U.S. Portfolio

[Duarte]

You sold at your exits as you had intended, so I would say that things went as planned. The market has gone sideways for the past two weeks and the increase in volatility has triggered many of your exit stops. This doesn't mean that you have to adjust your strategy. Your trend following or momentum strategy will work when the market moves again. It's important that you are still trading when this happens or you will miss out again.

My initial impressions are that you need to get into the move earlier using break-out tactics or buy the pullbacks. Once the trade moves in your favour you will be able to ride out future sideways movement and still be in when the price moves higher. I think your entries are late and this is placing your trades under pressure as you use tight exit stops.

Trading is mainly risk management. Manage your risks well and you will be around long enough to profit from favourable conditions. One aspect of risk management is understanding the correlations of your selected markets (stocks). I've already mentioned that when the market goes down the volatility rises and the XIV will drop quickly. You have also traded multiple ETFs that are highly correlated to the market direction and hence to each other (XIV, ERX, UPRO). You will profit from all or none depending on the immediate movement of the SP500.

If the market goes down do you have any plans to trade short? Now might be the time to hold a mixture of both longs and shorts in accordance with your interpretation of the charts.

Thank you for your message.
I agree with you, but I also think that I opened too many positions.
If the market falls I will buy inverse ETFs, but I do not know when I will.

 

[Duarte]

Here is the current portfolio:

A happy Easter to everyone!

 

[Duarte]

I discovered that there was a rounding problem in EXCEL sheet.

To calculate the Return I used the following formula: (Quantity*Close Price)-(Money), but to avoid the rounding problem I'm going to use the following formula: (Quantity*Close Price)-(Quantity*Buy Price).

The rounding problem has very little effect on portfolio but I have also decided to fix the previous trades.

 

[Duarte]

Here is a current portfolio update:

 

[Duarte]

I realized that I get stopped out to many times.
The reason this happened it was because I traded a lot.
I will trade less, if I trade less, I get stopped out less, and my broker will get less commission from me.
At this moment, my technical indicators are mixed, so I'll not risk a lot.

 

[peter2]

I realized that I get stopped out to many times.

I agree with you.

The reason this happened it was because I traded a lot.

This is not the reason you were stopped out too often. Basically the market stalled and many people decided to take profit after the recent bullish rally. This caused an increase in volatility and the profit taking caused prices to fall slightly. This small price pullback triggered many of your sell stops. Your current trade management does not allow this to happen and you had to close many trades. You should consider how often you see small pullbacks in an up trend and you should modify your management style to account for them.

On your charts you mark the observation that price has gone past a recent high (break out). I notice that you buy many days later. Do you think it might be better to buy the break-out or on the very next day after the break-out? What is your reason for buying much later?

All your charts show a very strong price trend. If you agree that an up trend consists of higher highs and higher lows then you must allow price to make another higher low. This means that your trade management must allow price to pullback and make a higher low. Your trade mgt style must allow you to get the price movements that you need to reach your objectives. I don't know what these are so all my suggestions are of a general nature.

If you are concerned by the total amount of your losses at this early stage then you need to learn about managing your portfolio heat (total open risk). Including this to the money mgt part of your trading plan will help you manage the number of open trades and keep the amount of open risk within your comfort zone.

I think you should stop trading or start only a few trades while considering these aspects I've mentioned.
(i) Entries can be improved. Are you trading break-outs or not?
(ii) Placement of your initial stop loss (size).
(iii) Trade management style, method of your trailing stop once it's above break-even.
(iv) Risk per trade (depends on the size of your initial SL, but also your equal size position sizing model)
(v) Portfolio heat (total open risk).

I hope you consider my suggestions carefully as I'm trying to be helpful.

 

[cynic]

At the risk of being off topic, I'd like to offer an insight into the potential impact of word/phrase choice when offering advice.

Please consider the following two examples (i & ii) of the various ways in which similar items of advice might be worded:

(i) When proffering advice one shouldn't be excessive in the use of phrases containing words like "should" or "shouldn't" as their arrogant and dictatorial nature always antagonises the recipient and provokes a dismissive and/or rebellious response. You should never tell the recipient what they must or mustn't do as these terms always come across as judicious and offensive. One must always exercise care in the use of absolute words such as "never" and "always" as failure to do so will result in the creation of inappropriate generalisations.


(ii) When proffering advice it is often helpful to avoid terminology that has the potential to belittle or invalidate a recipient's personal efforts.
Substitution of absolute wording with more amenable alternatives can often result in advice that is more palatable to the recipient. Whereas one might want to use the word "should" one could substitute the word "could", this may result in a greater sense of empowerment on the part of the advice recipient. If one wishes to use words like "always","never" and "will" one might consider substituting softer terms such as "often","seldom" and "may". Instead of phrases like "must do..." one could consider substitution with the phrase "usually do..." (or perhaps "might consider doing...").Such substitutions might serve to reduce the risk of unintended generalisations.

Which of the above (i & ii) is more dictatorial and arrogant? Which is more likely to antaonise the target audience? Which has the better chance of being graciously received and considered?

Whilst contemplating the answers to these questions, one might like to consider how this concept may also have a bearing on one's trading performance.

P.S. Like other posters to this thread, I'm trying to be helpful.

