I wanted to copy another post of mine from this thread NLY spike down? so that there is a consistent narrative in this journal.
My post:
And also this one:
My post:
And also this one:
fickletrader journal
- Thread starter fickletrader
- Start date
Trading bot results today: -0.85%
(S&P 500 results: -0.36%)
Pretty bad week for the bot =(
This makes me want to focus even more on adding new strategies and improving the diversification. Easier said than done.
(S&P 500 results: -0.36%)
Pretty bad week for the bot =(
This makes me want to focus even more on adding new strategies and improving the diversification. Easier said than done.
Correction: S&P 500 was -0.65% today. The naz was -0.36%
I read the entire thread Futures Spread Trading today. In my view that is one of the best threads going right now on ET.
Although I am not a futures trader, they did talk about pair and basket equity trading. Those guys inspired me to code a bunch of infrastructure to support equity and etf pair charts this afternoon.
Here is a sample chart showing what I thought was an interesting pair trade:
With just a little bit more coding this week will be able to replicate any pair trade like this down to whatever precision re-balancing I want, full auto (intraday continuous, intraday interval-ed, open-close, daily, or weekly). Transaction costs will be a big constraint on what actual rebalancing implementation I might use for a given pair or basket trade.
Although I am not a futures trader, they did talk about pair and basket equity trading. Those guys inspired me to code a bunch of infrastructure to support equity and etf pair charts this afternoon.
Here is a sample chart showing what I thought was an interesting pair trade:
With just a little bit more coding this week will be able to replicate any pair trade like this down to whatever precision re-balancing I want, full auto (intraday continuous, intraday interval-ed, open-close, daily, or weekly). Transaction costs will be a big constraint on what actual rebalancing implementation I might use for a given pair or basket trade.
Just for grins, here is an illustration of the currency trade I have on using currency etf's. I am short EUR/AUD, so I put AUD in the numerator of the chart to show it from my perspective. Note that the data for both legs of the pair have been dividend adjusted in this chart.
Trading bot results for the day: -0.71%
(S&P 500: -0.41%)
Had a really nice salad for lunch today. I didn't used to like salad, but I've found that if it has a lot of different fruits to go along with the veggies instead of salad dressing then I really enjoy it.
The two parts of my lifestyle routine I'm struggling with right now are sleeping 7 hours (got 6 last night) and doing jump-rope. I'm going to try waking up 30 minutes earlier tomorrow so that I will feel like I have time to jump-rope, and that means going to bed early tonight.
I want to mention a trading system development trick. This may not be new to some people, but I like the idea. It has to do with minimizing the degrees of freedom in a technical trend following system. Take for example a system that makes use of EMA crossover. Normally there is a "fast EMA" and a "slow EMA"; 2 separate degrees of freedom that are usually optimized by the designer or on a walk-forward basis. I have found that by tethering the "slow EMA" to the "fast ema" like this: "slow EMA" = "fast EMA + 1", a good trend following behavior still emerges and there is only one degree of freedom. That one degree of freedom (fast EMA) represents how aggressive you want to be, which could be optimized in a backtest or be a function of some other factor such as volatility.
(S&P 500: -0.41%)
Had a really nice salad for lunch today. I didn't used to like salad, but I've found that if it has a lot of different fruits to go along with the veggies instead of salad dressing then I really enjoy it.
The two parts of my lifestyle routine I'm struggling with right now are sleeping 7 hours (got 6 last night) and doing jump-rope. I'm going to try waking up 30 minutes earlier tomorrow so that I will feel like I have time to jump-rope, and that means going to bed early tonight.
I want to mention a trading system development trick. This may not be new to some people, but I like the idea. It has to do with minimizing the degrees of freedom in a technical trend following system. Take for example a system that makes use of EMA crossover. Normally there is a "fast EMA" and a "slow EMA"; 2 separate degrees of freedom that are usually optimized by the designer or on a walk-forward basis. I have found that by tethering the "slow EMA" to the "fast ema" like this: "slow EMA" = "fast EMA + 1", a good trend following behavior still emerges and there is only one degree of freedom. That one degree of freedom (fast EMA) represents how aggressive you want to be, which could be optimized in a backtest or be a function of some other factor such as volatility.
I mentioned earlier in the journal that it was my expectation that the yield curve would blow out in the long end. I was very wrong, it has flattened sharply over the last week. I view this as very ominous for equities. And through this flattening gold has risen to new highs, which is counter to what you would expect, and also ominous.
More on this later.
Trading bot results for today: -0.7%
(S&P 500: -2.56%)
The S&P has been down on all but the first two days since I started this journal almost 2 weeks ago. I see a lot of confusion on ET lately about how the market will act. The people who were long or writing straddles into last friday ahead of the debt ceiling vote are now justifying riding out their positions because the market is now oversold and had too many down days in a row. Over this same time period, the trading bot has cut exposure in these areas steadily until a couple of days ago when it got to its minimum exposure. In my journal entry on 7-27 I said:
Indeed. The bot is braced for the worst right now. Personally, I've been de-leveraging for months. Tomorrow I'm making the last payment to my credit card for a bunch of physical silver I bought after the drop from $50 to $35. Every weekend it was around $35 I bought more, and the bill got sort of big
The debt I took on to buy silver is my only debt at the moment. No mortgage, no car payment, no margin (except forex EUR/AUD short).
