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.
funny most place i read say this is a bullish signal
ReplyDeleteSpy and Vix both down may be slightly bullish. But vxx up with vix down is moderately bearish 2-4 days out. Ill dig out the stats tomorrow. One thing I never took into account was whether it occurred during opex week tho.
ReplyDelete"4 round trips rule"?
ReplyDeleteHaven't heard of that one. Help?
RMI,
ReplyDelete4 rounds trips in 5 business days will get you Pattern Day Trader status. You probably want to avoid this as it limits your ability to swing trade effectively, among other things. 1 round trip is simply a stock purchase and subsequent selling.
Is that just in one stock or ANY trade??? uh oh...
ReplyDeleteBuy a stock and then sell that same stock = 1 round trip.
ReplyDeleteDo that 4 times in 5 trading days, you're a PDT.
I'm just not sure how it works if you buy and sell in partial chunks. My broker has my status on their homepage listing how many round trips I have remaining before I'm labeled a PDT.
As far as I know, partial chunks still count.
ReplyDeleteIt should be noted that this is only a concern if one's current equity with loan value amount is under $25,000.
law87,
ReplyDeleteRegarding VXX/VIX. Since the inception of VXX in early 09, there have been 31 occurrences where VXX up/VIX down.
Next day SPX Avg: -2.03 pts
Day 2 SPX Avg: -4.28 pts
Day 3 SPX Avg: -6.39 pts
Day 4 SPX Avg: -7.23 pts
Days 1 and 2 were lower 17 of 31.
Days 3 and 4 were lower 19 of 31 (61%).
So not a huge edge, but better than a coin flip.
Algyros,
ReplyDeleteGot your email, I'll try to hit you back Tue or Weds. Things are kinda hectic over here with the holidays approaching. Sorry for the delay.
True about the account minimum, but it also affects the structure of your account. If you carry a trade overnight, you will not have access to that capital on the day you decide to close that position. You can still swing trade, it's just you won't always have access to all your money, which I found frustrating sometimes.
Don't worry about it, J-Trader. You can respond anytiime.
ReplyDeleteOne solution to this problem is to trade futures. The downside is that the amount of money they control is rather large, but the advantage is that you need relatively little to invest in them and they don't count as daytrades so you can make as many rountrips per day as you want without being identified as a pattern day trader restrictions.
Very interesting Algyros, i didn't know that. Thanks!
ReplyDeleteThanks for the update J, but I already sold yesterday and think I am going to wait this one out and hold for the next buy... pre-market is up this morning so your buy-in on your short might be better :-)
ReplyDeleteRMI, yes it appears the mishap worked in my favor this time. :)
ReplyDeleteWell, for me. I got back into TZA with a small position (the only settle cash I had) at 26.90 and was in the money pretty quick... set a stop so I could take the emotion out of the trade at 27.74 and got stopped out... oh, well. Didn't make a ton, didn't lose any, so I am on the sidelines for a day or two... I hope a buy signal comes soon :D
ReplyDeleteNot bad, RMI. I'm still holding TZA that I picked up this morning, also at 26.90. What a great day! :)
ReplyDeleteThat's one nice thing about trading the e-minis - there's no PDT rule there.
ReplyDeleteCan you explain what your post meant Michele? Don't think I know those terms :-)
ReplyDeleteIt's what I said above: pattern day trading restrictions don't apply to futures contracts.
ReplyDeleteah, dummy me, that makes sense, thanks!
ReplyDelete...how do you guys get over the 3 days turn around?
ReplyDeleteLaw87, I try by only trading with 1/3 of my portfolio per day. Settlement will allow me to use it 3 days later if I need or want to :)
ReplyDeleteLaw87,
ReplyDeleteMargin account.