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the black line on full sto just crossed below the red line from above the 50 level for the 8th time in 3 years:
http://stockcharts.com/def/servlet/SC.web?c=$NDX,uu[w,a]waclynay[df][pd20,2][iUp14,3,3]&pref=G
let's see if this holds through the end of the week...if so...
???... ????? ...??...??...<ggg>
let's see if i can clarify my previous post...
...some retir accts offer only mutual funds from certain families excluding rydex/profunds so one can only go long stocks, bonds, and maybe gold...
...some of my ndx system trades would have resulted in 5-6% daily losses or 10-12% losses with full 2x ndx uopix/uspix positions...that's creates a psych problem and is the reason for trading less than 100% positions in uopix/uspix in certain cases...
...some of my ndx signals are generated when extremes of oversold/overbought are not reached so that a possibility of a large loss is greater than when using spx signals which are either more reliable or less risky or both...
i'll turn bullish when they turn bearish:
http://www.spearreport.com/update/ohiggins1.gif
well, i have AGAIN completely re-evaluated my system for profunds trading (and also for long-only mutual funds trading using ndx and spx)...
i have been very surprised how effective my system appears to be (only on paper of course...<ggg>)...it turns out that even just trading 2x spx profunds funds using 100% positions one can get 10-15% a month compounded...
trading 2x ndx profunds increases this return considerably of course but there are additional difficulties:
(1) much higher risk/volatility (ndx daily percentage changes are about 2-2.5 times larger than spx daily changes)
(2) much harder to interpret valid long/short signals
(3) much harder to withstand psychological impact of larger losing trades
as a result of this thorough analysis, it has occurred to me for the first time today that the optimal approach may be to either split positions 50/50 between ndx and spx or trade 50-75% ndx positions in cases where the signals are least reliable...
practice of course will soon be the ultimate arbiter of these trading theories i have developed...
...i hope that by now the few people still checking this thread have correctly concluded that seeing an actual trade posted here is extremely unlikely any time soon...<ggg>
george
PPT:
http://www.investorshub.com/boards/msgsearch.asp?txt2find=PPT
what if there is a correlation between
(1) the existence of PPT (since the 1987 crash)
(2) Alan Greenspan's tenure at the Fed (since 1987)
(3) the historically anomalous rise in the spx since late 1987 (6-fold in 12 years):
http://finance.yahoo.com/q?s=^SPX&d=c&k=c1&a=v&p=s&t=my&l=on&z=l&q=l
(4) the likely inability of the (manipulated) US stock market to escape the secular bear market in the next 10-15 years
steve, lots of good points in your post...i appreciate that... here are my thoughts:
(1) suppose you have $100 cash in your account...
by no leverage i mean that you either invest $100 in qqq/ndx with no margin OR you invest only $50 in the 2x ndx profund (uopix)...if ndx goes up by 1% you gain 1% of $100 or $1...
by full leverage i mean that you either invest $100 in qqq/ndx on 100% margin OR you invest full $100 in the 2x ndx profunds (uopix)...if ndx goes up by 1% you gain 2% of $100 or $2...
so, if you invest 100% of $100 in uopix you are EFFECTIVELY investing $200 in ndx which is EQUIVALENT to an investment of $100 in qqq/ndx on full margin...you don't get margin calls but you lose money very fast if you bet wrong on the market...
that's exactly why very few traders invest 100% in uopix or invest in qqq/ndx with full margin...the others already lost their capital...<ng>
you, ajtj, and hul often invest 100% in uopix/uspix...wahz often goes on 50%-75% margin...KT does not use margin...
so, let's say the goal is 10% a month compounded with no margin/leverage or 20% a month compounded with full margin/leverage...i actually have never seen anyone achieve 20% a month compounded with either qqq/ndx on full margin or 100% invested in uopix/uspix...so the more realistic goal should likely be about 15% a month compounded achieved through a partial use of margin/leverage...this is what the best traders have been achieving historically...
(2) i have not traded recently for several reasons:
(a) i have done a very thorough re-validation of all my system signals and have significantly improved my system in several ways
(b) i have been somewhat reticent to trade in the volatile and emotional market environment due to the war
(c) i have gotten very few system signals recently
(d) and frankly, i have been aware of the fact that my trades will be immediately posted on the thread so i guess the ego aspect is present as well...<ggg>
i will definitely start trading this week, likely with 50% positions initially...my goal is still 15-20% a month until i prove to myself that this goal is not attainable...
