Saturday, December 31, 2011

Final 2011 Stats

These are not my actual trading returns. Mine are listed in a chart below. The following stats are compiled using raw signals from my system, using TNA as a trading vehicle. Results below do not account for slippage, taxes, or commissions.

Annual Compound Return: 51.43%

Total Trades: 46
Winners: 35 of 46 (76%)
Avg Return per Trade: +1.12%
Profit Factor: 1.63


Long Trades: 27
Winners: 20 of 27 (74%)
Compound Return (Longs only): + 27.76%
Avg. Return: +1.03%
Avg. Return (winners only): + 5.01%
Avg. Return (losers only): -8.28%
Worst Loss: -44.36% (ouch)
Best Gain: +11.90%
Profit Factor: 1.32

Short Trades: 19
Winners: 15 of 19 (79%)
Compound Return (Shorts only): + 35.41%
Avg. Return: +1.86%
Avg. Return (winners only): + 3.55%
Avg. Return (losers only): -4.45%
Worst Loss: -8.36%
Best Gain: +8.69%
Profit Factor: 2.90

All returns above incorporate whether the system was 50% or 100% invested. For example, if the system went 50% long at TNA 40 and sold at TNA 44, it does not get credit for the full 10% gain.

At first glance, it appears my system did better shorting the market and I suppose that is true. But if you play the "what if" game and pretend that 1 bad trade in August didn't happen, my system would've returned well over 110% for the year, the majority of which came from the long trades. Remove that 1 trade and the profit factor for all long trades would've jumped up to 6.60!!! (Which is an insane number). I introduced stop losses in August, so eventually this weekend I will calculate some stats assuming I had stop loss rules in place all year (done - below).

Here's a fun chart tracking my actual trading account throughout 2011. You can see I couldn't keep up with the 51% performance of my system. But after August, I was happy just to finish in the black. I remember praying several times back in Aug. Looks like it worked! :)

Hypothetical August Stop Loss case. CAUTION...almost unbelievable results ahead. :)
If we had the stop loss rules in place in the summer, half of the long trade initiated in July would've been stopped out on July 29th when my model flipped to unhealthy status. TNA closed at 72.71 that particular day. The other half of the trade would've been sold at 44.15 on Aug 11. Stopping half the position at ~72 results in moderate damage versus severe damage like we experienced. The trades that followed in mid-late August were nothing short of amazing (as can be seen in my chart above) and the total loss in August would've been a paltry -6.61% versus the actual -29.44%. Obviously this makes a world of difference. The account at the end of August would still have been up over 41% for the year versus the actual 6%. The difference by the end of the year would've put the system up 100.4% through December versus the actual 51.43%! Like I said, almost unbelievable. So far, my system has flipped to unhealthy status before every recent crash. The process by which a market tops before crashing leads me to believe this stop loss feature will protect assets in a similar fashion in the future. The outlook appears bright.

All-in on the first signal scenario...WARNING...UNBELIEVABLE RESULTS AHEAD :)
Taking a 50% position on the first signal, followed by going all-in on a second signal was a terrible strategy in 2011. While playing with smaller amounts of capital might have lowered my stress levels, it substantially lowered profits... SUBSTANTIALLY!!!
Here is a profit curve with a $10,000 initial investment.

Your eyes are not deceiving you...that is a 268% gain for the year!!!

Late November had back to back losing trades that were pretty big, but by far the biggest blow to the system came in August when it gave back almost 50% on that 1 trade. Can you imagine if I plotted this curve using the stop loss rules? Let's do it!

The loss in Aug is marginalized and the system returns 387%!

I'm going to give my 50% / 100% strategy a few more months to prove its worth before I completely scrap it. But with a profit curve like that, I can't see sticking with it much longer. Especially now that stop losses are built in.

Market Health Section
I've described how I determine market health several times. I only use market health as a qualifier for my signals, but that doesn't mean it can not be used for long term buy and sell signals. Here is a chart showing when my model flipped from healthy to unhealthy and vice versa. Assuming a long only SPX strategy with no leverage, it would be about a 5% gain for 2011.

Last but certainly not least - Strong buy and sell signals.
(Defined as when both healthy and unhealthy modes are generating the same signal.)

There were 29 signals that were strong (either buy or short). There were 23 winners, 6 losers for an 79% win ratio. Of the 6 losers, 5 were very mild. The 1 major loss came in the summer. Check out this profit curve assuming you only traded strong buy/short signals using a 100% positioning strategy (TNA).

That's a 200% return despite losing almost half the equity from 1 trade in July. Looking closer at that bad trade, the strong buy signal bought TNA at ~80 on July 14th. A week later TNA was up around 85. So the buy signal was decent, the problem was my system failed to generate a sell when it should have. Neither buys nor shorts had an edge. All strong signals (long or short) should be followed. One possible strategy since strong signals are rock solid is to use 100% positioning for strong signals and 50% for regular signals. Food for thought...

