173 replies to this topic

[tozwp]

diogenes, Since we have had enough turns in the last 3 - 4 months, I believe we are at a point where we can evaluate this tool in the context of this current bear market. Is it useful? No? success rate? Failure rate? etc

Okay, let's evaluate it but why just in the context of the bear market? How about year to date? That gets the last of the bull and all of the bear so far.

How about this test? Buy $1 million worth of TNA on the close each time there is a low above a low on the NYMO, sell those shares on the close of the day each time there is a high below a high on the NYMO. Buy $1 million worth of TZA on the close each time there is high below a high on the NYMO, and sell those shares on the close of the day each time there is a low above a low on the NYMO. In the market one hundred percent of the time either long or short from January 1, 2011. Would that be an adequate evaluation?

Today looks like a high below a high. Looks like a short at the close today.

diogenes - if its not too much trouble, I'd be curious to see what a mechanical backtest of that simple 'system' you've described does. I don't have Tradestation or I'd give it a whirl myself. It won't be perfect as there are times when its best to wait until the next day to see if a high below a high is real or if the MCO continues upward and breaks that previous high the next day (and opposite for shorts). It would be interesting to see what it does though.

Thanks so much for the education regarding this breadth indicator. It is probably the most useful thing I've learned in a very long time.

[DrSP]

diogenes, Since we have had enough turns in the last 3 - 4 months, I believe we are at a point where we can evaluate this tool in the context of this current bear market. Is it useful? No? success rate? Failure rate? etc

Okay, let's evaluate it but why just in the context of the bear market? How about year to date? That gets the last of the bull and all of the bear so far.

How about this test? Buy $1 million worth of TNA on the close each time there is a low above a low on the NYMO, sell those shares on the close of the day each time there is a high below a high on the NYMO. Buy $1 million worth of TZA on the close each time there is high below a high on the NYMO, and sell those shares on the close of the day each time there is a low above a low on the NYMO. In the market one hundred percent of the time either long or short from January 1, 2011. Would that be an adequate evaluation?

Today looks like a high below a high. Looks like a short at the close today.

diogenes - if its not too much trouble, I'd be curious to see what a mechanical backtest of that simple 'system' you've described does. I don't have Tradestation or I'd give it a whirl myself. It won't be perfect as there are times when its best to wait until the next day to see if a high below a high is real or if the MCO continues upward and breaks that previous high the next day (and opposite for shorts). It would be interesting to see what it does though.

Thanks so much for the education regarding this breadth indicator. It is probably the most useful thing I've learned in a very long time.

diogenes, I personally feel you don't like anybody pointing about backtesting or saying bear market is different from bull market, so forth and so on. Let me know if you don't like, I will stop looking at weaknesses in this indicator.

The reason why I said the above is: Already this indicator became a day trading indicator from a swing indicator. In the bull market, it used to work very well as a bull market indicator, atleast I assume! In the bear market, this indicator had become a 1, 1 day indicator 2, no indicator (if you check your circles for the past 3 days) or 3, zigzag indicator.

If I followed this indicator this past week, I'd be holding all trapped positions in TNA, TZA, TNA in that order - all with a loss. Bear market may be a reason why this doesn't work.

To sum up my doubts:

1, Is this a day trading indicator (means just buy at close and sell the next day) or a swing indicator (means hold for 2-3 days and above)?
2, Is this an indicator which works in bull market or bear market or both?
3, Is you cannot for sure establish 1 and 2 above, we can also look at success/ failure rate at any given time and establish a 0.xx success rate because we already know this is not a 100% success rate indicator.

I know about getting stopped out, so that is already a given, no need to stress again. Don't please fume at me, I am coming out with a valid reason after several consecutive failures.

[darnelds]

The market has been in a trading range the last 8 weeks, hence the whipsaws.

[diogenes227]

diogenes, Since we have had enough turns in the last 3 - 4 months, I believe we are at a point where we can evaluate this tool in the context of this current bear market. Is it useful? No? success rate? Failure rate? etc

Okay, let's evaluate it but why just in the context of the bear market? How about year to date? That gets the last of the bull and all of the bear so far.