 

[Duarte]

I compared the previous period with the current period, and I came to the conclusion that the S&P500 after reaches its resistance line (key value: 1575) can follow the path 1 or 2, in the first chart.

The two paths remain open as long as the S&P 500 remains below to 1625.

If, over the next two months, the S&P 500 remains below to 1575, I think that the S&P 500 will follow the path 1, but if the S&P500 rises above 1625, I think that the S&P 500 will follow the path 2.

I will continue to evaluate on a monthly basis the possibility of happening one of the paths.

 

[Duarte]

peter2 and Cynic:

Thank you very much for your comments and good cooperation.

I will attempt to reply to a few of the questions.

I'm not worried because I get stopped out.
I think that I opened too many positions, and because of this, I get stopped out too many times.
When I started the portfolio I bought DLPH, RWT, EXH, ERX, XIV, UPRO, and EDC.
It would have been better if I only had bought 3 stocks, and not 7. If it were so, I would be stopped out only 3 times, and not 7.

In these particular stocks or ETFs, I have not waited for the breakout, and it wasn't because of this that I bought. This was circumstantial.

I just started the portfolio a few weeks ago, but this does not mean that I don’t have trading experience.
It will take some time to see the results.

At this moment, I look more closely for the big picture, and as I wrote before, my technical indicators are mixed, so I'll not risk a lot.

I am not in a hurry at all. I remain calm and I trust myself. Stock market trading is a marathon, not a sprint.

 

[Duarte]

Listed below is one closed trade:

 

[Duarte]

Here you can see the portfolio update:

I now wait for the next buy signal of my technical indicators.

 

[Duarte]

The U.S market remains very strong. Looking at the monthly chart of the S&P 500 Index we note that the S&P 500 is already above the key level of 1575. As I have written before, if it continues above of 1575 in the next two months, that would be very positive in the long term.
However, this period is still one and a half months away.

This week the CONSENSUS Bullish Sentiment Index * was displaying very bullish sentiment with 77%bulls. In rather stark contrast the AAII Investor Sentiment (American Association of Individual Investors) ** reflects very bearish sentiment, with 19,30% bulls and 54% bears, which is surprising since historically, when the market trend is up and new highs are being made, the number of bulls tends to increase rather than decrease.


These AAII Investor Sentiment numbers are typically seen at market bottoms, not during price advances. The traditional interpretation of sentiment readings is contrarian, meaning that AAII Investor Sentiment is giving a bullish signal, and also suggests that Investors are trying to guess a top. We can also consider that investor confidence is lower than it ought to be in the context of a rally, but this is not the traditional interpretation of sentiment readings.

In conclusion, the number of bears suggests that the market will rise but my technical indicators for U.S. market still show mixed signals, so I will not put much money in the stock market. I, however, will follow the market developments next week closely and maybe I will buy one or two shares or ETFs.


(* Sentiment data is provided courtesy of the Consensus Inc. (Consensus - National Futures and Financial Investment Newspaper). The CONSENSUS Bullish Sentiment of Market Opinion shows the positions and attitudes of professional brokers and advisors. Polling is conducted on Consensus web site with a Thursday cutoff and Friday release. The survey is available on Saturday for free on the Barrons web site at Barron's Market Lab Table - Barrons.com).

(** Sentiment data is provided courtesy of the American Association of Individual Investors (AAII: The American Association of Individual Investors). Polling is conducted on the AAII web site with a Wednesday cutoff and Thursday release).

 

[peter2]

Duarte: Good to see you back, I thought we had lost you. While you were away and waiting for your "next buy" signal of your technical indicators, you missed out on the continuation of a very strong trend up. The trend is still up and still strong. I know many indicators are signalling "overbought" and sentiment is looking for a pullback. It's been like this for most of the swing up. Are you trading price, indicators or sentiment?

My systems primarily depend on the market trend (Up = buy) and the indicators/sentiment tell me how much (indicators overbought and sentiment is uncertain = invest 60 - 80% or start a few shorts in the weak sectors (like gold)). For me the biggest risk when the trend is up and strong (like now) is not being invested and I miss out on the opportunity.

It's good that you are posting your thoughts as you can review them and see what works. You can then use the feedback to improve your system. Indicators (including sentiment numbers) should add to our edge, not distract us from trading.

 

[Duarte]

Peter2: Easier said than done, isn't it?
I have since several months ago a leveraged long position in the S&P 500 and shows substantial profit.
I also have a long-term market timer portfolio in another forum, but in this portfolio I use the technical indicators in a different manner.
Don't worry. I will not leave the forum
If you like, you can create a topic to share your market signals and then you can use the feedback to improve your system.

 

[Duarte]

I will buy shares of Kilroy Realty: (NYSE: KRC).

 

[Duarte]

See annotated chart:

 

[Duarte]

The following is the current portfolio:

 

[cynic]

...If you like, you can create a topic to share your market signals and then you can use the feedback to improve your system.

+1

I distinctly recall having offered similar advice to a forthrightly critical poster in another thread. Regretfully said poster chose not to accommodate the suggestion on that occasion. Perhaps this time will be different! (But I won't be holding my breath!)

 

[Duarte]

The following is the market timer portfolio.

 

[Duarte]

The following is the market timer portfolio chart.
The chart is updated on a weekly basis.