Did so at the close yesterday, but didn’t have time to post. Yesterday was, in a way, a remarkable day for me, since it was one of the few discretionary trading decisions I got right this year. The close the day before yesterday was very close to the point between long and short in my system. As a result, the actual close on Interactive Brokers left me in my short position, while the official close suggested a long position (there is always some variation among data providers, and even from the same provider). The winning decision was to stay in the “wrong” position for the day.
The strategy implementation was posted on the Systematic Investor Blog. The December allocation is 100% SPY. The closed EFA position yielded 0.5% gain in November.
The DVI indicator is a well-known indicator, created by David Varadi from CSS Analytics. It was introduced in 2009 as a good predictor for the S&P 500 over the past 30 years. Its performance on the S&P 500 has been studied in the blogosphere comprehensively. None of these studies, however, contained everything I was looking for, and since I have a few indicators on my todo list, I decided to use the DVI to create an approach for analyzing indicators.
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This switch to the short side was, as already mentioned, delayed by a day. The shortened sessions and the prevailing holiday mood made me too lazy for anything but a single market-on-close order. Staying in the wrong position was wrong today – ended up with a loss versus a small to decent gain had I traded at almost any other time during the day. Well, nothing new this year – getting most discretionary decisions wrong.
It happens – was quite busy yesterday (you know, work gets in the way of trading sometimes) and since it was only a day since the long position was opened, I didn’t pay enough attention to the signal and missed to switch to a short at the close. The reason to bring it up here, is that this situation does happen for various valid reasons (outages, software bugs, etc) and one needs to account for it.
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Flipped my position at the today’s close. The SPY short on the open resulted in a small gain, but still, as it’s the case with all “discretionary” decisions this year, taking the positions at the open was wrong – my ARMA strategy “compensated” for the SPY gains.
Finally back to trading. According to my system, I should have been short the SPY today. Eager to put a trade (yeah, I have those moments too), I put a limit order to go short the SPY using the yesterday’s close as a limit (in other words, taking the short only at a better price than I would have had at the yesterday’s close). It got filled right at the open. So far so good.
Another losing short trade, and a pretty bad one at that, but it’s also vacation time, so I simply closed my trading positions and am out until I return. With my luck (and one is much better off with some when trading) this year, my strategies are probably going to roar while I am out. Let’s see.
The original strategy implementation was posted on the Systematic Investor Blog.
The November allocation is 100% EFA (Europe), both for the original strategy and my version. Actually, I am going to be making some changes to my version of the strategy – most likely I will take a step back and get rid of USO. In terms of performance, that’s likely irrelevant short-term (the damage has been done in other words), because of USO’s abysmal performance while it was selected (the first selection is based on momentum, so a bad loser like USO is unlikely to cut it in any time soon).
Time to switch gears yet again. Duly did so at the today’s close.