Paul,
Wonderful analysis; now tell me what to do! :)
Prior to the close today, I bailed out of TNA and jumped into TZA. Sold the TZA 2 minutes before the close. This is the only advantage of watching the soap opera, called the stock market: one can reverse course at an obvious inflection point.
But Trev-- are you out there?-- the Jesse Livermore rule about not wasting time during times like these sure proved correct.
Peace all,
Hi Nickola,Originally Posted by nickola.pazderic
Yes, the best place to be just now is out of the market. We have not had success on the short side but we have also not lost anything on the long side. We are in an even better position than Jesse was in that we have the Robot to guide us unemotionally through the morass.
I have just read that this is the worst pre Thanksgiving week on record !!
Only fools rush in :O(
Trev
Hi Nickola,
I see so much of myself in your Q's.
This community is well-educated and/or extremely good traders.
For me, Daniel Kahneman captures the mental challenges that I (and perhaps you) face in his recent book.
http://www.amazon.com/Thinking-Fast-.../dp/0374275637
IMHO, the markets are probabilistic and mostly not well-understood/random events - especially on an intraday-basis. A great way to make money in all conditions is the probabilistic advantages offered by the robots.
Personally, in the last 60 days, I am 9 for 10 losing on my discretionary trading (while the IWM robot is averaging a 70% win rate - which is an insanely awesome win rate when coupled with the 4.16% to 1.31% win to loss rate)- that convinced me to stop. You see Billy's recent comments on his discretionary trading. Keep meticulous records and see the truth in your own trading (PM me if you want to know exactly what that means).
I have a note on my monitor that list my edges: #1 on that list is "Stay Out Power"
All my best and have a happy Thanksgiving!
Shawn
Hi Shawn,
It is very kind of you to be concerned. But, I'm not certain what symptoms I may exhibit?
As I noted, I sent out a probe today, as did Jesse Livermore, at a key inflection point in the market as presented by Billy. It never reached a stable profit point; every rally was sold, and I watched it all day. Finally, I began to fret about holding any position over night, and I sold the position and took, a perhaps less well advised but profitable trade in TZA to finish off the day with a scratch. The biggest waste, I suppose, was my time. but I enjoyed the chance to learn very much.
As for the robot, I should note that I have followed it carefully and faithfully. In June, I made a fundamental decision to follow the robots rather than Dr. K's MDM, even though I did very well with the Dr. K's MDM and recommend it. I missed the two best robot trades this summer because I was at funerals or on vacation with family. The robot, however, missed the big August down move and the creeping October rise. The profits I made at the end of September and the beginning of October were neutralized by losses in November.
I must admit that I find the Thinkorswim platform to be seductive but not effective. It offers so much power. In fact, as I have noted previously, I don't really need a Ferrari to trade the markets. Indeed, I have four active trading accounts. TOS is the worst performer of all by a large margin. Two accounts in Vanguard are up approximately 50% this year. Another flouders about in a TBT trade that many, including Tom Sosnoff (never believe anything your broker says), called the trade of the decade. It may take me a decade to realize the profit in that one! In any case, you can be sure Vanguard is no Ferrari. It is more like my 1997 Nissan Quest, stable and dependable but not flashy. And I trade it very infrequently.
I do have a rather significant question about the robots, and it regards position sizing. I sense that more experienced hands adjust their positions, choosing leveraged or unleveraged plays depending on their experience. Being an utter newbie and having read Trend Following and the turtle books, I know I should follow the order, no matter what I think. Presently, I've decided to take exposure of 125% of my TOS account on any robot trade. But honestly, I don't know if this is correct or not. The last couple of robot trades resulted in some hard blows. Nonetheless, I remain steadfast in my conviction that the robot presents the best possible opportunity for me and others here.
Lastly, I want to note that I pulled down Value in Time from my shelf to read once again during this Thanksgiving weekend. The logic is now more clear to me than when I read it in the spring, and I feel very excited (like a good graduate student) to know its author is "down the hall" and available to answer questions!
