The next bit I am laying with is to trade with the trend.
There are various timeframes as well as various frames of reference to apply this idea. My spread trading has little to do with trend trading and now that I have a trend neutral plan in place that is proving to be profitable, easy to execute and track I am moving into trading with the trend to boost potential profits in other areas.
Timeframes are going to be daily weekly and monthly even though I do not plan on using weekly or monthly charts. I will be running longer time frames just to be sure of established trends and possible trend reversals.
Other frames of reference include using the S&P 500 as an overall gauge of market sentiment while drilling down to the sector level to look for the various sector trends that are driving the overall market. In an SPX down trend the best thing to do is short the poorest performing sector and in an up trend long on the best performing sector.
Within this frame of reference the next step is to drill down one more level, or two if you have that inclination, to the ETFs. Same rules apply as in an SPX downtrend, pick the poorest sector and the poorest ETF within the sector and, perhaps, pick the poorest stocks that make up the ETF. In an up trend of the SPX pick the best sector, the best ETF within the sector and perhaps again the best stock within that ETF.
How to determine which is the best and poorest is not rocket science either and there are many ways to manage this. Dual linear regression applied to the respective charts could be used, Oscillators to look for over sold/bought conditions under varied timeframes, P&F charted performance.
The Investors Intelligence site is a good cue to work from though. The Bullish Percent Index comparison for the sectors works as seen by the correlation with the BP and SPX charts. This is the CTP part as this represents the over sold/bought indication. There is no identical comparative setup for ETFs but going over to Stockcharts.com and looking at the Performance Charting (this is still free and works exactly the same as if I had a paid subscription). I used this when playing with the Pankin method to compare ETFs in sectors before. I can place 10 symbols onto the chart and it compares the relative performance of all 10. I can look at the line chart of a bar chart, there is a cool tool to slide to change the timeframe and period. Esignal can point me to the top ten performers in the last 12 month period and Stockcharts can apply those top ten against each other in the various timeframes to choose which one might be best to trade at the time.
Mentioning Pankin reminds me that this is really just a modification of his strategy that worked for him for many years. While the idea was unique then it is much easier to see and apply now as the online charting and data available is far far superior to what was available to traders back in the day.
Jeff.
Questrade, My direct access discount broker.
Showing posts with label CTP. Show all posts
Showing posts with label CTP. Show all posts
Saturday, December 5, 2009
New service trial and the Bullish Percent Index
I signed up for an information service yesterday, Investors Intelligence. This was one of the gems that was mentioned in the program that I mentioned in the last post.
While it does not replace a decent charting package, too bad, it gives great information on ETFs and stocks with regard to some of the things that I am likely to need for my CTP-O plan.
I had hoped that they might have free access to some of this but they really don't. I could generate my own studies as long as I could find the index charts that I would need. I can do a relative performance comparison on a list of ETFs through Esignal to find performers based on MTD, QTD and YTD as well as last 12 months within the sectors to determine which one has been a best performer for those periods. Running the sectors against each other for the same comparison would point to the one that should be looked at.
Using the CTP approach (Counter Trend Positioning) I could just enter the best performing ETF for the sector in the most over sold position... but that would be too simple.
Some time ago I was looking at the Bullish Percent Index for the overall market and comparing that against the performance of the market. It was not hard to notice the correlation between the two.
The S&P500 chart for the last 3 years:
While it does not replace a decent charting package, too bad, it gives great information on ETFs and stocks with regard to some of the things that I am likely to need for my CTP-O plan.
I had hoped that they might have free access to some of this but they really don't. I could generate my own studies as long as I could find the index charts that I would need. I can do a relative performance comparison on a list of ETFs through Esignal to find performers based on MTD, QTD and YTD as well as last 12 months within the sectors to determine which one has been a best performer for those periods. Running the sectors against each other for the same comparison would point to the one that should be looked at.
Using the CTP approach (Counter Trend Positioning) I could just enter the best performing ETF for the sector in the most over sold position... but that would be too simple.
Some time ago I was looking at the Bullish Percent Index for the overall market and comparing that against the performance of the market. It was not hard to notice the correlation between the two.
The S&P500 chart for the last 3 years:
The Bullish Percent Index for the S&P 500 for the past three years:
Looking at the correlations I noted that during the downtrend the BP index peaks closely matched the rally peaks in the SPX. The meltdown in latter 2008 is out of synch and can hardly be used for any meaningful study as everything went out the window for a couple of months.