How about this test? Buy $1 million worth of TNA on the close each time there is a low above a low on the NYMO, sell those shares on the close of the day each time there is a high below a high on the NYMO. Buy $1 million worth of TZA on the close each time there is high below a high on the NYMO, and sell those shares on the close of the day each time there is a low above a low on the NYMO. In the market one hundred percent of the time either long or short from January 1, 2011. Would that be an adequate evaluation?

Today looks like a high below a high. Looks like a short at the close today.

diogenes - if its not too much trouble, I'd be curious to see what a mechanical backtest of that simple 'system' you've described does. I don't have Tradestation or I'd give it a whirl myself. It won't be perfect as there are times when its best to wait until the next day to see if a high below a high is real or if the MCO continues upward and breaks that previous high the next day (and opposite for shorts). It would be interesting to see what it does though.

Thanks so much for the education regarding this breadth indicator. It is probably the most useful thing I've learned in a very long time.

diogenes, I personally feel you don't like anybody pointing about backtesting or saying bear market is different from bull market, so forth and so on. Let me know if you don't like, I will stop looking at weaknesses in this indicator.

The reason why I said the above is: Already this indicator became a day trading indicator from a swing indicator. In the bull market, it used to work very well as a bull market indicator, atleast I assume! In the bear market, this indicator had become a 1, 1 day indicator 2, no indicator (if you check your circles for the past 3 days) or 3, zigzag indicator.

If I followed this indicator this past week, I'd be holding all trapped positions in TNA, TZA, TNA in that order - all with a loss. Bear market may be a reason why this doesn't work.

To sum up my doubts:

1, Is this a day trading indicator (means just buy at close and sell the next day) or a swing indicator (means hold for 2-3 days and above)?
2, Is this an indicator which works in bull market or bear market or both?
3, Is you cannot for sure establish 1 and 2 above, we can also look at success/ failure rate at any given time and establish a 0.xx success rate because we already know this is not a 100% success rate indicator.

I know about getting stopped out, so that is already a given, no need to stress again. Don't please fume at me, I am coming out with a valid reason after several consecutive failures.

Okay, let's evaluate it but why just in the context of the bear market? How about year to date? That gets the last of the bull and all of the bear so far.

How about this test? Buy $1 million worth of TNA on the close each time there is a low above a low on the NYMO, sell those shares on the close of the day each time there is a high below a high on the NYMO. Buy $1 million worth of TZA on the close each time there is high below a high on the NYMO, and sell those shares on the close of the day each time there is a low above a low on the NYMO. In the market one hundred percent of the time either long or short from January 1, 2011. Would that be an adequate evaluation?

To sum up my doubts:

1, Is this a day trading indicator (means just buy at close and sell the next day) or a swing indicator (means hold for 2-3 days and above)?
2, Is this an indicator which works in bull market or bear market or both?
3, Is you cannot for sure establish 1 and 2 above, we can also look at success/ failure rate at any given time and establish a 0.xx success rate because we already know this is not a 100% success rate indicator.

I know about getting stopped out, so that is already a given, no need to stress again. Don't please fume at me, I am coming out with a valid reason after several consecutive failures.

I will always stress that STOPS ARE ABSOLUTELY NECESSARY to limit losses, guard against trading insanity and protect against capital catastrophe. That said again, let's pull out all the stops for the proposed test above.

Your doubts:

1. As outlined in the test, this is a swing indicator (like all swing indicators, it sometimes lasts a day).

2. It works in both a bull market and bear market (but obviously long signals work better in bull markets, and short signals work better in bear markets).

3a. Okay, 1 and 2 are established for you. But I doubt you are ever going to get rid of your doubts until you actually do some work instead of just guessing -- take the test, do the math for yourself. TNA on a low above a low to the next below a high on the NYMO and TZA from a high below a high to the next low above a low, all trades year to date on the close, no stops. Or back test it two years, or three years, if you have the stamina.

3b. One more note, you are going to have to focus on the lows above lows and highs below highs without the obvious bias expressed in your doubts because the "several consecutive failures" you seem to be citing as a valid reason for questioning me are actually up a lot -- roughly 85 percent on TNA/TZA for the last five long and the last five short swings (an equivalent of about 288 SPX points).

This proposed test is purely a technical exercise in what I have always believed is the best internal measure of the fear, greed and timing of mass market psychology.

Good luck and good trading.

