TH's buy & hedge system

[Trembling Hand]

How much longer will the BS go on??

 

[prawn_86]

How much longer will the BS go on??

Exactly.

Any posts not specifically discussing this method TH is trying to employ (the results/outcomes), will be removed.

If you wish to discuss synonyms, please start a new thread.

 

[leedskalnin]

By the way my system will probably produce another buy signal some time between here and next Monday.

has this been triggered yet ?

 

[Trembling Hand]

has this been triggered yet ?

Nope.

I wouldn’t be surprised if we make a low over the next 3 days. Very possible that I’m out of sync here because of the extra volatility (Murphy's law states first trade must always be a stinker!!). Signs are building for some sort of bounce. Trouble is with this type of action we could wallow around here next week and then we are vulnerable to further falls.

I’m not all that confident that a good bounce is set up with this action,

yet.

But no panic. I'm down 1% of capital as of this open. We take the low from yesterday to Monday and make that a stop for cautiously putting on a hedge. Sooner hopefully rather than latter it will get into sync.

 

[sails]

... (Murphy's law states first trade must always be a stinker!!)....

lol - as soon as a live trade is posted old Murphy has a habit of butting in...
Here it is described - courtesy of WayneL:
https://www.aussiestockforums.com/forums/showthread.php?p=374692&highlight=murphy's+law#post374692

Murphy's Law
Section 36, Subsection(c), paragraph(2)

Any trade posted publicly on a forum must fail. Furthermore, it shall be the only losing trade on the trader's books, and all other unposted trades on the trader's books shall be deliriously successful. Only the posted trade must fail. This law is absolute and no exceptions are allowed.

Interesting thread - thanks TH...

 

[trainspotter]

Have been watching and reading with great interest on the methodology of the spread. Amazed at -1% of capital due to the volatility around at the moment. Notice a "bounce" is building ? Got a predicted low yet TH?

 

[Trembling Hand]

Notice a "bounce" is building ? Got a predicted low yet TH?

Nope better at time than the actual price.

Should of seen my last call

 

[tech/a]

Have been watching and reading with great interest on the methodology of the spread. Amazed at -1% of capital due to the volatility around at the moment. Notice a "bounce" is building ? Got a predicted low yet TH?

Starting capital $500k
Current as of 10 mins ago $463,698

I make that 7% ish on Invested capital and 3.5% on Capital base.
I'm sure There must be an error which will be duly pointed out.
Thanks.

 

[trainspotter]

Starting capital $500k
Current as of 10 mins ago $463,698

I make that 7% ish on Invested capital and 3.5% on Capital base.
I'm sure There must be an error which will be duly pointed out.
Thanks.

Hence my comment on only -1% capital ?? Call is at 4200 for mine before upward trend. Bit more pus to be squeezed out of this boil before the "story tellers" come out to play.

 

[Trembling Hand]

Not sure where we are out. I have initial value of funds invested @ $475,036

Current value @ $461,993. Down $13,000

haven't the time to check will follow up lata.

 

[tech/a]

$475,036

The difference is here.
V's---- $500K
Clears that up.
Thanks.

 

[Sir Osisofliver]

I have a system that is longer term than my normal 1-5 min trading. Thought I might post the trading here as an ongoing record. I'll base it on a 1 mil paper trading account for this example.

Basic idea is a swing trading setup trading ASX 20 stocks but instead of selling to lock in profits and then triggering CGT or income tax the idea is to place hedges until another buy signal is triggered on the same stocks or the underlying index. Then removing the hedge to hopefully gain more upside.

No margin on the stocks but used for oppies & futs to gain the hedge positions. Will also add extra exposure from time to time in each direction if signals line up. For example if I was full invested at the recent XJO 5000 mark my system would of given a signal to hedge. Because my super duper never fail indicator gave such a "good" signal I would of went short 1.2 times my stock holding as an example.

First trades in forum tradition of all buy and holders is a hindsight from yesterday. 50% of funds invested for first trade.

Hi TH,

Thanks for displaying this strategy. I have a couple of questions.

1) You've stated your trading on a 1 million dollar paper trade account. You only have $475k invested. Why?