Even before the uptrend was established the BP index troughs were corresponding to the pullbacks in the SPX. These COULD have been traded profitably based solely on this and using the SPY as a proxy for the index but I tried to tie it into trading sector stocks and it got too complicated...that was one reason why I dropped the study and never got to really trying it out.
The reason I go over this is due to a very useful tool at Investors Intelligence which is a sector bell curve of Bullish Percent Indices. This shows where each is with respect to the index percent value so it is easy to tell where the sector is with respect to the underlying stocks.
I should mention that the index is made up of the percentage of stocks assigned to the sector that are in a bullish phase based solely upon the P&F charting. This is dead simple and ties the P&F charts into the plan nicely and makes a good point to end this post...in the interest of trying to keep these a little shorter for easier back referencing for me.
Jeff.
Monday, February 9, 2009
Alternate to day trading blog
I started a blog for the purpose of tracking a small project I have in mind for medium term trading. Earlier in last year I started such a plan, Counter Trend Positioning, in this blog and it has morphed into what you read now. I do plan on doing some longer term trading and I figured this is a method to get my bearings again.
Essentially what that plan had was a smidge of technical indicators, some trend plotting and some rather aggressive position trading with both long and short positions being used. This time I am going to apply the pivot points in a purely hypothetical setting...no real trades...but still making "real time" decisions for entry and exit orders. Ultimately this is aimed at making these trades in future once I have a capital base to work with.
It is not so much as Counter Trend as using pivots to enter on the extreme peaks and valleys and at key support and resistance levels much in the same manner as my daytrading plan is now...on a longer term time line.
If any are interested here is the link to my Medium Term Trading Blog
Jeff.
Essentially what that plan had was a smidge of technical indicators, some trend plotting and some rather aggressive position trading with both long and short positions being used. This time I am going to apply the pivot points in a purely hypothetical setting...no real trades...but still making "real time" decisions for entry and exit orders. Ultimately this is aimed at making these trades in future once I have a capital base to work with.
It is not so much as Counter Trend as using pivots to enter on the extreme peaks and valleys and at key support and resistance levels much in the same manner as my daytrading plan is now...on a longer term time line.
If any are interested here is the link to my Medium Term Trading Blog
Jeff.
Tuesday, January 6, 2009
Crude Oil, HOU and HOD ETFs
Someone asked me about investing in oil the other day. I am not going to be doing so but I do watch other charts and markets seeing as I have to buy gas and it affects almost every facet of life somehow. So one method of offsetting the additional costs of oil induced increases is to own oil stocks that pay when the oil price is high. Dividends are nice but not necessary...in my view.
So, this brings me around to another of the Exchange Traded Funds (ETF).
The short story is that these funds track the sector, or commodity they are named for.
Horizons BetaPro NYMEX Crude Oil Bull Plus ETF... or HOU.TO.
This is a fairly new fund so the 200sma is just getting going, les thana year old. I circled the nicest positive divergence you could ask for. The price is levelling out and the MACD has been steadily rising since October. Personally I would give this one another chance for a pullback before buying in but if a little risk is in the books then it could be purchased now too. Perhaps scale into the investment.
So, this brings me around to another of the Exchange Traded Funds (ETF).
The short story is that these funds track the sector, or commodity they are named for.
Horizons BetaPro NYMEX Crude Oil Bull Plus ETF... or HOU.TO.
This is a fairly new fund so the 200sma is just getting going, les thana year old. I circled the nicest positive divergence you could ask for. The price is levelling out and the MACD has been steadily rising since October. Personally I would give this one another chance for a pullback before buying in but if a little risk is in the books then it could be purchased now too. Perhaps scale into the investment.The nice thing about this is there is little fear of the underlying company doing anything weird (Enron anyone?) as there is no underlying company.
Here is a zoom in of the main activity lately...
It looks to me like $10 is about as low as it can go...but that certainly is not a guarantee. Once the red 30sma crosses the blue 50sma I would consider it back in the bullish territory...by then the price could be back up to $20 quite easily. The trick is whether it will stay up or not. As a position trader I would not wait quite that long anyway...one more low to see where the support really is then it would be time to read the chart again. Anything under $10 would be worth the risk for a small position.
This brings back memories of the CTP strategy.
