duc's Journal

[ducati998]

The purpose of the journal is to demonstrate the profitability of my hybrid system/methodology. The system is traded on the S&P500, although it could be any index, Dow, NASDAQ, etc. The purpose of using an index is to simply eliminate individual stock risk, and retain market risk.

This essentially consists of two separate strategies that run together in a single portfolio. One is a constant, always in the market methodology, and in the early days, which this still is, may well result in a drawdown. The second component is a purely timing component, based on a weekly signal.

Strategy #1 seeks to build a compounding position, suitable to fund a retirement at some point, while the swing component, strategy #2, simply seeks to accelerate that process.

The hybrid strategy has been tracked fro the last 10 weeks. I use the various tools at m@arketocracy to track all the transactions. This has several advantages: they provide an accounting of all trade metrics, entries/exits/dividends paid/profit/loss/etc. It saves a tremendous amount of time rather than doing it all by hand.

Second, it prevents cheating. All the metrics are kept by m@rketocracy, therefore providing the accounting of an independent third party, always useful in the trading game.

I'll have this weeks results posted a little later.

jog on
duc

 

[ducati998]

The results from last week.

As can be seen, I have only allocated 50% of available capital. This will change as market conditions change. The lower the market, the larger in % terms the allocation, the higher the market, the lower the % allocation, which is of course the market axiom "buy low, sell high".

The longer term, in the market permanently, will gradually over time build that core position larger and larger using the accumulated and banked profits. The longer term strategy also has a 'timing' component to it, it is just less sensitive to market fluctuations than the 'faster' component of the strategy.

The 'faster' component is based upon technical triggers. The purpose is to try and catch the larger chunk of trends, and is a weekly signal. The signal although weekly can actually be used to day-trade. For example: if the signal is 'long' then buying intra-day dips carries a higher probability of success than if the signal was 'short'.

jog on
duc

 

[ducati998]

Just a quickie...

My system is a weekly system. This has both advantages and disadvantages. In a choppy market, it can be frustrating, as you are forever seemingly giving back gains. In a trending market, which really is the market I am aiming to catch, it keeps you in the trend for the majority of the move. It tries [the methodology] to get you in and out, entry & exit at reasonably opportune moments.

That’s simply a long way of saying, regardless of market movement currently, the position that I held on Monday, will be the position that I hold on Friday, with an analysis and new market posture [or the same] adjusted on the Monday of the new week.

I'll post this weeks results after they are updated, which is a day after the close on Friday, just the way the system works [m@rketocracy]

jog on
duc

 

[ducati998]

Here are the results from the past week.

As can be seen, the position has been open from 21 December 2011, or 79 trading days with no alterations to the position.

It is a weekly system, so daily trades are not a feature of either methodology, which is also part and parcel of the risk management position, hence the current 50% allocation to cash.

The 'dip' earlier in the week will provide some interesting data in preparation and analysis for next week's trading.

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duc

 

[ducati998]

How daytraders can profit from my methodology.

Each week I prepare my analysis of the week ahead. The analysis is 'good' for the week, which means that early in the week, the signal is at it's strongest. Thus, daytraders could, if the signal was buy long, or hold long [from the previous week] wait for any intra-day dip, and buy that dip.

The probabilities are far higher in the early part of the week, they potentially could weaken towards the end of the week, although that has not been my experience to date, but it must be acknowledged as a distinct possibility.

Check out my record.

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duc

 

[ducati998]

So here are last week's results. Another winning week.

There are many ways to responsibly leverage these returns, you know if 14% doesn’t float your particular boat. I use one such strategy myself in my own account. It involves using options, and that 14% jumps to about 800% with the use of options, but more importantly, it can actually reduce the risk. More on this later, however, a key component is actually having a robust signalling system, which the newsletter provides, again, I’ll go into a bit more detail later.

For those looking to transition into 'trading for a living', you know, the dream, give up the ****ty job, **** of a boss and all the backstabbing bs. then Options provide an option that you really should consider, as, smaller accounts can actually generate enough income to allow that transition, if not immediately, then at least sooner rather than later.

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duc

 

[ducati998]

Why might you use Options?

One benefit that I like, is that there is no requirement for a stop-loss, stop-losses are something that I like to avoid if possible, they tend to whipsaw your positions. Options, if you are buying, provide a built in stop loss, the dollar value of your investment.

