Weekend Update: F.A.Q.


It's time for our periodic exercise in questions and answers. We are starting out with a fresh perspective on the events of the past three days and will move on from there. For the sake of brevity I am paraphrasing the questions, but they are all one form or another of actual questions I have received over the past 30 days. 

Q. The market doesn't seem to want to go down, when it does it doesn't stay down, always making up what it has lost. Is the downtrend still in effect? 

A. The down-up-down-up observation is very short-term oriented. This is where the longer term charts help in a big way.  Here is a simple daily price chart of the SPX without any bells or whistles, just price bars. Quick, what is the dominant trend? 


Q. My options start out with great gains, but those gains don't last and after a week the trade is back to much smaller gain, or zero gain, or even a loss. Is the system still working? 

A. "The System" is made up of two elements: (1) Trade Signals, and (2) Trade Management. You can see from the performance table that the trade signals do just fine over fixed periods, so if you are not doing as well as you think you should be doing, take a closer look at your trade management. Despite those huge highest interim returns per trade, if you are not exiting with those gains, or at least a portion of them, what good are they? If you see triple digits, start thinking of your exit on at least half if not more of the options, and if you can leave something in the trade. If your position is too small to "leave something on the table" it is better to take it all of those gains.  As we keep seeing in both services, there will always be new signals coming down the road. Month to month, we are getting a lot of signals. 

So, "yes," the system is still working. Look to trade management to change your results. 

Q. I've been good at taking profits, but with so few new signals the past few weeks I am sitting on a lot of cash and not that many positions. Where are the new trades? 

A. They're coming (see SPY chart below). I can see it in the charts. Some trading services feel that they must always keep churning out new trades to keep subscribers happy. We value quality over quantity. Every signal that goes out has a high probability of success, and higher reward, against the risk we are taking. If you must have more action, we offer the Premium Service which works off of smaller time frame price bars, generating more signals. Like the Standard Service, these trades too must be managed correctly, taking good profits quickly, waiting for the next trade. 

Here is the Standard Service SPY chart. I posted it on Thursday after we had that "first red candle." There was no new (Intermediate) trade signal then. I suspect the first red candle after today, or after a few more blue candles, will trigger a new Sell Signal. This set-up is appearing in a lot of other Standard Service charts. 

Q. Do you, or do you know of any brokers who, offer managed accounts that will trade the system? 

A. I don't know any brokers who offer managed accounts, but I do have some brokers who subscribe to the two services. If any brokers who are already is trading the system are interested in managing accounts, please contact me personally: apharris@mac.com and I will pass on your contact information. 

I personally no longer manage individual accounts. I do trade the system for my hedge fund, but that is not a part of Blue Line Trading. For anyone who is interested to know more email me directly: apharris@mac.com.