This time I used futures (the S&P 500 minis – ES). The main motif was to learn the mechanics of trading futures, which I think I will need for some new stategies.
I also decided to increase the leverage of the strategy. Immediately I noticed a disturbing problem with trading futures in small quantities, namely, one cannot control leverage precisely. The reason is that a single future is equivalent to about 500 SPY shares. Thus, I was left to choose between going under the required leverage or over it. Greed won …
In a recent post, I did some analysis of the efficiency of the DVI indicator. That was pretty much all I had to say back then, but that quickly changed. While reading Building Reliable Trading Systems, by Keith Fitschen I stumbled upon an alternative way to visualize entry efficiency – the entry power.
The first position reversal for the year.
2013 was a tough year. Trading was tough, with one of my strategies experiencing a significant drawdown. Research was tough – wasted a lot of time on machine learing techneques, without much to show for it. Also made some expensive mistakes, so all in all – it was a year I’d prefer I had avoided. 🙂
The strategy implementation was posted on the Systematic Investor Blog. For a second month in a row, the allocation is 100% SPY. The gain for December was about 2.6% (assuming trading at the close, which is unrealistic IMO for this strategy). This strategy yielded more than 10% in 2013, but more about that in the annual recap.
Happy trading in the New Year!
On one hand, it’s holidays. On another, we are without power for more than two days now. Without the machines, the future is unclear, so I am out. Might as well take it easy for the rest of the year, it has been a lousy one anyways.
Feeling a bit nervous going short at this time of the year (just for the Christmas rally, usually on light volume), but system is system.
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.