High Probability ETF Trader

R

Ragnarok

Hello,

Longtime reader, first time poster. Been enjoying the forums for a while and decided to try and get involved now that I started trading a new strategy that I think has some promise.

About me...
I have a full time job as a software consultant but I've been in trading my own stocks/options portfolio for about 10 years and was also part of an automated trading partnership as a side venture. In other words, I'm not a full time trader but I think I know some stuff.


The strategy...
I've been researching some overall market indicators that I think show a lot of promise and have cobbled together a loose methodology that I can hopefully refine as the year progresses.

The gist of the system is a overbought/oversold indicator that I'll use to take a long or short position in the overall US stock market via SPY, SSO, QID, QLD. I'm still working on a methodology for closing trades so right now I use a combination of "gut" feeling and an arbitrary period of 1 month. My goal is to outperform the S&P 500 in 2007 by 5-10 percentage points. I'm hoping my methodology will allow me do do this while simultaneously reducing risk/volatility.

Based on the past few years, I'm only expecting to make 1-10 trades per year so some may find this journal a little boring. Some may look at this as more of an asset-allocation strategy - which suits me just fine.

I actually started trading this strategy about a month ago when I received a "Sell" signal in Early July. I'll start my journal with this trade - because it was the first day I started trading this system - which is significant to me.

<b>
7/3/2007 Buy 500 QID for 22,340.00
8/15/2007 Sell 500 QID for 23,939.64
Net Gain: 1,599.64 (7.16%)
</b>

Getting this trade right was a great feeling for 2 reasons. 1) It confirmed my methodology and provided an additional trial. 2) This trade was a great hedge against my regular "discretionary" portfolio which was net long during the Sub prime meltdown.

On 8/15/2007 I also sold my short position and moved into 50% Cash/ 50% SSO. I'm pondering this my "neutral" position that I'll use between signals which will serve as a proxy for a 100% long S&P 500 position.

<b>8/15/2007 Buy 350 SSO for 29,094.99</b>

Any feedback/comments suggestions welcome! :)
 
<b>
Bought 200 shares of SPY at 147.10 yesterday afternoon. (8/27/2007) </b>

Not a great start for this one, but according to my model, this should be a profitable trade within 10 trading days. My holding period is 30 trading days.

To recap, I went short in early July then into SP500 equivalent on 8/15. I am now fully invested the S&P 500 with approximately 50% extra leverage.

Current holdings:
350 SSO (2x daily SP500 return)
200 SPY (SP500)
 
Ragnarok,

Did you backtest your strategy? What were the results?
Risk/ reward, max drawdown, average trade P&L?
Can your account balance absorb the max drawdown?
Have you considered slippage and commisions?
Etc. Etc. Etc.

Good luck.:)
 
Quote from ess1096:

Ragnarok,

Did you backtest your strategy? What were the results? Risk/ reward, max drawdown, average trade P&L?
</b>
I have a crude back testing spreadsheet that shows all QQQQ trades I would have made from the past 4 years.

The average 30 day return on each trade is 4.33%

Average long trade ROI = 8.3%
Average short trade ROI = 2%

Max long loss = N/A
Max short loss = 3.3%

<b>
Can your account balance absorb the max drawdown?
</b>
Since the max drawdown for an individual trade has been less than 4%, I'll assume yes. I don't plan to use more than 100% leverage, so the max per-trade loss would be 8%. I'm still working the optimal way to allocate resources when I get a signal. I doubt I would use 100% leverage

<b>
Have you considered slippage and commissions?
</b>
Fortunately, this shouldn't be much of an issue for me. My holding period is approximately 30 days and I only plan to make 5-10 round trips per year. For my models, I use prior day's close as the trade price - which I know has some flaws.

<b>
Good luck.:)
More...


Thanks!:)
 
For anyone interested..

Its been a a while since my last update, but I've been sticking with the strategy and have subsequently closed a lot of my long positions over the past few weeks.

To Recap:
08/15/2007 Buy 350 SSO for 29,094.99
09/07/2007 Buy 350 SSO for 30,701.49

10/15/2007 Sold 200 SSO for 19,969.70
10/17/2007 Sold 200 SSO for 19,669.70
10/26/2007 Sold 300 SSO for 28,759.56

Net profit 700 shares SSO = 8602.48 (14.3%)

This trade worked out pretty well by my standards. I now must wait patiently for what will most likely an overbought signal so I can move to a short bias. I'm thinking this could be in mid November, but only time will tell. I'll will try to do a better job of keeping up with this journal in the future.

Good Luck to all..
Ragnarok
 
There is nothing original about this...
And your results will not be statistically meaningful for about 10 years or whatever...

So this is exactly what not to do.
 
Quote from Zig Zag North:

Any update on your performance? You need a more reputable tracking site than this forum if you want credibility with your trading system.
More...

Why even bother refreshing a 6+ month old dusty meaningless thread?
 
lol, because he sprang out of the gates with a ton of energy. Wanted to know if he crashed and burned or if he's sipping Mai Tais on the beach in Hawaii.
 
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