20dmf rt

[Pascal]

We have had a range day without any MF/Price divergence.
I would however like to point out that materials have been attracting money all day today (fertilizers, base metals)


Pascal

11540

[Pascal]

Money not moving back in yet.
None of the price bounces were supported by a good positive MF.. yet.

Pascal

11559

[nickola.pazderic]

Please let us know when the BUY programs kick in (or when the SELL programs devour my position)....

Many thanks,

[grems8544]

Nickola,

I can't comment on the RT 20d MF signal, but my automated bot on TZA just closed my open positions due to a strengthening of the $TICK off the lows of the day.

Regards,

pgd

[nickola.pazderic]

11565

oh boy, massive sell hit. breaking the channel, taking out stops.

[grems8544]

I know... amazing. I'm out (darn) and my rules prevent me from getting back in today, but wow, what a drop.

I trial ballooned some TNA at SS3 and THAT was a mistake... :oP Trial balloon popped -- out with a 1% loss. I'm waiting for it to come back a bit before attempting again...

Regards,

pgd

[nickola.pazderic]

patient as my mom watching "The Days of Our Lives."

[Pascal]

patient as my mom watching "The Days of Our Lives."

Finally a little bounce?

11567

[nickola.pazderic]

Hi Pascal, Billy, and all Trading Wizards,

Do you'all put any stock in magical Fibonacci retracements:

11568

People are noticing the break of the 50% retracement here on the SPY.

[grems8544]

Hi Pascal, Billy, and all Trading Wizards,

Do you'all put any stock in magical Fibonacci retracements:

11568

People are noticing the break of the 50% retracement here on the SPY.

Absolutely. Not so much in market mechanics, but because people believe and code their systems to the Fib numbers.

This is why you see GGT MAs of 2,3,5,8,13,21,34,55...

As an aside, I note that the SPY finished below the YPP and that IWM finished below SS3, with the Q's significantly below QPP and SS1. These are now significant resistance levels....

11569
11570
11571

Make it a great Thanksgiving all.

Regards,

pgd

[nickola.pazderic]

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,

[manucastle]

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,

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

[Riskslayer]

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-Slow-Daniel-Kahneman/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

[nickola.pazderic]

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,

[Billy]

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.

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

[mingpan.lam]

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.



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

[manucastle]

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

[Riskslayer]

Nickola,

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.

Billy

Hi Billy,

Are you looking at 30-min (or shorter?) bars to find the 1 higher low and 2 higher highs?

Thanks,

Shawn

[roberto.giusto]

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

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.

[Billy]

Hi Billy,

Are you looking at 30-min (or shorter?) bars to find the 1 higher low and 2 higher highs?

Thanks,

Shawn

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

11573

[roberto.giusto]

Billy,

this is very interesting. Is your position sizing independent by the strenght of the robot signal?

[nickola.pazderic]

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...


Billy

Billy,

This is a terrific explanation, and I will study it with intention to implement a similar approach.

In fact, I had worked out with Paul's help a similar though less sophisticated approach in late September and early October. In essence I placed 1/3 in each of the following: 3X, 2X, and IWM, such that the exposure equaled a 125% position in IWM, long or short. Any sudden price spike in the 3X ETF would be taken as windfall profit with the hope to re-enter the next day if a signal permitted. This allowed a suprising outperformance of the robot.

However, I sought to follow the robot more precisely in November and failed to grab the ready outsized profits on the occassions that appeared only briefly but obviously in the 3X ETFs.

The question of course becomes: Do these human inventions warrant backtesting? Your formula is extremely precise, and I believe mine can be made so-- although as noted previously I cannot translate my procedures and intutions into complex mathematical or logical operations.

Lastly, in answer to the above question about Dr. K's MDM: When I saw what Pascal, Billy and team were assembling here, I knew immediately it offered a golden opportunity to develop my skills. The styles of traders are varied, the discussions are rich, and the wizards are willing to help.

I did have one problem with the robot. I didn't realize it at the time. I had been closely and successfully following Morales and Kacher. While I grew tired of attempting to hop on break outs and ride them for profit and I wanted to learn a style that would give me more precise entires and exits, I had internalized their approach. Thus, when the robot issued a buy announcement and the price had not formed a cup or base in June , I couldn't compel myself to follow it. I kicked myself as I missed substantial opportunities. Indeed, I would say my choice to switch has been very costly in the short term, but I expect it to be a very good long-term decision.