My methodology has been designed, obviously, to suit my needs. My needs are however likely similar to most traders. I primarily want to distance myself from having to make highly charged emotional decisions, frequently. I want the decisions to be easy, and generated by the market.

My methodology has the following characteristics, as I said, these primarily are to suit my needs and comfort while trading.

It allows me to sleep at night, and not have to get up with 5 cups of coffee waiting for the 'Open' to see what the **** is going to happen, gap up, gap down or flashcrash.

That it is robust enough that you can trade any market: stocks, commodities, whichever you prefer. I've never traded debt markets, so I have no idea if it would be workable.

This is a biggie: it works in trending or rangebound markets. Of the two, rangebound is the more challenging, trending markets have their own issues, but here I am talking more about the technical issues around managing the structure of the position.

Reasonably sensitive to changes in trend. This is more a function of 'timing' rather than trade structure, but assuming a change in signal, the methodology has to be able to transition long to short, or vice versa.

It never misses big moves. Big moves can make your year, especially using Options. To never miss a big move, you have to be in the market 24/7. If you are, then a further issue is...

It allows to you make money if the market enters a flashcrash, unseen 1987 redux, or any other surprise disaster, when you are positioned long. In other words, it provides a fail safe hedge mechanism.

I am never stopped out.

My methodology provides for all these conditions. When you catch a trend, as we are currently experiencing, it must mint money, bank the profits as we go, and never violate the above conditions and rules.

To do so, you need two elements: you need a vehicle, or trade structure, and second, a robust signalling system.

The newsletter is my signalling system. Obviously, it is a weekly system. One week is sensitive enough that in a trend change, it allows one to reposition, or restructure the trade construction, and most importantly, it needs to be pretty damn accurate.

More later.

jog on
duc

 

[ducati998]

Just so that you are aware, I am in the process, well, completed the process actually, of setting up a live chat facility for day trading, the following is the post from my blog. It is where I will demonstrate the Options based methodology that I have touched on here.


I’ve written, and e-mailed next week’s newsletter, see, I’m getting quicker. The e-mail will also contain the link and login to the live chat room, yes, I have stolen the only worthwhile component from the PPT and Pelican Room.

There may well develop a free bonus as it were. SpyderCrusher sells subscriptions to his TradeTimer algorithm that I have featured a few times on the blog. It is different to my newsletter, but compatible, almost a confirming alternate signal.

Anyhow, SpyderCrusher may well join us in the live chat, and provide some set-ups on stocks, where my system and methodology is exclusively focussed upon the S&P500 index via the SPY ETF.

jog on
duc

 

[ducati998]

Here are the week 13 results.

This week saw a slight pullback in the S&P500 index. The strategy remained long into this week, and gave back 0.46% of ‘open profits’ nothing too terrible. The position for next week will be important.

jog on
duc

 

[ducati998]

Just having a bit of a scroll through these boards highlights a couple of things, at least for me: first, most would love to live the dream, viz. trading full time profitably for a living and [ii] most, or many are sceptical that it can actually be done.

Well, it can be done, and by anyone. It is not easy, that is true enough, but neither is it impossible.

For novice, even intermediate traders, many are loath to seek help. Partly, I'm sure that is due to so many rip-off merchants within this industry, there are however many legitimate and honest ones. Find an honest one, use the services, and learn from them. If the services are profitable, you can't help but learn from them, it may not be the entire answer, but at least you are making money while you learn the ropes.

Shorter term trading relies upon two components, both fundamental: a timing methodology and [ii] a trading vehicle or system. The vehicle can in a large degree offset some of the risks of the timing methodology.

Some offer one or the other, some offer both, some will offer you one, with the option of adopting their methodology.

The takeaway message is this: the 'dream' is possible, very much so. Can you find it on your own...of course you can. Is it easier with a helping hand, definitely, you can shortcut potentially years of work, really of exploring dead ends more than anything.

jog on
duc

 

[ducati998]

Week 14 Results

Again, a profitable week.

An observation on opportunity. Again, from perusing the boards here, it becomes apparent that there are any number of fraudulent undertakings promoting systems, etc.

This is why, along with the newsletter, that obviously can only be read in hindsight, an independent third party auditor of the results, which are the m@rketocracy results that I post each week.

Therefore with independent verification of the results, it is quite clear that the market can be traded profitably.