2) What about the other stock in the XTL - FGL SUN WDC etc? Did you simply not have a signal yet on these positions?

3) You've gone in with even position size ~ 30K in each position you have open. These positions have a weighting that does not conform to the index weighting of the XTL. Why?

I'm sure I will have more questions later.

Cheers

Sir O

 

[Trembling Hand]

Sir O

I'm sure I have already answered your questions above but,

1. I think its a dump idea to employ all funds on day 1. Whats the hurry to run head long into a draw down. Once I'm in sync I'll add more funds.

2. AXA is effected by takeover. FGL looks to be the worst of the lot, in a down trend & not really moving historically in any fashion that suits what I'm trying to do. So it got flicked. SUN & WBC - I didn't want to load up too much in fins at this point or have to follow 20 company divs etc.

3. I don't want to follow the weighted index. How can anyone outside of a fund weigh their holdings like that? Why would you hold 20% in BHP & RIO and only 2% in NCM? It may make sense in regards to hedging with an index instrument but that IMO doesn't outweigh the added risk of being hit unexpectedly by something you have an outsize holding in.

 

[Trembling Hand]

Well aint that a stinker??!! Here we are, Friday, and I'm getting my low alright just a good +200 odd points lower that I figured.

More lata.

 

[Trembling Hand]

China comes to the rescue today. They started this mess and now have been ignoring the falls the last few days by rallying into the close. Looks to be doing the same today but from their open.

Buy signal will be triggered tonight.

Hmmmm!

 

[Sir Osisofliver]

Sir O

I'm sure I have already answered your questions above but,

1. I think its a dumb idea to employ all funds on day 1. Whats the hurry to run head long into a draw down. Once I'm in sync I'll add more funds.

Fair enough, but as far as I can see this strategy is still in testing phase (live paper trading). I appreciate that you have certain elements of discretion built into your strategy based upon your extensive experience in the industry but when you come to evaluate the strategy in the future, (and assuming you use numbers to validate your strategy rather than just looking at it and saying "That'll work") doesn't it just add unnecessary work to then calculate your performance accurately?

I don't want to be seen as having a go TH. I'm genuinely curious. I'm far too OCD to evaluate a strategy or system without accurate testing data. I'm not being critical of the strategy - I like the idea behind it and will probably do some modelling based upon the concept. However the last testing that I did for a system took me nine months which included historic testing, paper trading, and live trading with a small percentage of the final funds invested. Have you done any significant backtesting or is this just an idea you are kicking around?

2. AXA is effected by takeover. FGL looks to be the worst of the lot, in a down trend & not really moving historically in any fashion that suits what I'm trying to do. So it got flicked. SUN & WBC - I didn't want to load up too much in fins at this point or have to follow 20 company divs etc.

Cool thanks

3. I don't want to follow the weighted index. How can anyone outside of a fund weigh their holdings like that? Why would you hold 20% in BHP & RIO and only 2% in NCM? It may make sense in regards to hedging with an index instrument but that IMO doesn't outweigh the added risk of being hit unexpectedly by something you have an outsize holding in.

Once again I don't want to seem critical, I'm genuinely interested in the strategy, I just have some issues with your testing methodology. Do you know what will happen in the event you match the index weighting? (I'm asking if you have modelled this against historic data) Since you are testing anyway and your price and time data will remain the same regardless of weighting, how much more difficult is it to see what the results will be with a couple of variations?

Cheers

Sir O

 

[tech/a]

I don't want to be seen as having a go TH. I'm genuinely curious. I'm far too OCD to evaluate a strategy or system without accurate testing data. I'm not being critical of the strategy - I like the idea behind it and will probably do some modelling based upon the concept. However the last testing that I did for a system took me nine months which included historic testing, paper trading, and live trading with a small percentage of the final funds invested. Have you done any significant backtesting or is this just an idea you are kicking around?

Although put another way if you read back over the posts earlier on---when I bought this up I got this among various other responses from T/H and moderators!!!!!

How much longer will the BS go on??

and

Exactly.

Any posts not specifically discussing this method TH is trying to employ (the results/outcomes), will be removed.

