Discretionary trading

[manucastle]

I will close my TNA position.



I have added an IWM Robot Comment. I will probably close my TNA position today in order to avoid a possible down-gap on Monday that would be linked to an un-friendly political decision on which I have no control.

Trading in the back-ground of a big political decision is more like playing chess than a probability based investment decision.



Pascal
================================================== ====

Pascal,

As I have often stated I am extremely pleased with the VIT service and the very valuable feedback from yourself and others.

The only small problem I have is recently Billy mentioned that you and he would not publish your discretionary trades. I understand this because my worst faults over 21 years of investing have been discretionary emotional trading and overiding my systems.

Now we have the Robot this negates this major problem in my trading.

Your comment above is probably very wise and considered but is still discretionary and has me, and I am sure others, confused has to know what to do because I have a lot of respect for your opinion.

Europe, together with the Greek situation is obviously very serious and could get a lot worse over the weekend into next week.

I do not need to be led by the hand but I would appreciate a clear route - are you and Billy going to issue statements on your discretionary trading or not ?

Sorry to be so forward but this is an important topic for us all going forward and needs to be black and white IMHO.

Thanks in advance :O)

Trev

[Billy]

I will close my TNA position.



I have added an IWM Robot Comment. I will probably close my TNA position today in order to avoid a possible down-gap on Monday that would be linked to an un-friendly political decision on which I have no control.

Trading in the back-ground of a big political decision is more like playing chess than a probability based investment decision.



Pascal
================================================== ====

Pascal,

As I have often stated I am extremely pleased with the VIT service and the very valuable feedback from yourself and others.

The only small problem I have is recently Billy mentioned that you and he would not publish your discretionary trades. I understand this because my worst faults over 21 years of investing have been discretionary emotional trading and overiding my systems.

Now we have the Robot this negates this major problem in my trading.

Your comment above is probably very wise and considered but is still discretionary and has me, and I am sure others, confused has to know what to do because I have a lot of respect for your opinion.

Europe, together with the Greek situation is obviously very serious and could get a lot worse over the weekend into next week.

I do not need to be led by the hand but I would appreciate a clear route - are you and Billy going to issue statements on your discretionary trading or not ?

Sorry to be so forward but this is an important topic for us all going forward and needs to be black and white IMHO.

Thanks in advance :O)

Trev

Trev,

Thank you for the frank discussion. I am the only one who commited to stop disclosing my discretionary decisions in this forum.
Pascal never committed to such thing.
For the time being, I stick to the penny with the robot on triple leverage.
That's because my discretionary decisions since the robots are online have totalled a significant net loss compared to the robot results.
My stop for TNA is at the robot stop.
Billy

[Pascal]

I will close my TNA position.



I have added an IWM Robot Comment. I will probably close my TNA position today in order to avoid a possible down-gap on Monday that would be linked to an un-friendly political decision on which I have no control.

Trading in the back-ground of a big political decision is more like playing chess than a probability based investment decision.



Pascal
================================================== ====

Pascal,

As I have often stated I am extremely pleased with the VIT service and the very valuable feedback from yourself and others.

The only small problem I have is recently Billy mentioned that you and he would not publish your discretionary trades. I understand this because my worst faults over 21 years of investing have been discretionary emotional trading and overiding my systems.

Now we have the Robot this negates this major problem in my trading.

Your comment above is probably very wise and considered but is still discretionary and has me, and I am sure others, confused has to know what to do because I have a lot of respect for your opinion.

Europe, together with the Greek situation is obviously very serious and could get a lot worse over the weekend into next week.

I do not need to be led by the hand but I would appreciate a clear route - are you and Billy going to issue statements on your discretionary trading or not ?

Sorry to be so forward but this is an important topic for us all going forward and needs to be black and white IMHO.

Thanks in advance :O)

Trev

You are right Trev. The best is that I do not disclose what i do with my robot positions.
From now on, the Robot comments will only be technically oriented to explain what the robot is doing and why.

I will limit my "opinions" to the "comment of the day" section.



Pascal

[manucastle]

You are right Trev. The best is that I do not disclose what i do with my robot positions.
From now on, the Robot comments will only be technically oriented to explain what the robot is doing and why.

I will limit my "opinions" to the "comment of the day" section.



Pascal

Thanks very much Pascal.