P.S. I've been writing about this indicator on Swing Waves for nearly three years. It has been a journey of decision through and sometimes revision for ever-fluctuating market conditions. Whatever made you think I'm not constantly testing it?

[DrSP]

Diogenes, Define a % stop. Also, define what you would do after a stop is hit, but the system is still in a signal. You will wait for the next signal, I assume, in cash? What I will do is, I will track the swings from now (irrespective of whether you post real time or not). I will use the closing price the day signal is initiated. I will see you after 6 months and we will extrapolate the data from there. Because this is a forum. On forums, nobody is going to agree they are wrong.

[diogenes227]

Diogenes, Define a % stop. Also, define what you would do after a stop is hit, but the system is still in a signal. You will wait for the next signal, I assume, in cash?

What I will do is, I will track the swings from now (irrespective of whether you post real time or not). I will use the closing price the day signal is initiated. I will see you after 6 months and we will extrapolate the data from there.

Because this is a forum. On forums, nobody is going to agree they are wrong.

For the record of this thread, had THIS LONG DISCUSSION with DrSP today on Fearless Forecasters, the most pertinent part of which, in relation to our discussion here, starts HERE includes the following:

QUOTE (DrSP @ Oct 4 2011, 11:36 AM) *
I suggest you to define your swing trade signal if that is what it is. I noted it failed because on 28th you got a TZA buy, on 29th you got a TNA buy, on 30th again you got a TZA buy. Does a swing trade indicator give you swing signals every day? I am not even going to the 1 day signals that you got several times for the past 2 months. So, tell me what I don't understand! It is a pity that you blame on it me and say you don't understand. And you never define your stops.

I see several people on this forum coming and gloating when they are up saying "I am sitting on the beach and enjoying the sunshine while my indicator is doing the work for me" but they fail to acknowledge when that fails. It is not fair.

diogenes227:

My swing signals have been defined ad infinitum (and for some, ad nauseum, I suppose) and even revised at times (markets make revisions necessary at times, if you're wondering) on my Swing Waves thread for years:

LATEST BIG MAC ATTACK POSTS

You say:

QUOTE
I noted it failed because on 28th you got a TZA buy, on 29th you got a TNA buy, on 30th again you got a TZA buy. Does a swing trade indicator give you swing signals every day? I am not even going to the 1 day signals that you got several times for the past 2 months. So, tell me what I don't understand! It is a pity that you blame on it me and say you don't understand. And you never define your stops.

diogenes227:

This exactly what I mean by you not understanding my signals (and apparently want to take no effort to understand, as I have above to try to understand yours).

I did not get a TZA buy on the 28th. That swing began on Sept. 8th (14 days earlier, which is pretty much the average duration for my signals) and netted about 8.3 percent. You are right, there was a one-day signal on TNA from Sept. 29 to Sept. 30 which lost about 9.3 percent. That was the second biggest loss for a TNA swing in three years, by the way -- sign of the bear (the biggest loss was just before that -- also a sign of the bear). The current TZA buy, on Sept. 30, is at this moment up 15.2 percent. All of those are end-of-the-day trades. Is that defined enough for you, and are those end-of-the-day triggers precise enough for you to understand?

I believe in using stops but the purpose of this discussion and the current discussion on Swing Waves, I pulled out all the stops. Repeat, there are no stops to be defined.

You don't have to bother but if you're going to go on doubting me, at least for once try to understand what you dealing with. Willful ignorance and laziness doesn't help any trader, especially the trader who has those vices. When and if you do understand my model and you find fault with it, please let me know. We're supposed to all be here to try to help each other trade better.

Good luck and good trading.

- Listen, you are recording the peaks and the lows. Keep in mind you cannot tell it is a peak or a low, until after the next day's close. No matter what you explain, that is the truth. You can circle the peak and the low, but you cannot buy TZA or TNA until the peak or low the next day.

Next time, don't mark a peak and say "Hey I bought TZA on the day NYMO peaked". The correct explanation, if you did, is you buy TZA the next day close, unless you already dreamed about it. You are marking buys and sells on the exact days where peaks and lows have happened.

