Weekend Update: Since Inception


Big Picture Update: The pattern recognition analysis that describes the parallels between current conditions and 2000-2002 and 2007-2009 is still valid and in some ways, even more so. At some higher level in the market the "next leg down" expectation might have to be tempered or abandoned, but we are no where near that now.  We were early in our expectation time frame, but not wrong in anticipation. The countdown has been running for most of January and it continues  going into next week.

Since Inception

We now have 141 real time trading signals with corresponding performance statistics from which to evaluate the reliability and profitability of the trading system. With the multiple "trader's choice" exit strategies, assessment of performance is problematic, if not impossible. It is easer to simply illustrate how various exits could affect results, whether holding until expiration, taking gains at a set level (of which there are many), or doing a combination thereof.

Last week I did an exhaustive analysis of a simple-to-implement exit strategy with results that are absolutely achievable no matter what your level of trading experience. The simple strategy is based upon relatively conservative trade management and profit-taking. It has generated a win-per-trade rate of 80% based upon all of the trades generated since inception of the system since mid-May 2018. After 141 actual trading signals over nine months, this may be the most realistic and viable way to implement the system and trade the signals. If you are satisfied with the bottom line results from your own current trading strategy, there is no reason to switch. But if your results do not match these set out below, this methodology may be a better alternative. 

By its nature this exit strategy will miss blockbuster trades. But with 8 out of 10 trades winners, the fact that you miss out on a 300% win is balanced out by a stream of consistent gains. Although the average gain per trade is probably on the low end of what is possible with this system, with four out of five wins profits will add up and could very well be worth missing the grand slams. In addition, the psychology of winning trades is much easier on the psyche. Your choice, but if you are not satisfied with your results to date this may very well be the way to go.

Trading Management System: 35/75

Rules: (1) Take first 35% of profit then exit trade completely, and, (2) Use an 75% stop. 

Number of Trades: 141
Trades that hit 35% profit target: 113 = 80%
Trades that did not achieve 35%: 28 = 20% 
Average Loss*: (62.75%)
*factors in trades that neither achieved +35%, nor did they hit -75%


For anyone who is having trouble making this system work for them, consider this methodology. It takes quick profits and has a wide stop. As the numbers above illustrate, these gains are there 80% of the time. For the most part the profit threshold is realized early in the trade, within the first week or two and at times in a manner of days. To use a baseball analogy, although home runs and especially grand slam home runs give rise to incredible adrenaline rushes, hitting .800 puts you in Hall of Fame. 


*This table might be easier to see in detail by viewing it on the website.