It is funny how we think differently about taking on debt depending on what we buy with it. For me, this debt I am about to pay off completely was essentially pulling future income into the present at that time to take advantage of an extraordinary value opportunity. Since silver is now back above $40 per oz, that value opportunity is no longer as attractive, and not worth carrying the debt another month just to add size right now.
Nobody seems to have a problem with taking a $20k to $40k note to buy a car that depreciates faster than almost anything else they could buy, but if you were to suggest that they instead take a $20k note to buy an appreciating asset like gold or silver, they would think you're nuts. It isn't going to seem so nuts to everyone soon, but it'll be too late by then. By the way, I didn't buy $20k of silver at that time, just $3500. But I did open an unsecured line of credit at that time in case silver plunged 50% from $35. Right now with gold surging the way it is, $17 silver might seem like fantasy land, but when we had just seen silver fall from $50 to $35 in a few days time, it sure seemed like a possibility to me. That unsecured line of credit is unused, and probably won't be used any time soon. I'm glad I have it though, because when the time does come to put it to use, good luck trying to open a new one!
This rant has gotten kind of long and I didn't even get back to the subject of my post from earlier today. What I wanted to say about it is that today's drop in the market is much more serious than people realize. Please see this ratio chart of SPY/GLD:
What this illustrates is that the S&P fell almost 5% in terms of gold! This is called keeping your eye on the ball. People look at the chart of the DOW in the early 1930's and wonder how in the world the market could go straight down for so long. It seems like markets don't do that these days and such a thing is impossible now. The truth is that they are looking at a distorted version of the market today because the dollars it is priced in are changing value so much. In the early 1930's, the dollar price of gold was fixed, meaning that the dollar didn't change in value and the DOW was essentially priced in terms of gold. So to compare the DOW in the 1930's to the market indexes today, one should price the indexes in gold terms.
(S&P 500: -2.56%)
The S&P has been down on all but the first two days since I started this journal almost 2 weeks ago. I see a lot of confusion on ET lately about how the market will act. The people who were long or writing straddles into last friday ahead of the debt ceiling vote are now justifying riding out their positions because the market is now oversold and had too many down days in a row. Over this same time period, the trading bot has cut exposure in these areas steadily until a couple of days ago when it got to its minimum exposure. In my journal entry on 7-27 I said:
Indeed. The bot is braced for the worst right now. Personally, I've been de-leveraging for months. Tomorrow I'm making the last payment to my credit card for a bunch of physical silver I bought after the drop from $50 to $35. Every weekend it was around $35 I bought more, and the bill got sort of big
The debt I took on to buy silver is my only debt at the moment. No mortgage, no car payment, no margin (except forex EUR/AUD short).It is funny how we think differently about taking on debt depending on what we buy with it. For me, this debt I am about to pay off completely was essentially pulling future income into the present at that time to take advantage of an extraordinary value opportunity. Since silver is now back above $40 per oz, that value opportunity is no longer as attractive, and not worth carrying the debt another month just to add size right now.
Nobody seems to have a problem with taking a $20k to $40k note to buy a car that depreciates faster than almost anything else they could buy, but if you were to suggest that they instead take a $20k note to buy an appreciating asset like gold or silver, they would think you're nuts. It isn't going to seem so nuts to everyone soon, but it'll be too late by then. By the way, I didn't buy $20k of silver at that time, just $3500. But I did open an unsecured line of credit at that time in case silver plunged 50% from $35. Right now with gold surging the way it is, $17 silver might seem like fantasy land, but when we had just seen silver fall from $50 to $35 in a few days time, it sure seemed like a possibility to me. That unsecured line of credit is unused, and probably won't be used any time soon. I'm glad I have it though, because when the time does come to put it to use, good luck trying to open a new one!
This rant has gotten kind of long and I didn't even get back to the subject of my post from earlier today. What I wanted to say about it is that today's drop in the market is much more serious than people realize. Please see this ratio chart of SPY/GLD:
What this illustrates is that the S&P fell almost 5% in terms of gold! This is called keeping your eye on the ball. People look at the chart of the DOW in the early 1930's and wonder how in the world the market could go straight down for so long. It seems like markets don't do that these days and such a thing is impossible now. The truth is that they are looking at a distorted version of the market today because the dollars it is priced in are changing value so much. In the early 1930's, the dollar price of gold was fixed, meaning that the dollar didn't change in value and the DOW was essentially priced in terms of gold. So to compare the DOW in the 1930's to the market indexes today, one should price the indexes in gold terms.
And just for completeness, here is the SPY/GLD ratio chart going back to GLD's birth in 2004. From this view, it is plain that the "recovery" since the March 2009 market bottom is largely fictitious:
Trading bot results for today: +0.71%
(S&P 500: +0.5%)
(S&P 500: +0.5%)