- On Sept. 15th, NYMO recorded 55. On 27th, NYMO recorded 22 and next day on 28th it went lower. That is lower high. It is on 28th TZA is a buy, not 27th. Tell me why it is not!
- Dude, You don't know if it is higher high, higher low or whatever until the next day reading when market ends. How are you telling me you bought TZA on 29th, when the NYMO actually went lower the next day on 30th and recorded higher low. To record a higher low, the peak has to be followed by a next day down. Unless you are imagining a lot of things and saying that to us.
- On Sept. 30th, it is your signal for TZA. Close for 30th was 52.97$, today's close is 49.58$. Tell me why it is not a fail.

Don't repeat the same things. I have indicated you the specific points I contradict, I cited the dates. If possible, offer individual explanations. Otherwise you can end the thread here, I personally don't care.

[diogenes227]

QUOTE (DrSP @ Oct 4 2011, 11:36 AM) *
I suggest you to define your swing trade signal if that is what it is. I noted it failed because on 28th you got a TZA buy, on 29th you got a TNA buy, on 30th again you got a TZA buy. Does a swing trade indicator give you swing signals every day? I am not even going to the 1 day signals that you got several times for the past 2 months. So, tell me what I don't understand! It is a pity that you blame on it me and say you don't understand. And you never define your stops.

I see several people on this forum coming and gloating when they are up saying "I am sitting on the beach and enjoying the sunshine while my indicator is doing the work for me" but they fail to acknowledge when that fails. It is not fair.

My swing signals have been defined ad infinitum (and for some, ad nauseum, I suppose) and even revised at times (markets make revisions necessary at times, if you're wondering) on my Swing Waves thread for years:

LATEST BIG MAC ATTACK POSTS

You say:

QUOTE
I noted it failed because on 28th you got a TZA buy, on 29th you got a TNA buy, on 30th again you got a TZA buy. Does a swing trade indicator give you swing signals every day? I am not even going to the 1 day signals that you got several times for the past 2 months. So, tell me what I don't understand! It is a pity that you blame on it me and say you don't understand. And you never define your stops.

This exactly what I mean by you not understanding my signals (and apparently want to take no effort to understand, as I have above to try to understand yours).

I did not get a TZA buy on the 28th. That swing began on Sept. 8th (14 days earlier, which is pretty much the average duration for my signals) and netted about 8.3 percent. You are right, there was a one-day signal on TNA from Sept. 29 to Sept. 30 which lost about 9.3 percent. That was the second biggest loss for a TNA swing in three years, by the way -- sign of the bear (the biggest loss was just before that -- also a sign of the bear). The current TZA buy, on Sept. 30, is at this moment up 15.2 percent. All of those are end-of-the-day trades. Is that defined enough for you, and are those end-of-the-day triggers precise enough for you to understand?

I believe in using stops but the purpose of this discussion and the current discussion on Swing Wave, I pulled out all the stops. Repeat, there are no stops to be defined.

You don't have to bother but if you're going to go on doubting me, at least for once try to understand what you dealing with. Willful ignorance and laziness doesn't help any trader, especially the trader who has those vices. When and if you do understand my model and you find fault with it, please let me know. We're supposed to all be here to try to help each other trade better.

Good luck in the future and good trading.

DrSP:

- Listen, you are recording the peaks and the lows. Keep in mind you cannot tell it is a peak or a low, until after the next day's close. No matter what you explain, that is the truth. You can circle the peak and the low, but you cannot buy TZA or TNA until the peak or low the next day.

Yes, that is right -- it is the next day's close that is the signal.

Next time, don't mark a peak and say "Hey I bought TZA on the day NYMO peaked". The correct explanation, if you did, is you buy TZA the next day close, unless you already dreamed about it. You are marking buys and sells on the exact days where peaks and lows have happened.

I have never said I bought TZA on the day the NYMO peaked. I may in fact have bought it during the day for myself but for the purpose of this thread the buy is always on the close. THE BUY IS ALWAYS ON THE CLOSE!

- On Sept. 15th, NYMO recorded 55. On 27th, NYMO recorded 22 and next day on 28th it went lower. That is lower high. It is on 28th TZA is a buy, not 27th. Tell me why it is not!

This is a swing signal for TZA from a high below a high on the NYMO to a low above a low. It's not a new buy on the 28th because the buy was on Sept. 8 (I've repeated this many times now). There were wild swings while that signal was in place (it was losing like 9 percent at one point) but there was no low above a low to reverse to the long. That came on the 29th (please note that the close of the 29th is the date after low on the 28th which set the low above a low in place -- always on the close of the day after the dip or peak). That TZA trade closed up 8.3 percent.