Thanks for reading!!! Let's see if the system can keep producing these kinds of results in 2012. Insert standard disclaimer here about how past results can not predict future performance, and trade at your own risk, etc, etc.... Happy New Year and God Bless!!

To view all the raw signals, click below. On the ensuing page, scroll halfway down and click the gray "Download This File" button.
2011 Signals Excel Spreadsheet
Sorry these links are broken!!! Email me for files!

As a fun extra bonus, here are the old 2010 signals. Keep in mind, the system was still in its infancy in 2010.
2010 Signals Excel Spreadsheet
Sorry these links are broken!!! - jtrader21 at gmail dot com

Friday, December 30, 2011

Buy confirmed.

5pm: The buy signal indeed held into the close which puts the system 50% long going into the new year. It wasn't a strong signal by any stretch, but it did strengthen in the last few minutes.

At any rate, I'm content sitting on the sidelines despite the fact my system recommended I buy some TNA. If we see any weakness early next week, I'll be a buyer. With another strong month under its belt, the system finished the year up over 50%! More on that in a future post...Take care.

3:46pm: Looks like a buy signal, although it's very close right now and it's a very weak signal. I'm going to exit my short position on the close and remain in cash over the extended weekend. If the buy persists into the close, I'll consider going long on Tuesday. Happy new year all!!!

PS - Extensive year end stats are coming this weekend.

Archiving Dec Trades below...

Nov 30
Dec 1
Dec 2
Dec 5
Hold - 1/2 Stop
Dec 6
Dec 7
Dec 8
Dec 9
Dec 12
Dec 13
Dec 14
Dec 15
Dec 16
Dec 19
Dec 20
Dec 21
Dec 22
Dec 23
Dec 26

Dec 27
Dec 28
Dec 29
Dec 30

Thursday, December 29, 2011

Short confirmed.

408pm: I wasn't expecting to be short so soon again, but here I am back in BGZ (got a great fill price 2 cents from LOD). Even though TZA performed better on the last short trade, I am still hesitant to short small caps right now. Should we continue higher, TZA would burn me worse - and I'm in pretty conservative mode right now as I want to close out the year on a high note - and at or near new equity highs.

Take care and I'll see ya tomorrow!

3:28pm: Here we go again. System goes 50% short (tna) if spy closes 125.66 or higher.

Wednesday, December 28, 2011

Cover shorts.

Cover signal is confirmed. My system is not seeing an edge in either direction now, so it moves to the sidelines.

Tuesday, December 27, 2011

Short if TNA closes above 46.30

3:52pm: Ok, I should've been more specific in my first post. TNA just has to finish positive...aka above 46.30... to get the short signal. That is the only requirement today.

3:15pm: If TNA holds these gains through the last 45 minutes we'll easily get a short signal. The system will move to 50% short TNA. I am considering shorting a different leveraged ETF since small caps tend to outperform. I'll be looking to perhaps purchase some BGZ or FAZ.

I had some twitter issues last Friday which caused my tweet to be delayed. I think I have it fixed and hopefully it won't happen again.

I will update in a bit to confirm. Take care!

Friday, December 23, 2011

Hold confirmed.

Merry Christmas all!

Thursday, December 22, 2011

Sell confirmed. No short.

3:45pm: We lost the short signal, but a sell signal remains. So my system heads to the sidelines. I notice VXX is up and VIX is down. This usually means a pullback is imminent. On the other hand, seasonality as we all know remains strong. It will probably lead to a bunch of boring range days to close out the year.

11am: It's only 11am ET, but we are getting a strong short signal. If it holds the system will book profits in TNA and open a partial short position. I may consider using a different ETF for shorting, given the tendency for small caps to outperform this time of year. BGZ is an old favorite of mine. I will update later... happy trading.

Wednesday, December 21, 2011

Hold confirmed.

The system remains 50% long. Good evening!

Tuesday, December 20, 2011

Hold confirmed.

The upthrust component of my system won out today and is holding the long position. I'm expecting higher prices in the short term. Tomorrow should be a range day, though maybe slightly red.

Monday, December 19, 2011

Friday, December 16, 2011

Hold confirmed.

Holding my longs. Have a great weekend!

Thursday, December 15, 2011

Hold (longs) confirmed.

My system sells the long position and goes 50% short if SPY closes anywhere from 122.50 to 122.65. Anything outside of this range (whether above or below) will be a hold signal - maintaining the long position.

Wednesday, December 14, 2011

Hold confirmed.

No new signal today. System remains 50% long.

Tuesday, December 13, 2011

Strong buy signal.

4:10pm: The strong buy signal was confirmed. I mean it this time. :) Sold my shorts I bought this morning for a huge profit. Two stellar days in a row. Good night!

Currently, 3:47pm, I'm getting a strong buy signal. Here is the rundown.

SPY closes at 122.62 or higher: Strong buy signal. System covers shorts and moves 50% long.

SPY closes at 122.61 or lower: Cover signal. Systems exits shorts and moves to sideline.