(3) i think that managing money once you are confident in your trading results is a good idea but if i were to do it i would wait perhaps a year to see what kind of returns i am getting and what drawdowns i have experienced...
as far as options trading, very few are able to systematically generate adequate positive returns over a longer period so this area seems less attractive to me than profunds trading...
also, the returns one can get are quite dependent on the type of market (bull/bear), the portfolio size, and the assumed risk level...
steve, good luck in your trading
george
larry, since i am trading spx (general market index) and ndx (general tech sector index) in profunds i deem my profunds portfolios well-diversified with only systematic risk being present...as a result i prefer to use Treynor's index (return in excess of the risk-free rate divided by portfolio's beta) instead of Sharpe's index (return in excess of the risk-free rate divided by the portfolio's returns standard deviation)..
steve, it's not specific traders i am competing with, it's their returns (in turn based on their unique systems which are actually my main focus and not the individuals)...
as long as they they generate approx 10% a month compound returns (without leverage) or 20% a month compound returns (with leverage) they are on my list...when they (i.e. their systems) start underperforming, i may have to remove them from my list...
KT and wahz have been able to do it in 2003 (KT at 10% a month compounded through end of march with NO leverage equivalent to 20% a month with FULL leverage and wahz also at 10% a month with NO leverage when his returns are adjusted for margin he sometimes utilizes)...the other two trade options and futures and have been realizing approx 20% a month compound returns through end of march according to my estimates and their records...
steve, your returns were about 8% a month compounded in 2003 using full leverage (profunds) through end of march similar to the returns of hul who also trades profunds with full leverage...these are great returns and much better than mine in 2003 and yet my principal focus is on SYSTEMS that allow for 20% a month returns on a full leverage basis...
the only vexing question in my mind is whether the fact that KT trades at the market open (once a day) and wahz trades intraday gives them a SYSTEMATIC advantage over someone who trades profunds strictly at eod...i am monitoring their trades very carefully to see if this is the case...
right now i tend to believe that KT trading results can be duplicated with eod profunds trading but i am not sure about wahz yet...
once i start trading my theories will be put into practice...i obviously dread the thought <ggg> (will it ever happen though as i seem to be only good in paper trading?...well, some people like me like to live in fantasy world forever, no? <ggg>)
four superb individuals i pay attention to:
(can't really think of anyone else...four should be enough)
Warren Buffett
worth $30 Billion...2nd richest in the world...most successful investor in the last 50 years
http://www.investorshub.com/boards/msgsearch.asp?txt2find=warren%20buffett
Bill Gross
manages the world's largest mutual fund...oversees $250 Billion in PIMCO mutual funds
http://www.investorshub.com/boards/msgsearch.asp?txt2find=bill%20gross
Stephen Roach
the only(?) economist who has been correct the last 3 years...forecasted global recession this week
http://www.investorshub.com/boards/msgsearch.asp?txt2find=stephen%20roach
George Soros
worth $7 Billion...most successful trader in the last 50 years
http://www.investorshub.com/boards/msgsearch.asp?txt2find=george%20soros
...since i follow the opinions of these four individuals i am able to "overlook" the long-term views of the other 99.99% of "experts" in all kinds of media including the threads...
so, i don't intend to turn bullish anytime in the next 10 years unless these four individuals make the bullish case first...<ggg>
well, i am still competing (in my mind only? <ggg>) with the top 4 traders i have identified: one trades futures, another one is switching from trading options to trading futures, and these two trade qqq:
http://www.geocities.com/k_tieff/e/KT-QQQ-e.htm
http://www.investorshub.com/boards/board.asp?board_id=1566
KT trades qqq only once a day at the open while wahz trades intraday...KT trades 100% of acct while for wahz 1st position equals 75% of acct and 2nd position equals another 75% of acct so that he has 75%-150% of acct invested at any given time...
i am still assuming that trading profunds eod only should be competitive with the results of KT/wahz even though entering trades at the open or intraday gives one more info/flexibility...
still, their approx. 10% a month compounded returns in 2003 for 100% position trades without margin/leverage (equivalent to 20% a month in a 2x ndx fund) are likely to be the upper limit of what is achievable trading ndx/qqq...
i have not made a single profunds trade since the posted trade closed on 3/18 with 5% loss, mostly due to my additional extensive pattern analysis...
interestingly since 3/18 neither KT nor wahz have had a positive return (including open trades)...