- Dude, You don't know if it is higher high, higher low or whatever until the next day reading when market ends. How are you telling me you bought TZA on 29th, when the NYMO actually went lower the next day on 30th and recorded higher low. To record a higher low, the peak has to be followed by a next day down. Unless you are imagining a lot of things and saying that to us.

Okay, that "Dude" makes me wonder how old you are (hmm, this may be the problem...). Regardless, don't call me Dude again -- it is rude, disrespectful, unprofessional and evidently immature.

As per your comment: I did not buy TZA on the 29th, I bought TNA because that was a low above a low from the 28th. The next day that long signal failed and, with a out stop, lost 9.3 percent. As you would say, this is not a 100 percent system (I'd like you tell me where there is one). This is trading, you have winners, and you have losers. That's the way it is.

- On Sept. 30th, it is your signal for TZA. Close for 30th was 52.97$, today's close is 49.58$. Tell me why it is not a fail.

That's right Sept 30th is my signal for TZA and, yes, the close was $52.97. You're starting to get it (I hope). And, yes, at today's close, without a stop, that signal is now losing 6.6 percent as a result of the massive squeeze at the end of the day but there is no low above a low on the NYMO so if you're a swing trader with no stop that trade is still on. It may very well lose money by the time there is a low above a low to close it out but it is not "a fail" yet. It might be in the end but we'll have to wait to see (just like the swing from Sept. 8th, which you declared a failure a couple of times as I recall before it finished up 8.3 percent). We'll have to wait and see.

In the meantime, it is a perfect example of why I say above "I will always stress that STOPS ARE ABSOLUTELY NECESSARY to limit losses, guard against trading insanity and protect against capital catastrophe." You want a definition of a stop? NEVER LET A 15 PERCENT GAIN TURN INTO A LOSS.

Which is why I am in cash now while the short signal is still on. I will short via TZA the next high below a high on the NYMO.

Don't repeat the same things. I have indicated you the specific points I contradict, I cited the dates. If possible, offer individual explanations.

Sorry I had to repeat -- trades in this system are always on the close on the day after a peak, and on the close on the day after a dip. Never on the peak or the dip itself. You have your dates wrong and that is a simple fact. That said, I hope my individual explanations are clear and have helped.

Good luck and good trading.

Edited by diogenes227, 04 October 2011 - 04:41 PM.

[diogenes227]

Short again. Chart later.

[diogenes227]

Short again. Chart later.

Got chopped out of the short even before I could get around to putting up the chart.

Long again. TNA.

The swing signal I'm tracking here took a huge hit on this TZA swing. Without stops, the short from the Sept. 30 high below a high close would have lost 21 percent at today's close. Because of the hard gap down, even using a reasonable stop was ugly -- at best a 15 or 16 percent loss on the open before the all-day grind-down began. Ouch!

That was the biggest signal loss in TZA for this swing strategy in the past three years. Interesting to note TNA had its biggest single three-year loss back in August. Volatile market.

Given the volatility, I'm not real comfortable with this low above a low buy on the NYMO at this level but when has comfort ever made a dime? Again, stops at the ready.



Good luck and good trading.

http://stockcharts.c...1656&r=9578.png

[diogenes227]

Took half of TNA off the table at the close for six percent. Two days. Moving the stop on the rest to breakeven.

Call me Mr. Nervous --

Don't really have a sell signal yet and probably shouldn't be thinking but here's what I'm thinking: it's October; it's a bear market, has been since the end of July at least; fourteen of the fifteen ETFs I follow are overbought (the fifteenth, DRN, was overbought intraday but backed off at the close); of my "nifty-fifty" stocks had 47 on buys three days ago, 40 yesterday, 33 today (in other words they are rolling over while the market keeps climbing; had 26 of the nifty-fifty overbought yesterday, 25 today (that's a down tick); the NYMO (another overbought) is nine weeks past its low so this cycle is getting long in the tooth: and as I count the swing days, each up swing since this bear began has been seven days at best -- to illustrate on the NAZ:

http://stockcharts.c...5312&r=6029.png

So I lighten up some.

Good luck and good trading.