No new trades for Monday. Trading System Performance After three months of real time performance we now have enough data points (read: trades) to credibly assess how well the new trading signals are doing. The column in the tables labeled "option best return" represents the highest possible gains for any one signal and is a good place to start our analysis as we have tried to develop an objective rule-based system to extract the best and most consistent returns contained within those numbers. The results: (1) The profits are there, meaning the signals are working. The average "maximum gain per trade" since going live is 78.95%. (2) The rules for taking those profits can be better. Of that 78.95% our rules for taking those signals should for seeing at least half of that, or an average return of approximately 40%, for all of the trades and including those that fail to reach any profits at all. These numbers tell me that we have the right signals, but current rules are not doing a great job of maximizing returns. Traders doing best are tweaking the rules, either taking only a subset of signals (of their own choosing), or using a combination of staggered exit strategies and stops. There is clearly a balance between letting some gains run and cutting some trades short that we have yet to achieve. I've always like the idea of taking quick profits on part of the trade and letting the rest of the trade run as a "lottery ticket." It's just hard to find an optimum rule or balance to cover all situations. Nonetheless, conceptually that seems the most likely to squeeze the highest and best returns out of each trade. As an example, a rule to "Take off 3/4 of position at +50% and hold the remainder with a stop at breakeven" would result in a nicely profitable trade (albeit with the potential of smaller total return than taking all off at +50%) while allowing to capture some of these larger gains. Equally appealing would be to lower that first exit threshold to +40%, depending on your own goals and tolerance for risk. So far in real time trading 33 out of 56 trades have hit the +50% or better target, 23 out of 56 real time trades have reached 75% or better, 16 have reached 100% or better, and 5 reaching 200% or better. Those numbers can only go up with the open trades listed in the table below, as there are 27 days still left in the open September trades, and 55 days to October expiration. I continue to refine the system both by strategy tweaks as well as discovering which stocks are generating the most reliable signals and in what time frames. I am keeping the overall portfolio at around 50 stocks while removing stocks no longer exhibiting reliable trending behavior and adding new stocks that do. My goal is to have a system that generates about 8-10 trading signals per month at an average gain of between 50%-75% per trade (including losers). It's a little less optimistic than our historical numbers suggested, but after three months it may be more realistic, and it's "realistic," that ultimately ends up in our trading accounts. MSFT This chart of MSFT labels three Buy Signals generated in the single Long Trend that MSFT entered into in mid-April. The two Buys on July 3rd and August 23rd were real time trades from the system, while the first Buy on April 26th was generated in the "beta" test period. OPEN TRADES TABLE