Trev

[davidallison@gmail.com]

Billy or Pascal,

For a fixed amount dedicated to robot trades, would you split this amount equally between the robots, and stick to that allocation, trading all primary signals? Alternatively and diversification benefits aside would you rotate out of positions that indicate Strong primary entries for a given robot, in an effort to seek better returns, for the robot account.

Dave

[Billy]

Billy or Pascal,

For a fixed amount dedicated to robot trades, would you split this amount equally between the robots, and stick to that allocation, trading all primary signals? Alternatively and diversification benefits aside would you rotate out of positions that indicate Strong primary entries for a given robot, in an effort to seek better returns, for the robot account.

Dave

Dave, we are currently researching these optimal allocations scenarios. Pascal is doing intensive backtesting on this and he'll come soon with his conclusions.
In the meantime, there is no way to be sure that any choice is superior to another.
Billy

[Pascal]

Billy or Pascal,

For a fixed amount dedicated to robot trades, would you split this amount equally between the robots, and stick to that allocation, trading all primary signals? Alternatively and diversification benefits aside would you rotate out of positions that indicate Strong primary entries for a given robot, in an effort to seek better returns, for the robot account.

Dave

Hello Dave,


This is a very good question.
As Billy wrote it, I am now busy with the research, whihc could still last a few days, as more results bring more questions.

As of now, the basic findings are the following:
1. If you trade one instrument with high leverage (for example TNA/TZA) and do not mind the drawdown risk, then adding GDX will not help create better returns. In fact, GDX would even hurt the TNA/TZA returns.
2. If you use TWM/RWM (double leveraged), then a combination with GDX improves the returns.
3. If you use IWM and GDX then staying with only GDX is better. But then GDX is more volatile than IWM, which means larger drawdowns.

The principle of this test was to invest 100% of the capital in the first robot that issues a signal that is not neutral (Buy, strong buy, sell, strong sell). You then keep the trade unless one of the following event occurs:
- You hit a stop loss or you have a signal change
- The other robot issues a signal that is not neutral. In such a case, you sell 50% of the first position and invest 50% in the second robot.

The idea is to be 100% invested whenever there is a non neutral signal in one of the robot and to split between robots when the two robots have produced a signal.

I did not test the idea of switching 100% to the second robot from the first if the second robot signal is very strong, while the first turned to neutral. I believe that this could encourage over trading and would deny some benefits of trading two instruments that are lightly correlated. However, this is just an opinion. Testing might reveal that this opinion is groundless.

To be honest, what I like best in the case number two (TWM/RWM and GDX) is that the equity curve is very very smooth. I will not post it now, because I need to check some things and then do more tests, but as I am much a "risk averse" person, that rings a bell somewhere in my trading guts.


Pascal

[Billy]

As of now, the basic findings are the following:
1. If you trade one instrument with high leverage (for example TNA/TZA) and do not mind the drawdown risk, then adding GDX will not help create better returns. In fact, GDX would even hurt the TNA/TZA returns.
2. If you use TWM/RWM (double leveraged), then a combination with GDX improves the returns.
3. If you use IWM and GDX then staying with only GDX is better. But then GDX is more volatile than IWM, which means larger drawdowns.

Pascal,
Do you have any significant indication yet about which allocation is providing the best long term risk-adjusted returns between 100% of the time only in TNA/TZA (option 1) and a combination of TWM/RWM + GDX (option2)?
Billy

[Pascal]

Pascal,
Do you have any significant indication yet about which allocation is providing the best long term risk-adjusted returns between 100% of the time only in TNA/TZA (option 1) and a combination of TWM/RWM + GDX (option2)?
Billy

Not yet, but when you have an instrument with such strong returns as TNA/TZA, switching 50% out of that instrument into an instrument that produces only half of the return cannot help the performance (drawdowns/risks put aside). Also, the definition of a good risk/reward balance is different for each investor.

So, as I wrote, new research results bring more questions, which lead to more research and so on.
I plan to wrap what I did up to now, write a report and then do more work on the pending issues.


Pascal

[Maxime A.]

Yet another option may be to try achieving better returns w/ the GDX robot by using the leveraged ETFs NUGT and DUST. That said, GDX is already quite jumpy, so the result may be too volatile for most investors. Also, they haven't been around much, so any backtest is going to be hard. Thanks,

Max