This entry was posted on Thursday, January 24th, 2008 at 8:53 am and is filed under Trades, chart patterns, market commentary, system trading. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
This recent foray below 20 was met with an extremely emotionally charged market action. We are above 20 again so the system waits for the next plunge below. Yesterday EWG (Germany) nailed the 3% profit target right away in the morning. The other holding IEO (US Oil and Gas) came withing 3 cents of our profit target but the Ultimate Oscillator crossed above 50 so it is an exit at today’s open. The other holding we are carrying from the last punch below 20 is EWS (Singapore) pushed right to the cusp of a 50 cross as well. My data shows no cross so we’ll see where it is after the close today.
I think (hope) that the past 2 days succinctly pointed to the need to develop some sort of strategy that will try to do something in these fear/panic market environment to the long side. Again and this is the key, remember position size. That is the piece of the puzzle that you must put together. Based on my risk how much of my portfolio would a system like this be allocated 20% 50% 10% ?? That is only a question you can answer. One thing we should note though is the this “system” never had more than 3 holdings in a 8 position portfolio. We played and set it up conservatively. I did that intentionally in order to try to highlight the fact as the trader/developer I test and design these things in ways I feel comfortable based on historical backtests taking into account that things in the past can always overwhelmed by a worse current situation. I wanted to show readers that although these trades seem aggressive it is really a matter of how much equity you allocate to the idea. I tried to show you it could be done in a very conservative way.
After the last position closes I will review all the trades and we’ll assess how we did and use this realtime trade information so that we can maybe apply some of that knowledge in the next poke through 20.
On a side note the 2 stocks I mentioned also hit the respective 5% profit targets that individual equities use.
Have a Great Day!
Dave Johnson
January 24th, 2008 at 10:58 am
Dave,
Thanks for sharing your trading setups. I really like the way you have a very simple system with such great probability. I’m trying to under your T2108 method some more but the question I have is that when I pulled the charts for IEO and EWS, they don’t hit 30 on the UO charts. Are you using a different setting than the standard (7,14,28)? Do the ETF’s that you select when the T2108 is below 20 have to be below a value of 30 for the OU? Thanks Dave for showing us this great setup.
January 25th, 2008 at 2:14 am
Same standard settings.
Original Post.
http://thetradingdigest.com/blog/2007/12/17/a-rather-simple-oversold-system-using-t2108-indicator/