As I will be day trading my full account I don't even have room to sneak 100 shares of this ETF or I just might...although if it drops to $10 even, again, it would certainly be doable, I'd make it work for that.
Here is the inverse ETF, Horizons BetaPro NYMEX Crude Oil Bear Plus ETF... or HOD.TO
This is for those who want to play against oil climbing.
Jeff.
Saturday, November 29, 2008
Just some month end odds
I went back to check my September through November trading, both fake and real combined, and found only 18 days that I traded. I tried a few things in there that were outside of my rule book so I shouldn't expect anything great, in fact one month had an overall 10% or so loss due to some dinking around.
Even after that I saw a 0.73% daily average net gain over the period, total of 13.14%. I don't consider this a great return as my goal for the same period would have been 48% had I been trading four of five days per week for the three months. Although my goal is 4% per week, it is really 1% per day first...so I am only really off by less than 5%, not too bad.
As much as I don't like to shed too rosy a light on my numbers I think it fair to show the reality of it in good light at least. I could eliminate my dinking and see numbers that exceed my goal neatly...but the trades are the trades real or fake at this point.
No matter what my circumstance right now I consider myself in good shape compared to the classic buy and holders as my cash position is doing better than the majority of portfolios for the last while. I always believe that the proof is in the pudding so I hope to be able to apply my trading in the coming weeks.
On a small side note, AEM price is climbing a bit and I sincerely hope that it does not cross the $50 mark before January as the Tax Free Savings Account limit will be $5000 and I like to stick with 100 share trades, even lots work better, and the TFSA will be a cash account...so if the price is higher than $50 I will have to pare down the trade size to stay under the $5K cash limit, no margin use with this account. Bummer.
I may consider switching to a financial to stay under this $50 self imposed restriction, CM perhaps. I have tracked it in the past.
Another side note, my old CTP (Counter Trend Positioning) plan would have done very well over the last while due to the nice drops in some of the stock that I was tracking. Quite a few of them are down well over 50% or more now and look like they might be in a position to start heading back up if the companies are still sound. I will probably start back into it once I get my Day trading working well and have a balance that exceeds my trade sizes by a healthy margin.
I know, I am doing this backwards to common thinking. DTing is supposed to compose only 10% of your portfolio. Seeing as I do not count my RRSP account in this, stinky mutual funds, I am DTing 100% of my account and may use smaller percentages for longer term trading, followed by old school investing. I have a few drips but I do not plan on contributing to them too much until I get a positive cashflow in my account.
Jeff.
Even after that I saw a 0.73% daily average net gain over the period, total of 13.14%. I don't consider this a great return as my goal for the same period would have been 48% had I been trading four of five days per week for the three months. Although my goal is 4% per week, it is really 1% per day first...so I am only really off by less than 5%, not too bad.
As much as I don't like to shed too rosy a light on my numbers I think it fair to show the reality of it in good light at least. I could eliminate my dinking and see numbers that exceed my goal neatly...but the trades are the trades real or fake at this point.
No matter what my circumstance right now I consider myself in good shape compared to the classic buy and holders as my cash position is doing better than the majority of portfolios for the last while. I always believe that the proof is in the pudding so I hope to be able to apply my trading in the coming weeks.
On a small side note, AEM price is climbing a bit and I sincerely hope that it does not cross the $50 mark before January as the Tax Free Savings Account limit will be $5000 and I like to stick with 100 share trades, even lots work better, and the TFSA will be a cash account...so if the price is higher than $50 I will have to pare down the trade size to stay under the $5K cash limit, no margin use with this account. Bummer.
I may consider switching to a financial to stay under this $50 self imposed restriction, CM perhaps. I have tracked it in the past.
Another side note, my old CTP (Counter Trend Positioning) plan would have done very well over the last while due to the nice drops in some of the stock that I was tracking. Quite a few of them are down well over 50% or more now and look like they might be in a position to start heading back up if the companies are still sound. I will probably start back into it once I get my Day trading working well and have a balance that exceeds my trade sizes by a healthy margin.
I know, I am doing this backwards to common thinking. DTing is supposed to compose only 10% of your portfolio. Seeing as I do not count my RRSP account in this, stinky mutual funds, I am DTing 100% of my account and may use smaller percentages for longer term trading, followed by old school investing. I have a few drips but I do not plan on contributing to them too much until I get a positive cashflow in my account.
Jeff.