Thanks all,

[Riskslayer]

Hi Billy,

Thanks for the excellent explanation.

I am interested in potentially trying your approach, so I have tried to see if I could re-create the various aspects of the trade.

I am struggling with the first support cluster and related initial stop on the 2/3 position. I went back to the Forum Clusters 111115 file you published before the open on Nov 15, and I see the first support cluster on IWM as 70.36 to 72.63. Accordingly, the bottom of the first support cluster on IWM at 70.36 is 3.5% below the Nov 15 open of IWM (72.92).

Your above note seems to say that your TNA stop at 42.10 was +0.2% below first support cluster on TNA - this is only 5.4% below the TNA open at 44.49. I would have thought there would be more like an approximately 3X % difference between the IWM and TNA stops, i.e. the bottom of the first support cluster on TNA more like in the area of 3.5%*3 = 10.5% below the Nov 11 TNA open??

If I traded TNA based on IWM price triggers (which I can do in my IB account), than an IWM trigger just below 70.36 (the first support cluster bottom) would have resulted in a lower TNA price than 42.10, perhaps in the range of $40 and exposed such a trade to about twice the downside risk you are describing.

What am I missing?

Thanks,

Shawn

[Billy]

Billy,

this is very interesting. Is your position sizing independent by the strenght of the robot signal?

Roberto, the various “strength” levels of the signals have been abandoned with recent developments of the robot. So all signals – buy or short – are now strong signals and can be approached similarly for position sizing.
Billy

[Billy]

Hi Billy,

Thanks for the excellent explanation.

I am interested in potentially trying your approach, so I have tried to see if I could re-create the various aspects of the trade.

I am struggling with the first support cluster and related initial stop on the 2/3 position. I went back to the Forum Clusters 111115 file you published before the open on Nov 15, and I see the first support cluster on IWM as 70.36 to 72.63. Accordingly, the bottom of the first support cluster on IWM at 70.36 is 3.5% below the Nov 15 open of IWM (72.92).

Your above note seems to say that your TNA stop at 42.10 was +0.2% below first support cluster on TNA - this is only 5.4% below the TNA open at 44.49. I would have thought there would be more like an approximately 3X % difference between the IWM and TNA stops, i.e. the bottom of the first support cluster on TNA more like in the area of 3.5%*3 = 10.5% below the Nov 11 TNA open??

If I traded TNA based on IWM price triggers (which I can do in my IB account), than an IWM trigger just below 70.36 (the first support cluster bottom) would have resulted in a lower TNA price than 42.10, perhaps in the range of $40 and exposed such a trade to about twice the downside risk you are describing.

What am I missing?

Thanks,

Shawn

Shawn,
You are correct. There was a typo in my journal notes and the initial stop was 40.10. Thank you for noticing and for the feedback.
Billy

[Billy]

.

The question of course becomes: Do these human inventions warrant backtesting? Your formula is extremely precise, and I believe mine can be made so-- although as noted previously I cannot translate my procedures and intutions into complex mathematical or logical operations.



Nickola,
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

[nickola.pazderic]

It is very interesting to me that Paul and I worked with a similar strategy in late September and early October. I realized a 17.5% increase in the TOS account in a matter of days. I mentioned this outperformance to you in private. Either I did not communicate precisely my meaning or you misunderstood it as a conscious attempt to outperform the robot or both. Actually, I was doing nothing other than attempt to ensure that my equity curve remained in an uptrend. If I can realize an equity curve rise like that displayed on our home page for IWM, of course I'd be delighted.

Because our communication had a flaw, when the November trades came, in particular the one you mention, I recall being torn between taking the profit and following diligently. I did a little of both and lost a lot more than planned.

The Fibonacci idea seems like a sensible way to draw stop losses on a exploding 3X instrument, and placing variable stops that ensure against blowouts to the downside is also most a helpful idea.

This discussion has been very helpful for me. I won't fear the robot signals nearly as much as I did during the past two trades when it felt like the The Charge of the Light Brigade as we went long into the jaws of a bear.

I'm a vegetarian, but I'll find some things to eat as I drink Argentinian Malbec with relatives.

Best to you,

[roberto.giusto]

Roberto, the various “strength” levels of the signals have been abandoned with recent developments of the robot. So all signals – buy or short – are now strong signals and can be approached similarly for position sizing.
Billy

Yes, I was thinking to the different ST and LT edges of a confirmed signal.
I then suppose you treat them all the same.