I'm hoping for a cover signal. The fact the VIX is not spiking bothers me. It wreaks of complacency.

Monday, December 12, 2011

Correction: Hold Shorts!

5:30pm: We were in solid buy territory as I began typing the message below. The thought did not even cross my mind that we could lose the buy signal, but that's exactly what happened. So unfortunately I screwed up. My system said to hold the short position. I will be going short again tomorrow to get in line with my system, though I will have to use extra caution to avoid for the 4 round trips rule. Sorry for the mix up. As a bit of confirmation, the VXX closed up while VIX was down. Statistically this is bearish for the short term. This is not part of my system, but it's something I keep an eye on... Again, sorry for the confusion.

3:37pm: The system is exiting shorts and switching to a 50% long position on the close. The late day strength has weakened the buy signal considerably. It was a strong buy signal when we were at the lows today. While the system goes to 50% long TNA, I'm going to take a smaller position and wait for a possible retest of today's lows before buying more.

Friday, December 9, 2011

Short confirmed.

3pm Sat: The short signal was confirmed yesterday. The long position was closed for a nice profit and a 50% short position was initiated. It was a strong short signal which simply means my healthy and unhealthy modes were both generating short signals. By design, it's difficult to get a healthy short signal because I developed the healthy mode for the sole purpose of riding uptrends. So confidence is fairly high that we'll see some type of pullback early next week. Stats have also been updated. So far Dec is down a couple percent, but hopefully this short signal can bring it back into the black. Hope you all are enjoying the weekend!

2pm Fri: Right now I am getting a strong short signal.... Here is the system rundown.

If SPY closes at or above 125.60 = Sell longs and go 50% short. (Strong short signal)

If SPY closes 125.17 to 125.59 = Sell longs and go to 100% cash.

If SPY closes 125.16 or lower = Hold longs.

Have a good weekend all!

Thursday, December 8, 2011

Buy confirmed.

5:15pm: A buy signal was confirmed. Because the late downward surge took the SPX below the critical 1234 level, we did not get a strong buy signal. Thus, my current long position is pretty small at this point.

3pm: A buy signal will be confirmed if SPY closes below 126.59. This is almost a given based on today's action. Further, it is a strong buy signal if the follow 2 conditions are met.

1) SPY closes below 125.81
2) SPX does not drop below 1234

Obviously I would be more confident with the long position if we can get the strong buy, but #2 looks like it could be in jeopardy going into the last hour.

Either way, I will be closing my short position on the close and taking a relatively small long position. Too much uncertainty with the "EZ" to place a 50% bet in my opinion, although the system doesn't work that way.

See ya tomorrow!

Wednesday, December 7, 2011

Hold confirmed.

No new signal today. Remaining 50% short. Some of my indicators are warning that something big could be coming within a week or so. By big, I mean down big. I'm not willing to wager too much on it right now though.

Tuesday, December 6, 2011

Hold confirmed.

A hold signal keeps the system at 50% short TNA and 50% cash. See ya tomorrow!

Monday, December 5, 2011

Half stop. Hold remainder.

Even though it appears we may pullback in the short term given today's reversal type candle (which makes 3 in a row?), the system is flipping to healthy mode today and exits half the short position. I did so prematurely on Friday when I thought SPY was going to finish green, so I will remain where I'm at - about 50% short TNA and 50% cash. The system moves back to 50% cash as well. Good evening!

Update - Tech. difficulties today... Twitter and Blogger down for both my phone and laptop.

Friday, December 2, 2011

Hold signal. Covering half my short position.

3:40pm: The system looks to flip to healthy mode today. I'm getting another hold signal, but since SPY is hanging tough in positive territory I'll be closing half my short position. If by some miracle we get a late day selloff, I'll keep my full short position through the weekend. I'm not expecting that to be the case. On the bright side, today could've been worse.

10:30am ET: Sadly, it just doesn't look like this short trade is going to work out for me. Like yesterday, I'll be looking for a green SPY close to dump half my shorts. I'd say based on the first hour of trading, I'm going to be taking a sizable loss today. Ugh.

Thursday, December 1, 2011

Hold confirmed. Possible 1/2 stop.

There are only two possibilities today and it hinges on SPY. If SPY closes up for the day, cover half the short position. If it finishes unchanged or down, hold 100% short.

Stop loss in play...

Stop Loss
Reminder if SPY closes green today, the system flips to healthy mode and cuts loose half of the short position. Judging by the market reaction to the 10AM news, this is looking more and more likely. (Or not!!?! 11:25am)

November wrap up
The system is 100% short averaged in at TNA 41.61. TNA needs to drop below this level in order to avoid 2 losing trades in a row. The failed buy signal back on Nov 16th ended up costing the system a good chunk of change, but it still managed to finish the month off on a positive note (+ 7.35%) thanks to the strong performance the first half of Nov. Not counting this (losing) short trade we are in, the system is up 35% for the year.