Monday, May 26, 2008
Counter Trend Positioning (CTP) - breakout
I did some thinking on the weekend...yardwork does that to me...I managed to get this into a presentable form.
Keeping in mind that CTP is, as far as I can tell, my own trading style as I haven't seen it anywhere yet and I have read a lot technical blogs, sites and as much as I could glean from services and books while browsing. It is a combination of styles that I have seen though. I find some swing trading, position trading, some level of buy and hold, trading for targets....maybe some others along the lines of technical trading with indicators and patterns. I liked the idea of mixing it up to come up with one general strategy that can work in all market conditions from a select number of stocks.
I went over my goals for this particular strategy.
1) not lose money overall
2) make some target profits
3) be in a really good position when the price breaks in your favour
1 leads to 2 which leads to 3.
Counter Trend Positioning broken down.
Consider that a trend can be one of four types...keeping it simple.
1) the uptrend, everyone's favourite, price is moving up
2) the downtrend, everyone's bane, I like them though...it's the whole basis for CTP
3) the consolidation...mostly horizontal, there are a few styles but that doesn't matter right now
4) the "churn", no real trend the price seems to follow no real pattern at all
Consider also the old mantra "buy low and sell high".
So, the best place to be is buying a stock when it's price is the lowest. That would mean buying a stock at the very end of a downtrend. So how do you tell when a stock is at it's lowest or the trend is reversing? The easy answer is that you can't with any real accuracy. This is where CTP comes into play.
THE DOWNTREND (over simplified)
I've marked the chart as follows: (now that I look at it it looks like a kid's drawing with crayons...track ball drawing is fun.)
black squiggly line - the price over time
blue lines - trend upper and lower boundaries
red circles - buy zone
green circles - short sell zone
So the plan would go something like this.
1 = short after the peak
2 = cover near the bottom then buy after the bottom bounces (this is the Counter trend part)
3 = sell after the peak using a stop as an exit strategy (the after is critical...more on that another time) then short after the peak
4 = cover near the bottom then buy after the bottom bounces
5 = sell after the peak again, followed by another short sell
6 = Cover near the bottom then buy after the bottom
The price passes the upper trend line at BRK (= break) and planning on selling AFTER this possible peak IF the price had dropped leaves me in the stock as it breaks the trend up and does not drop back yet.
7 = this peak establishes one of the first points of the upper new trend line I will do nothing as I want to stay in
8 = buy more shares here...margin may be used here under certain circumstances.
The period between 6, 7 and 8 is where all the fun is and it can take a number of forms. This rough example is a clean break and determining where #8 is going to be is a whole other topic. Suffice it so say that the gains realized from 1 to 6 should result in a good cash position where the risk tolerance can be increased in order to give the price movement more room to help the break play stick.
Keep in mind that 1 to 8 might take a year so there isn't a lot of trading going on until there are a few stocks in the portfolio that are being managed.
This is the Positioning part of CTP. I have effectively met all of my three primary goals without having to try to time the trend reversal by just being there each time a trend change could occur. From the example and a bit from my actual trading:
1) not lose money overall
This is only one stock example as the overall is really aimed at the entire portfolio, but if half of the stocks do this good a loss isn't in the books. The startup is the risky part while things get going and I am trying to establish excess cash from the initial target trades. Small loss allowances, tight stop loss settings and small sized trades. I set some quantitative goals which I don't really expect to be met in the first few months...but it gives me something to aim for. My first trades were mis-aimed as I jumped the gun on the final plan by a few weeks...but I still learned and I am still ahead so I am satisfied.
2) make some target profits
In the example I have made money with the short/cover buy/sell trades along the way, (the individual initial targets). In m ytrading I have made some and lost some but I am ahead overall and every time a stock gets sold for a small loss or profit I replace it with another and put the recently traded stock back in my watch list for the next cycle...it doesn't get dropped only because I may have set my stop wrong.
3) be in a really good position when the price breaks in your favour
Well, in the example, the price broke and the next steps would be to continue buying as each new low is made in the new trend thereby adding to the position and increasing the rate of gains after each new addition. At this point the strategy is to remain in the stock as long as the trend up continues. If the stock pays dividends, bonus money, if the stock splits, even better. This leads to the comfortable situation of being able to let the stop ride considerably lower than the new lower trend line which leaves the stock price lots of room to swing and continue moving up while buying at each low. My stop will sell the stock automatically when it breaks the trend and heads back down.
