Nickola,Originally Posted by nickola.pazderic
I want to stress that what I am presenting here is just the approach I feel most comfortable with in the current choppy environment. There are numerous leverage and position-sizing strategies that I use at different times and most are very discretionary with a lot of tolerance for porosity at key levels. If you remember, before the robot issued that last long signal and setup, I was already very bearish personally. I was doubtful of a successful trend-following trade. Since I’ve rarely seen a long signal of the robot not being in the green at least for one day or two, I was determined to grab a good chunk of the leveraged profit if it retraced more than 50% of an initial progress. The definition of an uptrend is higher lows and higher highs. The definition of a sound uptrend is one that doesn’t retrace more than 50%. Hence my choice of the current leverage management strategy.
My goal is always to at least equal the performance of a non-leveraged IWM position on average over time. The first condition I know to do better consistently with triple leverage ETFs is cutting your initial losses much faster if the trade turns wrong just after entry, but allowing for reasonable wiggle room. One support cluster sounds like a logical tolerance for initial stop, since it encompasses all support levels that could be hit within one day. The second condition is to book most of the gains compounded with a 300% factor before they reverse to losses compounding with a 300% factor.
Creativity and the list of possibly valid strategies are endless. In the end It’s all a matter of feeling comfortable with your logical plan and you need to adjust the rules with market conditions. In this leverage field, experience is more important than backtesting, because backtesting will have a hard time finding adaptive rules for changing trading environments.
Enjoy your stuffed turkeys everybody!
Billy
Reply With Quote