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Douglas Trading System


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#1 Douglas

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Posted 05 February 2017 - 09:52 AM

The system remains in cash. If the DJIA breaks out of the expanding triangle that it has been trapped in since early December, the system will be forced back in. The top of the triangle (closing basis) appears to be about 20145, so if after 3 pm Monday the DJIA is above 20145, the system will buy RYDHX at the closing price.

The trendless back and forth of the last two months has not been friendly to my trend following system which is being beaten year to date by buy and hold.

The next risk window appears to be at the end of next week on Friday. It will be important for the break out of the expanding triangle to be on improving breadth to indicate a healthy trend up.

Regards,
Douglas

#2 kssmibotm

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Posted 05 February 2017 - 11:24 AM

I would argue that you do not have a true trend following system.  The trend has clearly been up since the beginning of the year, and had you been following the trend, you would not be lamenting the fact that you are lagging buy and hold.  Seems to me, your trend following system is being side tracked by risk windows and triangle formations.  My advice is, keep it simple and just follow the trend and forget all the other noise.



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#3 Douglas

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Posted 05 February 2017 - 12:04 PM

I believe that the DJIA has been in a consolidation formation since early December, an expanding symmetrical triangle, broadening top formation. According to Edwards and Mcgee's "Technical Analysis of Stock Trends", this formation is often a reversal pattern. Prices have moved back and forth between the bottom and top of the formation five times since early December. That is not trending in the time frame I am operating in. The DJIA is currently within striking distance of the top of the formation. As I noted, if the DJIA daily breaks out the top of the pattern with gusto I will assume this reversal pattern has failed and the up trend from the election has resumed forcing my system to buy.

My system is not fleet footed and only trades at the end of the day using daily chart patterns, not hourly, so whipsaws are a problem which a consolidation like this one provides in abundance.

Regards,
Douglas

#4 fib_1618

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Posted 05 February 2017 - 12:48 PM

I would argue that you do not have a true trend following system. 

 

Fully agree...the intermediate term trend has been solidly up for a year with the usual backing and filling along the way.

 

Some would even say that the trend has been "undeniable".

 

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#5 ryanoo

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Posted 06 February 2017 - 11:30 PM

I keep Douglas' predicted turn dates in my google calendar. I found over the past several months that those dates agree with market turns and acceleration more often than not.  I used them in my trades profitably. Thank you Doug.  

 

On another note, if you know who Seth A. Klarman is, NYT has a piece on his current thoughts about market. 

https://www.nytimes....times&smtyp=cur



#6 Douglas

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Posted 07 February 2017 - 03:16 AM

ryanoo, thank you for the kind words. Please note that I believe that the ZIRP monetary policy is seriously affecting the efficacy of the risk windows. The FED, BOJ, ECB, etc. central banks act like a hedge to any long by standing ready to provide liquidity for any serious sell off. Investors have figured out that the central banks have essentially chopped off the left tail of the market risk distribution curve. Investors since 2009 have been able to fearlessly take on more risk and be handsomely rewarded. Also ZIRP forces yield starved investors to pay silly multiples for dividends which lowers downside risk to these higher yielding stocks since the investors are treating them like bonds.

When (if ever) the central banks return to a neutral monetary stance, the left side of the market risk curve should reassert itself restoring risk symmetry. That should usher in the halcyon days for the risk windows. Until then many risk windows occurring where tops should appear will often just signal a consolidation or are outright duds. Today I just accept that risk windows are very hit or miss. I currently use them to tighten and loosen stops.

Regards,
Douglas