as i posted earlier, trading during a war is NOT optimal imo especially for overnight holds...nevertheless, i am about to resume trading this week...hopefully, the international situation will get a bit clearer soon and stop dominating all other news...
gap below + gap above = chaotic market moves:
http://stockcharts.com/def/servlet/SC.web?c=$compq,uu[r,a]daclynay[db][pd20,2][J11050778,Y]&p...
hi, since you posted about your 2002 returns and that article from your university paper, i am reading your posts carefully and following your career with great interest...could you please provide a valid link to that marketwatch article?..
also, any info about your hedge fund would be appreciated...
thanks
george
i enjoy your posts...thanks..
george
(REPOST of my post to mish)...frankly i am very surprised that not ONE but TWO key sentiment charts on vto are becoming unreliable...
first, equity and total p/c ratio has been adversely affected by monster qqq leap put positions:
http://vtoreport.com/sentiment/putcall.htm
this is best seen here:
http://www.schaeffersresearch.com/streetools/cboe_eqpcr.asp
which shows that cboe equity p/c ratio 21dma peaked around 2/24/03, a long time before the 3/12/03 bottom...
and second, the cot report has been apparently adversely affected by the exclusion of mini futures contracts:
http://vtoreport.com/sentiment/cot.htm
fortunately, this chart shows that commercials are extremely heavily short ndx and heavily short spx (as of 3/25/03):
http://www.marketswing.com/L3charts/CombinedCOT.gif
thanks mish, an excellent post...frankly i am very surprised that not ONE but TWO key sentiment charts on vto are becoming unreliable...
first, equity and total p/c ratio has been adversely affected by monster qqq leap put positions:
http://vtoreport.com/sentiment/putcall.htm
this is best seen here:
http://www.schaeffersresearch.com/streetools/cboe_eqpcr.asp
which shows that cboe equity p/c ratio 21dma peaked around 2/24/03, a long time before the 3/12/03 bottom...
and second, the cot report has been apparently adversely affected by the exclusion of mini futures contracts:
http://vtoreport.com/sentiment/cot.htm
fortunately, this chart shows that commercials are extremely heavily short ndx and heavily short spx (as of 3/25/03):
http://www.marketswing.com/L3charts/CombinedCOT.gif
well, i am really excited again as i just discovered the one macro ndx candle pattern that appears to have been highly reliable in the past 3 years...
there are obviously many macro candle patterns as listed in bulkowski's book but i have so far found that none of them are generally reliable enough to meet my personal standards used in my system...
however, very very surprisingly this one is: the rising wedge:
http://stockcharts.com/def/servlet/SC.web?c=$ndx,uu[r,a]daclynay[dc][pd20,2][J9107157,Y]&pref...
still, one has to keep in mind that in many instances one can draw consecutive rising wedges which keep getting modified as ndx moves higher and higher...
so, the rising wedge itself is NOT a valid pattern for predictive purposes...
it is only the FAILURE of a rising wedge as shown in the chart above that is a valid pattern...
now i need to do more analysis to try to incorporate this multi-day signal into my system in a manner that is consistent with the other signals and does not lower the overall system performance...
btw, the (rare) failures of this signal all occurred during the largest bear market rallies of 2000-2003 which suggests that in a bull market this signal would have limited reliability..
well, i just made a breakthrough in my system after struggling with this issue for months...i found a way to extend my 1-day trades into several-day trades using all my signals and without lowering expected system profits...
i know this seems trivial to most traders as practically all traders "follow the trend", "add to positions", "gradually build positions", "hold positions expecting follow-through", etc...
yet, until now, i was unable to justify such approaches using math/stat as being superior to 1-day trades (with 100% positions for each trades)...
essentially, i will now follow the trend as well (the trend determined by my long/short signals) as long as i don't get a signal in the opposite direction and as long as the probability of a large move against my position is minimal...
actually i did develop it first with spx yesterday...and today with ndx...the problem with ndx is its incredible volatility...
my spreadsheets with ndx and spx daily percentage changes clearly show that while "usually" ndx moves about 2-2.5 times as much as spx percentage-wise, there are dozens of instances where ndx daily moves are either several times larger or several percentage points larger than spx daily moves...
so, i am very aware of this fact as i intend to trade 100% positions (maybe not initially though)...
