Thursday, June 23, 2011

NEW Systems Information Page

 Recent Updates

VIX55/GDX55 for 2014: Intro
2012 Stats
100% JT Composite Strategy - Updated 12/15/12
Incorporating XIV and VXX ETF's - 9/1/12
New JTrader Composite System
CCI Stats and Profit Curves - 6/22/12
Email Notifications
100% Strategy
2011 Stats
Stop losses
Twitter feed

First off, welcome! I'm just your average swing trader who was so fed up with mediocre results that I took it upon myself to build a reliable, and easy to follow system. I run this page for the sole purpose of posting the output of a swing trading timing model I developed back in 2010. It is my goal to post the signals daily, not only on this site but also via other means such as twitter and email.

There is much more info below on my JTraderSystem timing model, but here are some things to get started. My system first determines the health of the equities market, then calculates buy and sell signals accordingly. When the market is "healthy", the model is programmed to buy dips and ride uptrends. When "unhealthy", it will sell and/or short rallies.

The system produces 1 of 5 signals everyday. Those 5 signals are Buy, Sell, Hold, Short, and Cover. On average, it will flip positions once or twice a week...from long to short or vice versa. Signals are generated on the close at 4pm. Usually I can predict what the signal will be before the close and try to post that info here and on twitter around 3:45pm. When I can't trade at 4pm, I will enter the position on the open the following day, or in after-hours or pre-market trading. The "healthy" or "unhealthy" signals are longer term indicators and could theoretically be used for TSP/401k accounts where transactions may be limited. One other thing to note, the system will go short in a healthy market and go long during an unhealthy market.

While my model is based mostly on $SPX, I exclusively trade TNA (or TZA if shares are unavailable for shorting) for a couple reasons. First, small caps will usually maximize gains for any market move. More importantly, the system has been optimized using small caps as a trading vehicle. If one prefers to avoid 3x leverage, IWM/RWM make great alternatives. All references to performance (monthly, daily, etc) are based on the closing share price of TNA and do not account for fees, slippage, taxes, etc.

This blog is available to the entire world. If anyone happens to stumble across my page and decides to follow these signals, I caution you to trade at your own risk. Money management is paramount. Don't go "all-in" short just because my model generated a short signal. I am not a professional trader, nor do I have any authority to offer any financial advice. Swing trading is just my hobby. I developed this system to make my trading more mechanical and systematic. Now that that's out of the way, here is a bit more info on my system.

For much of 2010, I tried my hand at daytrading and lost much more than I won. I never really had sufficient time to do it, between kids and work, so when I did have the time, I was wildly unsuccessful. That's probably not why I was unsuccessful though. I made all the mistakes such as trading with emotion and not following my own rules. I also found myself addicted to research and chart studying night after night. Something needed to change. I needed something simple and easy to follow. And I needed something that required very little of my time, or my wife was going to divorce me! Not really, but almost. I realized I had to eventually quit daytrading and get more into swing trading. I set out to develop a system which would tell me what to do and when to do it. Starting summer of 2010, I began developing a system which satisfied those requirements - to look at a spreadsheet a few minutes before the close and have it tell me what to do. I came up with JTraderSystem in late summer 2010. At first, it was a simple system which utilized candlestick math (which I'll get into) and a couple intra-market relationships...such as SPX vs RUT vs VIX. For example, VIX up, SPX down, RUT down more than SPX = Buy. Of course, it's not that simple which is why I needed candlestick math....and some other things that I hadn't thought of yet.

Before I get to those things, here is a quick glimpse at my candlestick math, which is exactly what it implies.
That was all well and good, but backtested results were mediocre. I needed something to establish what kind of market we were in. In September, it dawned on me one day that I needed to establish healthy and unhealthy market rules. Several years back, I had read an article "How to spot market reversals" and I wanted to incorporate those concepts into my system. I suppose I could've just simply used moving averages like the 20, 50, 200, but this was more sophisticated and I liked it. JTraderSystem2 was born, and I started using it a little for my trading. Not exclusively b/c I still thought I could succeed at day trading. Yeah, right.

The system did quite well in September as you can see on the left. And it had a stellar October (!) which is when I started this page so I could show it off to the world. November and December were blah, so I added one more piece to the puzzle in the winter - Bullish/Bearish Sentiment. I wanted it to be hard to generate a short signal when everyone (the dumb money) was bearish and I wanted buy signals hard to come by when everyone was euphoric. So I incorporated sentiment into the system and with lots of backtesting I introduced "cover" and "sell" signals in Jan 2011. JTraderSystem3 was born.