Then you can start the process all over again to catch the next bottom.
JD.
Keeping in mind that CTP is, as far as I can tell, my own trading style as I haven't seen it anywhere yet and I have read a lot technical blogs, sites and as much as I could glean from services and books while browsing. It is a combination of styles that I have seen though. I find some swing trading, position trading, some level of buy and hold, trading for targets....maybe some others along the lines of technical trading with indicators and patterns. I liked the idea of mixing it up to come up with one general strategy that can work in all market conditions from a select number of stocks.
I went over my goals for this particular strategy.
1) not lose money overall
2) make some target profits
3) be in a really good position when the price breaks in your favour
1 leads to 2 which leads to 3.
Counter Trend Positioning broken down.
Consider that a trend can be one of four types...keeping it simple.
1) the uptrend, everyone's favourite, price is moving up
2) the downtrend, everyone's bane, I like them though...it's the whole basis for CTP
3) the consolidation...mostly horizontal, there are a few styles but that doesn't matter right now
4) the "churn", no real trend the price seems to follow no real pattern at all
Consider also the old mantra "buy low and sell high".
So, the best place to be is buying a stock when it's price is the lowest. That would mean buying a stock at the very end of a downtrend. So how do you tell when a stock is at it's lowest or the trend is reversing? The easy answer is that you can't with any real accuracy. This is where CTP comes into play.
THE DOWNTREND (over simplified)
I've marked the chart as follows: (now that I look at it it looks like a kid's drawing with crayons...track ball drawing is fun.)
black squiggly line - the price over time
blue lines - trend upper and lower boundaries
red circles - buy zone
green circles - short sell zone
So the plan would go something like this.
1 = short after the peak
2 = cover near the bottom then buy after the bottom bounces (this is the Counter trend part)
3 = sell after the peak using a stop as an exit strategy (the after is critical...more on that another time) then short after the peak
4 = cover near the bottom then buy after the bottom bounces
5 = sell after the peak again, followed by another short sell
6 = Cover near the bottom then buy after the bottom
The price passes the upper trend line at BRK (= break) and planning on selling AFTER this possible peak IF the price had dropped leaves me in the stock as it breaks the trend up and does not drop back yet.
7 = this peak establishes one of the first points of the upper new trend line I will do nothing as I want to stay in
8 = buy more shares here...margin may be used here under certain circumstances.
The period between 6, 7 and 8 is where all the fun is and it can take a number of forms. This rough example is a clean break and determining where #8 is going to be is a whole other topic. Suffice it so say that the gains realized from 1 to 6 should result in a good cash position where the risk tolerance can be increased in order to give the price movement more room to help the break play stick.
Keep in mind that 1 to 8 might take a year so there isn't a lot of trading going on until there are a few stocks in the portfolio that are being managed.
This is the Positioning part of CTP. I have effectively met all of my three primary goals without having to try to time the trend reversal by just being there each time a trend change could occur. From the example and a bit from my actual trading:
1) not lose money overall
This is only one stock example as the overall is really aimed at the entire portfolio, but if half of the stocks do this good a loss isn't in the books. The startup is the risky part while things get going and I am trying to establish excess cash from the initial target trades. Small loss allowances, tight stop loss settings and small sized trades. I set some quantitative goals which I don't really expect to be met in the first few months...but it gives me something to aim for. My first trades were mis-aimed as I jumped the gun on the final plan by a few weeks...but I still learned and I am still ahead so I am satisfied.
2) make some target profits
In the example I have made money with the short/cover buy/sell trades along the way, (the individual initial targets). In m ytrading I have made some and lost some but I am ahead overall and every time a stock gets sold for a small loss or profit I replace it with another and put the recently traded stock back in my watch list for the next cycle...it doesn't get dropped only because I may have set my stop wrong.
3) be in a really good position when the price breaks in your favour
Well, in the example, the price broke and the next steps would be to continue buying as each new low is made in the new trend thereby adding to the position and increasing the rate of gains after each new addition. At this point the strategy is to remain in the stock as long as the trend up continues. If the stock pays dividends, bonus money, if the stock splits, even better. This leads to the comfortable situation of being able to let the stop ride considerably lower than the new lower trend line which leaves the stock price lots of room to swing and continue moving up while buying at each low. My stop will sell the stock automatically when it breaks the trend and heads back down.
Then you can start the process all over again to catch the next bottom.
JD.
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