If you wish to discuss synonyms, please start a new thread

I too see this as an important aspect in the discussion of the method.---but seems few do!

 

[Trembling Hand]

To the weighting question I just find this a ridiculous argument. What happens if I had 10 years of data saying that weighting gives a better performance than equal $ holdings.

Does that in any way isolate me from single outsize risk over the next 10 years?

What could possibly make a trader throw out what we all know is sensible portfolio position sizing? Its a theoretical question for those who do not trade and deal with the real world of trading.


_____________________________


On the rest. I've been using this as a swing trading trigger since 05. My blog is full of real time accurate examples of how this has kept me on the right side of things since then. This is a discretionary approach and as I have ALWAYs said unless you know an approach works via backtesting a system or forward testing a discretionary approach (which has served me very well over my time in this game) you shouldn't be trading it. I have tested this for long enough to know what it looks like when its working and will know when its not.

The only thing thats relatively new to this approach is the idea of hedging rather than exiting. But it seems, ironically, that the only people that are allowed to bring up or put forward a discretionary approaches are the system traders who think they are the ducks guts.

 

[tech/a]

But it seems, ironically, that the only people that are allowed to bring up or put forward a discretionary approaches are the system traders who think they are the ducks guts.

T/H thats not true from my perspective--
Although I am a duck.

I believe---and your going to find out---that the crux of out performance lies in the ability to apply the filter in a manner to increase return on the portfolio as against buy and hold or buy and exit.

There are a million other things you could add but the vanilla question and concept is what this thread is about---the rest even the above is discussion----and relevent---in my view---without detracting from the presentation or tracking of the results.

This forward test could take years.

 

[Sir Osisofliver]

I'm trying hard not to argue TH - please do not take what I say as confrontational or degraging to your experience or existing methodology in any way. I wish to understand and perhaps even assist with suggestions out of a genuine desire to see if the strategy a) works and b) can be improved.

I am a very firm believer in using what works - regardless of what others think. I would be a massive hypocrit if told you that what you are doing isn't they way I would do it...ergo you are wrong. Tone is hard to convey in a text based medium so please, I truly am not having a go at you, just wishing to have a deep comprehension of process.

Having said the above....

When I am designing something I try not to use preconceived ideas. I am distrustful of the statement "everyone knows". To give you some background I currently have a long-term portfolio that is based on blue chip shares from the ASX 200 with over ten years of history. Whilst I do not hold 200 stocks in that portfolio, it is balanced against the ASX200 index - requiring a weighting that you've stated is ridiculous...yet it meets the goals that I have set for that portfolio. It works very well for what I am trying to achieve.

You said the following

To the weighting question I just find this a ridiculous argument. What happens if I had 10 years of data saying that weighting gives a better performance than equal $ holdings.

Does that in any way isolate me from single outsize risk over the next 10 years?

What could possibly make a trader throw out what we all know is sensible portfolio position sizing? Its a theoretical question for those who do not trade and deal with the real world of trading.

The answer to that question from my perspective is...perhaps. It depends upon the power law and level of return that your strategy operates under. If your system compounds gains, then it only takes very small gains over a ten year period to make it more than worthwhile to expose yourself to a single outsize risk depending upon the frequency of that event. Unfortunately without data it is a moot question.

You've mentioned trading, but what I am seeing is not a "trading" system as I would normally define that. It's kind of a hybrid. You are buying and holding the core portfolio. You are not trading the core portfolio, seeking instead to profit in other means, so the question to me is why are you applying traders rules rather than fund manager rules? Is it of benefit to do so?

On the rest. I've been using this as a swing trading trigger since 05. My blog is full of real time accurate examples of how this has kept me on the right side of things since then. This is a discretionary approach and as I have ALWAYs said unless you know an approach works via backtesting a system or forward testing a discretionary approach (which has served me very well over my time in this game) you shouldn't be trading it. I have tested this for long enough to know what it looks like when its working and will know when its not.

The only thing thats relatively new to this approach is the idea of hedging rather than exiting. But it seems, ironically, that the only people that are allowed to bring up or put forward a discretionary approaches are the system traders who think they are the ducks guts.

*wipes off the duck*

Cheers

Sir O