GDX and IWM Cluster Strengths for June 6, 2011

[Pascal]

Billy,

On the Robot page it states:

These are the probabilities for the combined Long term / Short term settings:

Today's SHORT settings are NEUTRAL.
The LT algo found a short edge of -1.25%. This is lower than the -0.75% limit
The ST algo found a relatively weak negative edge of -1.59%
The LT edge is more positive than -2%. In the past this combination led to a 3D short LOSS of -0.11% from the previous day's close. The trade became positive after three days in 53.1% of the cases.

How do these probabilities coincide with the 3:1 risk reward probability you mention above?

The Robots uses the 3:1 risk rewrads and the potential earnings to decide on a short/long position (it compares first the LT edges and then the ST edges).

I have incldued additional statistics so that investors can see what the combination of the LT/ST combination did in the past. This allows to size your position. The robot does not take these into consideration.


Pascal

[adam ali]

I think I may be mixing up timeframes.

So far as I understand, the Robot page statistics indicate, based on historical data, what the likelihood is for gain/loss over the next 3-day period. The greater the probability of gain, the larger the position size, all other things being equal.

In conjunction with this shorter timeframe probability, I am to assume so long as the Robot is providing an entry point for that day the trade holds (at least) a 3:1 RR probability with the proviso one enters the trade at the price point given.

[Pascal]

I think I may be mixing up timeframes.

So far as I understand, the Robot page statistics indicate, based on historical data, what the likelihood is for gain/loss over the next 3-day period. The greater the probability of gain, the larger the position size, all other things being equal.

In conjunction with this shorter timeframe probability, I am to assume so long as the Robot is providing an entry point for that day the trade holds (at least) a 3:1 RR probability with the proviso one enters the trade at the price point given.

You have two sets of three figures one for long trades and one for short trades). Each set evaluates both the 10D and 3D potential earnings, the R/R and the probabilities. The robot first looks at the LT edges. if it is strong enough it takes the trade. If not, then the robot looks at the short edge. If it finds something -even the slightest edge, - the robot takes the trade.

When the decision to take the trade is taken, then the robot has to decide on an entry point and on a stop loss. This is where the Multi time frame pivots come with the 1:3 RR ratio. The RR ratio is not a probability. It is the best entry level that will allow you to earn three times more than what you could lose on the trade, based on the pivots analysis only (and on back-tests.)



Pascal

[adam ali]

Thanks, Pascal. Very helpful