6 replies to this topic

[kinga200]

I want to explain, not in detail, my system.

I use 3 models in my system n each one has 3 indicators which I use on different time frames. Each indicator has to signal bf I take a position short or long and can be used in different time frames. I have been short since Jan bc one indicator on my IT system has been diverging with price and that is very very rare.

But I still stay short on my IT system hedging with calls with my VST system AND has helped my account drawdown. Which is currently at -2.45% even with the SPX 100 point move against me.

Now my IT system is fully short (all 3 indicators on each model are in sync)

The system does not tell me how low or high it will go. Only there is a probability in chance in trend either VST or IT.

I have another life n try to post when I can...BUT I have mud on my face with my IT call since Jan BUT as well my VST system is helping along the way.

Given this anomaly in my IT system I still think we could see a very fast move (like Jan of last year)

If my IT system tells me to go fully long then I will take my lumps n go that way.

Just don't think it will.

[lawdog]

thanks for the honesty and humility. sometimes when we post, we sound like we never made a mistake or took a loss. there is no shame in making mistakes. you can make mistakes every day and still make a lot of money.

[NAV]

It's not clear to me. Are you saying the last 100+ points your IT system has been on sell  and did not give you an exit ? 

 

If you did not get an exit, then seriosuly you will need to re-examine the system. Open-ended losses in a system especially as the market keeps making new highs is very dangerous. Any kind of system on 135-min will be on a buy in this market, unless it's some mean-reversion system which generates sell based on extremes. Mean-reversion systems in a strongly trending market is suicide. Ask those folks who thought 1998 was extreme and shorted the market. Secular trends can continue for years, not months. Even if the market does a 5% correction from here and resumes the bull-trend you will only breaeven. To even make a 1:1 Risk/Reward trade, you will need a 10% correction. What if the market does not accomodate and keeps moving higher ? Where will you exit?  Hedging is fine on paper. Practically it' more tougher as you are hedging on a lower timeframe. What if your hedges also produce losses? - then it would be a double whammy.

 

I try not to comment on any posts here as most have their own strategies. When i see something extreme, like someone sitting on a 100 point loss in SPX, the risk-manager in me starts typing. Hence the post. Sorry, i have nothing against you or your strategy, my friend. And no vested interest either. Good luck on your trade.

[NAV]

Last but not the least, hedging is usually done to protect profits, not to offset losses. When hedged against profits, your hedge is in the opposite direction of the portfolio creating a neutralizing effect.

 

When you say hedging the losses, your portfolio and hedges are in the same direction, so it's not really a hedge - it's just a "double leveraged position" or  "adding to losing positions". In which case, when the hedges starts producing losses,then the end result is not a neutral portfolio, but a leveraged loss.

[kssmibotm]

I have been short since Jan bc one indicator on my IT system has been diverging with price

 

This sounds like an overbought/oversold indicator.  In a strong trending market like this, OBOS indicators can stay overbought for a long time.  I applaud your discipline in sticking with such a system.  My advice is to run, not walk, away from this system as fast as you can.  It will save you alot of heartache.  I know, I have been there.

[kinga200]

Last but not the least, hedging is usually done to protect profits, not to offset losses. When hedged against profits, your hedge is in the opposite direction of the portfolio creating a neutralizing effect.

 

When you say hedging the losses, your portfolio and hedges are in the same direction, so it's not really a hedge - it's just a "double leveraged position" or  "adding to losing positions". In which case, when the hedges starts producing losses,then the end result is not a neutral portfolio, but a leveraged loss.

NAV I have been hedging with calls, but yes now I am very short with puts.  If my VST system says a 70% probability of down tomorrow I going to keep my PUT.

 

I do appreciate your comments though.

 

Best of luck

[kinga200]

It's not clear to me. Are you saying the last 100+ points your IT system has been on sell  and did not give you an exit ? 

 

If you did not get an exit, then seriosuly you will need to re-examine the system. Open-ended losses in a system especially as the market keeps making new highs is very dangerous. Any kind of system on 135-min will be on a buy in this market, unless it's some mean-reversion system which generates sell based on extremes. Mean-reversion systems in a strongly trending market is suicide. Ask those folks who thought 1998 was extreme and shorted the market. Secular trends can continue for years, not months. Even if the market does a 5% correction from here and resumes the bull-trend you will only breaeven. To even make a 1:1 Risk/Reward trade, you will need a 10% correction. What if the market does not accomodate and keeps moving higher ? Where will you exit?  Hedging is fine on paper. Practically it' more tougher as you are hedging on a lower timeframe. What if your hedges also produce losses? - then it would be a double whammy.

 

I try not to comment on any posts here as most have their own strategies. When i see something extreme, like someone sitting on a 100 point loss in SPX, the risk-manager in me starts typing. Hence the post. Sorry, i have nothing against you or your strategy, my friend. And no vested interest either. Good luck on your trade.

As I have said this indicator, the way it has been showing with this move is very very rare.  BUT has happened before from the last consolidation back in June but the market broke down that time.

 

Im sticking with my system, especially my VST system with options (Puts & Calls).

 

Thanks for the comments, I like your comments as well as your calls.