -33.31% Still wish this drawdown was a bit less. Happened very early in the backtest on 11/21/2008 Maximum Drawdown % Date 11/21/2008 Wealth-Lab Score 1,765.06 Sharpe Ratio 2.33 The slightly lower Sharpe Ratio is from the increased length of the backtest. As systems go further forward in a test, the negative rate of risk free return will increase thereby decreasing the numerator in the ratio. Profit Factor 6.55 This is certainly more in line with what you'd expect from a system that could turn a 10 fold profit over quickly. The trades are from 9/2/2008. Recovery Factor 8.59 Payoff Ratio 1.52 Incidentally this system is out there in WL4 or the old Perl based WL code. I forget where. It's a very simple matter of popping that code into WL5's Translator by Dr. Koch. Pretty much if this backtest is even just a partial representation of the potential going forward, it doesn't really matter that I'm currently down about 3% from the $10,000 I started with. Now that I now the datafeed is broken, I do believe this is the point where one of the trades missed its' out. I should only be down about 1.5% from where I started, but it's my purpose in the system to be completely automated, and sometimes shit happens. In this case it's not really by any fault of my own that I'm comfortable trading a program on an automated basis, and the data feed screws up. On PTQQS, I'm currently at an oversold level. The rally I expected came and went, but there wasn't much volatility for the last few weeks.
Currently we are sitting right on an oversold threshold. Normally the trade would be to take QLD long, but I've had two trades in a row with QLD being wrong, so I wait until volatility has normalized back to a fair value range before acting on the oversold threshold. The next time around once we've gotten back into a fair value range and we normalize I will be taking a position long, but not today. I plan on saving another $100,000 with PTQQS by contributing about $1232 per month at a 25% rate of return. The calcuation is N=12*4=48,I/Y=25,PV=0,FV=100,000, cpt pmt about $1,232 per month required to reach my goal. Fidelity has still not fixed the SPX datafeed, and I'm suspecting that it could be another couple weeks before it's restored. Cash Cow will be on hiatus for the moment. In the backtest there was a marginally profitable trade today from 10:30 to 11:00 buying at 45.89 in SDS and selling at $45.96. Unfortunately, as I said, the datafeed is down, but I can still collect data, just not in real time. Here's a shout out to Jordan Peterson at custom trading computers for recovering a crashed hard drives contents, replacing the hard drive, for under $300. I couldn't be more pleased, and I'd recommend them whole heartedly to anyone who asks. They've been my computer since 2006. Prior to that I had a dell which had over three crashed hard drives, and when I asked Dell what they could do to recover the data they quoted me 20 g's. Kudos to Jordan, he knows WTF he's doing.
So do you actually trade? Or do you just back-test imaginary systems and troll other people's threads?
I don't trade often, but the answer is, yes, I actually trade, and if it's not obvious, it's because you haven't researched me. You can research me more by doing a google search. There are some other sites that would clear up this information more readily, but it's on you to find them, as Magna won't let me post any of the sites. The main background info is nexial_1002002 at wl4.wealth-lab.com . Do a user search and have a look around. If you're wondering if I really trade I can point you to the requirements for having wealth lab pro access. On trolling I always give people the benefit of the doubt, up until the point where they fail one of two yes no tests, which is either money management or strategy. I only get on people that lack strategy. Then, if someone comes on with no long term feasible money management techniques I'll say something. Leverage especially is an important consideration and very easy for financially sophisticated individuals to calculate. Leverage is where I can tell whether someone knows how to trade or not, or if they are even serious about trading. It's all over the web on overleveraged trades and there isn't a single good risk adjusted system out there at more than 4:1. I've seen 10:1 systems work, like TimeBomb, Superbands on the wl4.wealth-lab.com thread, but these are always over very short periods of time. I just met you from sicktrader's 50:1 leveraged gambling thread, but that's not anything you're going to find here. I just recently posted in a thread about doubling down on every dip, which is a perfect martingale strategy that always leads to blow ups, or at the very least is a pre-cursor to one. The backtests you see here are the results of years of research that only the best of traders have to show for their years of time learning trading and finance.
How do you determine a valid strategy? Must it be, in your opinion, susceptible to mathematicaal calculation and thus, presumably able to be automated? Or, would someone who, say trades off observable S/R levels on a discretionary basis also be said to have a valid strategy?