Again, thanks for your tips and concern,
Nickola,
FWIW, after experimenting various roads, the way I currently do it is always keeping 1/3 position of TNA/TZA with the robot exposure as if I were fully positioned but unleveraged with IWM.
I enter the remaining 2/3 with the initial robot entry and will always exit with the robot if not stopped out. As a general rule, the initial stop loss for that leveraged portion is 0.2% below the first IWM cluster support from the entry date. This initial stop may never be lowered. That stop is the maximum loss I am ready to take on my 2/3 leveraged position, barring big gaps. I can of course discretionarily adjust the stop porosity depending on circumstances, but it is just fine-tuning. If the initial stop is hit, I exit 2/3 of my TNA/TZA but always keep the 1/3 that follows exactly the robot rules.
If there is no robot signal change, I will try to reenter the 2/3 position at each day’s robot limit price with the same initial stop rule.
When initial stops on the 2/3 TNA/TZA positions are not hit, I wait for one higher low and two higher highs (if long). I draw a Fibonacci retracement grid from the first low preceding the higher low to the higher high and keep updating the Fibonacci grid if new highs are made. I have a trailing stop for 1/3 of TNA at a 39% retracement (failure of the 38.2% Fibo level) and another trailing stop for 1/3 of TNA at a 51% retracement (failure of the 50% Fibi level). The Fibonacci computations are made on TNA/TZA, not on IWM.
Any portion stopped out can be reentered on following days at the robot’s new limit if there is no signal change. The same initial and trailing stop rules apply from the day of reentry.
The general idea is to capture a maximum of profit on the leveraged position and avoiding any temporary leveraged profits to turn into losses. Remember that gains and losses are compounding 3 times faster on the leveraged ETFs. Your initial risk on leverage is theoretically (barring gaps) the size of one support cluster which is close to 1 ATR.
Billy
Hi Nickola,
What make you change from following Dr. K's MDM to the robots if you can recommend it? For the robots, I allocate 25% for GDX and 25% to IWM and that mean the other 50% in cash. Whenever the robots increase 10%, I will add 2.5%, when both robots increased 100%, I will be 100% mechanical trading with the robots.
Cheers,
Ellis
I cannot answer for Nickola but I find VIT and the Robots very much more understandable and straightforward than Dr. K's MDM. Pascal and Billy have done a very good job of educating us all on the intricacies and logic of the system we use.
Trev
Hi Billy,
Are you looking at 30-min (or shorter?) bars to find the 1 higher low and 2 higher highs?
Thanks,
Shawn
I agree. Although some aspects of the robot are proprietary (and rightfully so), the overall transparency of the method lets you accept gains (of course :)) and losses.
Taking a loss is hard, but it is much harder to take one when you are given no clue of why it happened in the first place.
Understanding the trading system lets you build confidence to open the next trade when the next signal is given.
Yes Shawn, 30-minutes chart seems to work best.
Here is what I did on the last long robot trade that lasted only 2 days (from open 11/15 to open11/17). It was basically a flat trade with the entry and the exit being only 1 cent away from each other.
But I could make a small + 2.38% gain scaling out of TNA as explained in my prior post.
Like the robot, I bought a full TNA position at the open at 44.49.
My stop on 1/3 of the position will always be the same as for the robot.
My initial stop on 2/3 of the position was 0.2% below the first support cluster at 42.10.
The stop is not hit. On 11/16 at 2:00 pm, the pattern of a higher low and higher highs is completed and I draw my Fibonacci grid. I enter hard stop orders for 1/3 position at 46.35 (39 % retracement) and 45.80 (51% retracement). They are hit before the close.
The last 1/3 position is exited with the robot signal change at the open the next morning on 11/17. If it had not been the case (no signal change), I would have entered a new limit buy order for the proceeds of the 2/3 position at the robot recommended price for 11/17.
Billy
Posting Permissions
Reply With Quote