The fear of the opportunity must clearly lie elsewhere, for instance: what about when the market changes, viz. when the trend bends at the end. A legitimate concern and one that is managed very easily by the structure of the trade [remember my own positions are actually Option positions which leverage the results, but also modify the risk]

Of course, if you are looking to place trades on a purely directional basis, then the evidence will have to take an empirical basis, and you will simply need to observe how I navigate the bend at the end when it actually arrives - which at some point, it will.

jog on
duc

 

[ducati998]

I've just had a quick look at the FX trading coach thread, and somewhere in the thread there are a photo of some car [ii] located in NZ.

Please.

If you want to do it properly, check out Tim Sykes, private jet, Las Vegas, lot's of booze, hookers and penthouse, throw in Wayne Gretzky and Michael Jordan for good measure...all in a couple days of earning from trading stocks.

March 2012 Vegas Recap: Private Jets, Jordan, Gretzky, Cassavetes, Gorgeous Girls, Giant Champagne Bottles, 20-Minute Video Of My Penthouse Villa

jog on
duc

 

[ducati998]

The results from Week 15

The S&P 500 ETF tracker SPY finished 0.31% lower this week, thus I lost some 'open profit'. Actually this is not the way to really look at the trade, or any trade for that matter. More to the point is that any methodology seeking to capture trends will always surrender at some point some of the open profit while waiting for the exit criteria to have been met. This methodology is a trend capture methodology.

The methodology 'exits' on a weekly close, not a daily close. The signal, to date, has not yet set-up, so, the trade remains open.

Next week sees the start of Q2 earnings. This may well increase the volatility in the market, and an increased volatility need not mean a fall, look at the calculation for volatility, and then look at various market periods. Of course, increased volatility creating bear conditions is the popular perception, and with good reason.

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duc

 

[ducati998]

An Easter freebie.

This week's [16] now posted.

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duc

 

[ducati998]

Just an update, now on week 35

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duc

 

[ducati998]

Update...

In addition to the returns shown here, there is an additional return generated through the selling of Option premium. This is very low risk.

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duc

 

[The Leopard]

What is your method?

 

[ducati998]

What is your method?

You want the recipe to the secret sauce?

There are two primary methodologies. The first is a core holding of stock, in this case an ETF, the SPY, for diversification and that it tracks the S&P500. With this core holding, I hold a variable value of cash. This cash/stock ratio is traded with a market timing methodology which is quant. based, and incorporates valuations.

The second leg of the methodology involves selling Option premium. As Option contracts are in 100 share lots, to participate in this leg of the strategy, you need a portfolio of a certain size.

Assuming that you do, you sell premium. The Calls, are covered, and the price that you sell the premium, is of course where you want to sell stock. Thus the premium creates a cash-flow while you wait.

Put premium is a little different. You are obviously selling naked Options. The cash you hold, provides the margin required. Again, you sell at a price that you want to buy at.

The tricky part is that in a falling market, where you want to buy stock, and let's say it is a crash type of market that we saw in 2008, IV's will go through the roof. This means that you can't simply close the trade and buy the stock, the exploding IV will create, likely, a loss.

You have to wait to be exercised on expiry. This of course creates a potential problem. The market may bottom while you wait for expiry, and reverse. The choice is: miss out on buying [ii] buy and risk doubling the amount of stock that you buy. Neither is a great choice.

For the less risk averse, simply do not sell naked Puts. Stick with only selling Call premium. With my system, that is actually a very low risk trade.

As you can see, I've only had it tracked for approaching a year. Keep your eye on it, especially if we have another major leg down and watch its performance. The Option premium isn't included, but I track the Option trades on my blog as transparently as possible, and will calculate the additional returns to the portfolio.

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duc

 

[The Leopard]

For novice, even intermediate traders, many are loath to seek help. Partly, I'm sure that is due to so many rip-off merchants within this industry, there are however many legitimate and honest ones.

Could you name a few legitimate and honest ones? I can't think of any that have been advertised or discussed on T2W that are.

This information might be of great help to new traders.

 

[ducati998]

Could you name a few legitimate and honest ones? I can't think of any that have been advertised or discussed on T2W that are.

This information might be of great help to new traders.

In what style? Stock, Futures, Options? What timeframe, intra-day, Swing, Position, Fundamental/Technical...

There are so many possibilities and combinations, where do you want me to start?

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duc