A few months back, I altered the way the system flipped back to healthy. Prior to the change, it was way too slow and we were stuck in short positions when the market was skyrocketing upward off of bottoms. Here is the new way I determine market health/unhealth. Click to enlarge.

So, that change along with some spreadsheet modifications to make it much nicer on the eyes resulted in the current JTraderSystem4, which I have running on my laptop every Monday through Friday from about noon until 415pm. It is an excel spreadsheet (actually OpenOffice) which ingests live market data every 60 seconds, including SPY, SPX, VIX, TNA, BGU, IWM, and VXX. All the candlestick math is done on the fly. I have different code to generate signals based on whether we are healthy or unhealthy. I can see both signals, so when both modes are showing "buy" or "sell", I label those signals as being strong. Not that I throw more money into those trades. It just gives me a bit more confidence.

It could be completely automated, except for the fact the VIX will still change values between 4 and 4:15pm. There have been a few times when the VIX changed a lot in that time and changed my signals. That really is the only "gotcha" that I have seen. When that happens, I'll take action on the following open to get back into line with my system.

Speaking of automation...

Update: 5.7.12 I just added a 2nd system that I developed earlier this year (2012), simply called the CCI System. It solely uses SPY and it's associated Commodity Channel Index (CCI) to generate signals. Nothing else is involved, at all. It's a very simple and effective system and I look forward to trading it and tracking it here. If one was so inclined, it could easily be automated due to its simplicity. I'm still in the dark ages when it comes to automated trading platforms, so I make all my trades manually.

Update: June 2012
I combined the two systems described above into 1 catch-all system called the JT Composite. It's fairly simple. If the JTraderSystem (JTS) is long and the CCI system is long, the JT Composite will be 100% long. If both are short, the Composite will be 100% short. If 1 system is in cash and another is either long or short, the JT Composite will take a 50% long/short position while keeping the other 50% in cash. This is my main model now and I do my best to follow it exclusively. I dedicate all of my capital towards it, so during draw-downs you may notice my mood a bit more sour than usual! lol

Update 9/1/12: I have incorporated XIV and VXX into my trading during times of contango and backwardation, respectively. See the link at the top for more info.

Please check out all the links above. They may answer some of your questions. Otherwise, feel free to ask questions in the comments section. Or better yet, email me at jtrader21 "at" Thanks!!


  1. Thanks for the posting and commentary.
    Will continue to watch your updates and results.

  2. Thanks for the background. I am curious why you choose to follow your data in the last couple minutes of the day? Have you backtested the results using complete data (including the 4:00 - 4:15 VIX data you mentioned) and always buying first thing in the morning. It seems like this might be easier from a practical standpoint since you don't have to submit a market order right at 3:59 and hope you made it in time. Of course I can see price gaps potentially messing this approach up. Just curious for your thoughts on why it's worth the hassle of creating the signals right at the end of the day. Looks like a great system!

    1. I heard of MOC (Market On Close) orders. This would buy/sell at the market close. My broker doesnt have them.
      Most of the time you can trade AH and get near the price, sometimes a better price. Next morning for me anyway, never works out with all the gaps that occur.

  3. All backtesting was done on daily closing prices of everything I track. So I have to wait til the end of the day to make sure I get the right signal. Many days I can "predict" the signal way in advance - in the early afternoon. See June 29 for example. Yes, I have definitely backtested waiting until the following open to place the trade. I agree with you that would be so much simpler, but the gaps hurt profits significantly. It's honestly night and day. Almost 80% of profits are lost. :(

  4. J-Trader
    I trade the Rydex Index fund Russell 2000 2X the priceing is twice a day, 10:45 A.M. and EOD.
    My cut off times are 10:30 A.M and 3:55 P.M. eastern times. I just found your web site yeaterday via Cobra and I don't know if I can use your signals.
    Do you have any suggestions? Thanks dmoe

  5. dmoe,

    I'm not sure what can be done. I usually post what values to watch around 3:45 or sometimes earlier. Friday 12/9/11 was a good example of what I strive for when I have the time to post.

    To follow my signals, I think you'd only have 2 options. Trade the following day or dump the Rydex in favor of TNA. There is nothing wrong with trading the following morning, but sometimes you'll miss out on the gaps.

  6. FYI: I'm up to JTraderSystem5 for anyone that's paying attention and/or cares...

    I made a slight tweak to the way my system accounts for sentiment. Very minor change from before but wanted to put on record here. The tweak was made in late Sept'11.

  7. Are you willing to say what you use to gauge sentiment?

    1. Sure... TSPTalk's Sentiment Survey. A quality survey of everyday investors.