from the practical standpoint it is much easier for a trader to follow trends even if only for a few days as opposed to engaging in 1-day trades...i am also aware than the best traders all use this approach
(there are specifically two traders that trade qqq plus one trading options plus one trading futures that i would like to try to out-compete...well, at least they give me the reason to throw "everything i have" at this trading game)...
so, we shall see soon how it all works out, won't we?...<ggg>
george
i already posted this chart showing market tops/bottoms:
http://vtoreport.com/sentiment/putcall.htm
this chart (borrowed from Trade Hard) improves on it by showing that market tops occur approx. when the 21dma (red line) bottoms out near the blue line:
http://stockcharts.com/def/servlet/SC.web?c=$cpc,uu[r,a]daclynay[de][pd120,1!b21][j11191709,y]&am...
this chart shows well different looks of bull and bear markets:
http://stockcharts.com/def/servlet/SC.web?c=$SPX,uu[r,a]maclynay[d19910101,20030324][pd20,2!b10][iUb...
i have been re-evaluating my system for the past few days...
the objective was to adapt it so that i could also use it effectively to trade mutual funds in my long-only retirement accounts (stocks and bonds only...no short funds)...
the result is that i made almost no system modifications as far as profunds trading is concerned...with one exception...this exception is important as it opens the door to holding ndx funds for longer periods of time...it is based on a well-recognized fact that spx plays the central role and ndx only plays a
supporting role...
in short, spx determines the trend which carries ndx with it (most of the time)...granted ndx is about 2.2 times as volatile as spx on daily percentage change basis so ndx moves are normally about 2-2.5 times as large as spx moves in rallies...
yet, spx essentially is a "smoothed out" version on ndx/compq in that it moves up more steadily and when it stalls the rally is likely over/nearly over...
the conclusion: when attempting to hold a long ndx position for the duration of the rally, one should monitor spx to see if it still trending up...the reverse of the above remarks applies to shorting ndx on prolonged drops...if shorting is not feasible, bonds are an excellent substitute imo...
i have no idea
LG, one more question for you...what factors, in your opinion, accounted for extraordinary trading results of people like Richard Dennis, Ed Seykota, Paul Tudor Jones, George Soros, and others?
tia...george
how do you use these charts in your trading?
LG, that's very, very interesting, thanks...i have so far concluded that a quasi-mechanical system is the best approach based on three principles:
(1) determine a number of specific patterns and indicator readings with high probability of success for trading long or short
(2) use findings in (1) to make daily trading decisions based on visual inspection of charts
(3) keep checking if findings in (1) still retain their validity as the market evolves (for example, bull markets and bear markets seem to have different patterns that work best in each of these)
These principles could be computerized up to a point but imo a computer program would not work as there are too many variables that have to assessed in their totality...as a result i believe that any such system has to be "manual" where the trading decisions are based on visual chart inspection..
Still, i believe that chart/pattern/indicator analysis is the best use of my time so my trading can be as "automated" as possible (this is also crucial to self-impose the needed trading discipline)..
LG, do you use a "system" of sorts for trading?
george
i think he talks about non-tech sectors...i am talking about gaining 100%+ a year trading 2x ndx funds (same as qqq on full margin)...that's different imo
it sounds interesting in principle but i would like to see someone do it successfully...most of the time all tech sectors move together with ndx (even though sox and btk sometimes don't) but timing these sector trades adds another layer of complexity so i am skeptical but openminded
very true...so isn't the conclusion to quantify those probabilities a bit depending on a a given indicator, pattern, or technique in order to systematize them into a (partially) mechanical system? or, is any type of a (partially) mechanical system inferior to trading based on one's total experience in your opinion?
tia...george
steve, i am well aware of all the sectors...the only sectors of interest to me are semis and gold...with weights of 2x for ndx and 1.5 for tech sectors, tech sector returns will never appreciably exceed ndx returns...so why bother?...
still, if i saw someone trade sectors and getting higher returns or assuming less risk i might be interested...
george
some charts best showing the high degree of oversold in spx/dow at the beginning of this rally (of course, one would expect that when spx/dow are near 5 year lows):
http://stockcharts.com/def/servlet/SC.web?c=$BPOEX,uu[r,a]waclynay[df][pf][iUp14,3,3!Ub5]&pref=G
http://stockcharts.com/def/servlet/SC.web?c=$BPSPX,uu[r,a]waclynay[df][pf][iUp14,3,3!Ub5]&pref=G
http://stockcharts.com/def/servlet/SC.web?c=$BPINDU,uu[r,a]waclynay[df][pf][iUp14,3,3!Ub5]&pref=...
