Yeah, I thought of that too. This method is very well-suited to an uptrending market like the one we've been in for the last 3 years, it basically can't lose.
It will be interesting to see how it performs whenever the next bear market comes along. I guess the safeguards for bear markets are the fact that bear markets always have upward retracements, there's the hedge as protection against a blow-up, it plays indexes which are far safer than individual stocks, and the method doesn't use leverage or margin. Offhand, the only danger I can think of would be a prolonged bear market like the one the Nikkei has been in since it's parabolic bull run in the 1980's. Depending on how the buys were spaced out, there is a danger you could have run out of buying power had you tried this method there. Though, you could still trade around the hedge in that scenario to offset some of the losses, not to mention the dividends as well, and the daytrading version of this, so there would still be ways to try and claw your way back...
By the way, on the daytrading thing... on all the trades you could just as easily have gone the other way. For example, here you were shorting at the pink circles and made a profit. Well you could just as easily have been going long at the orange circles I drew in and taken a loss. From what I saw it seemed like you had a lot more wins than losses, so you probably do have some sense of which way it's more likely to go on the intraday charts. Otherwise you'd have had a lot more losses. Of course, this assumes your long term w/l ratio is the same as it was for the brief time you were doing it live. Did you keep records of all your trades using that method? Number of wins vs losses? Avg win size vs avg loss size? Those numbers could prove or disprove my assumption...
It will be interesting to see how it performs whenever the next bear market comes along. I guess the safeguards for bear markets are the fact that bear markets always have upward retracements, there's the hedge as protection against a blow-up, it plays indexes which are far safer than individual stocks, and the method doesn't use leverage or margin. Offhand, the only danger I can think of would be a prolonged bear market like the one the Nikkei has been in since it's parabolic bull run in the 1980's. Depending on how the buys were spaced out, there is a danger you could have run out of buying power had you tried this method there. Though, you could still trade around the hedge in that scenario to offset some of the losses, not to mention the dividends as well, and the daytrading version of this, so there would still be ways to try and claw your way back...
By the way, on the daytrading thing... on all the trades you could just as easily have gone the other way. For example, here you were shorting at the pink circles and made a profit. Well you could just as easily have been going long at the orange circles I drew in and taken a loss. From what I saw it seemed like you had a lot more wins than losses, so you probably do have some sense of which way it's more likely to go on the intraday charts. Otherwise you'd have had a lot more losses. Of course, this assumes your long term w/l ratio is the same as it was for the brief time you were doing it live. Did you keep records of all your trades using that method? Number of wins vs losses? Avg win size vs avg loss size? Those numbers could prove or disprove my assumption...