http://stockcharts.com/def/servlet/SC.web?c=$NYHL,uu[r,a]waclynay[df][pf][iUp14,3,3!Ub5]&pref=G
http://vtoreport.com/sentiment/putcall.htm
http://vtoreport.com/sentiment/sentiment.htm
hey wahz, no, no, NO, you got it ALL WRONG my friend...
au contraire, they need to keep up this "criminal" advice for another 300+ naz points...that's the only way to qualify for a great job in a major wall street investment bank...<GGG>
and they still would be FAR from matching the stellar record of wall street gurus that kept providing everyone with advice to buy, buy, buy, and BUY SOME MORE for the past 4000+ naz points...<GGG>
see how shrewd they really are? and after all wasn't that our friend LG who said "think like a c..." <GGGGGG>
back to studying chart patterns...sorry for incursion...
i really hope your wife and daughter are getting better
george
i agree that a successful trader would reach a position limit at some point...at that point one has to be more creative with derivatives perhaps...or trade long only in mutual funds getting 30-50% a year...
well, you nailed it...no question there is a trade size problem...i look to George Soros and Warren Buffet for clues on how to handle this problem...i also fully expect proliferation of short funds which might allow one to place large trades on the short side...i am aware that all kinds of real-life limitations exist here...and i keep thinking about it a lot (in my fantasies <ggg>)...
larry, i am not clear on this...if you gain $10,000 on top of $10,000 you had why would you then only trade 50% of your money (the original $10,000)...and then later on when you have $20,000 in gains only 1/3 of the money...and so on...
dazed and confused...<ggg>
george
yes, i am familiar with Bill Sharpe's ratio:
http://www.gsb.stanford.edu/news/headlines/sharpe_nobel.shtml
clearly, in trading profunds one doubles the ndx beta (as it is 2x ndx) so the risk-adjusted returns would have to be lowered but fundamentally that's no different than trading ndx vs spx (my spreadsheet analysis shows that in the 2000-2003 period the ndx daily change was 2.2 larger than the spx daily change on average, based on days where both indices went in the same direction and had non-zero changes which happened in about 500 out 800 trading days)
george
as usual your sharp mind shows through...well, i was trying to simplify the thing here...in most non-leveraged situations compounding is of course well accepted such as eg. mutual funds, equity portfolios, etc...
in leveraged situations it's more tricky...i would say with profunds/rydex compounding is a reasonable assumption (up to a point) but with options and futures there is definitely a size limitation in trades and also it might difficult for most traders with $ millions in capital to risk, say, 20% of total portfolio on a single options or futures trade...
i have thought about this issue quite a lot...and that is one reason is like eod trading in profunds...risk is limited by daily index moves and trade execution is not a problem either plus shorting is just as easy as going long...
so my idea is to apply mutual funds-like compounding over the years based on trading FULL portfolio of leveraged profunds funds...granted the risk is high here so one normally has to have considerably more wins than losses and considerably LARGER wins than losses...
well, if it was that easy, everyone would be ...<ggg>
george
wld, as you know the only mathematically correct way to calculate cumulative gains of a SYSTEM is by using compounding...it doesn't really matter if a particular trader is reinvesting the money as we are comparing performance of systems (at least i am)..
steve, that's correct...for example, you are 60% in uspix and 40% in urpix, uspix is up 4% (ndx is down 2%) and urpix is up 2% (spx is down 1%), then your gain is:
.6(4%)+.4(2%)= 2.4% + 0.8% = 3.2%
now, suppose you were up 20% so far this year, you will now be up
1.20 x 1.032 = 1.2384 or 23.84%
conversely, if uspix is down 4% and urpix is down 2% your gain (actually loss) is:
.6(-4%)+.4(-2%)= -3.2%
so now your gain for the year is
1.20 x 0.968 = 1.1616 or 16.16%
what's interesting mathematically here is that the difference between the 3.2% gain and the 3.2% loss is 6.4% which is approx 1/3 of the current 2003 gain of 20%...also the new 16% gain is 20% less than the old 20% gain...
this shows clearly a large negative impact of even moderate losses on one's overall performance...
george
augie, please see my earlier posts on this board which explain general principles of my system
in short: i look for ndx daily candle patterns with high probability of an up or down ndx move next day and i trade uopix/uspix based on these signals
augie, do you have a system as well?
you have a sharp mind...i'm impressed...
your friend
george