Swing trading FTSE100 members

[tomorton]

May was just the wildest month. My cash balance is 8% down on the month, but counting unrealised profit in open positions as of today's close, I would be 2% up. This time round, I'm not manually closing any positions just waiting for them to expire at stops.

Nearly all positions open are now shorts so I have to be honest and admit I'm hoping for the possibility of some more bad news from Europe. What chance of that?

 

[barjon]

Yeah, been pretty whippy. Like you, tomo, nearly everything's been on the short side. I've been taking more 1:1s than usual, otherwise exiting promptly on limit without consideration for the action and also stuck in a few FTSE long hedges when I've been overstretched on the short side.

 

[tomorton]

Forgot to say also my positions are half size what they were in March before volatility spiked: I am referring to 5d daily volatility and it seems to correlate pretty well with trade outcomes - the lower the volatility, the less likely a swing trade will be stopped out.

 

[barjon]

tomo

You've probably got enough trades under your belt by now to start doing some hard work sharpening up your approach rather than swinging a pretty blunt axe at everything that moves.

I'd suggest you start testing some variables (you can dream up whatever occurs to you) to see if there is anything statistically significant that might cause you to introduce a condition necessary for taking the trade . Be careful not to curve fit though.

For example, if you find that your win rate for trades taken in the direction of the FTSE trend was over 60% but less than 40% for trades taken counter to the FTSE trend, then it would probably persuade you to introduce a condition only to take trades consistent with FTSE trend.

jon

 

[tomorton]

tomo

You've probably got enough trades under your belt by now to start doing some hard work sharpening up your approach rather than swinging a pretty blunt axe at everything that moves.

I'd suggest you start testing some variables (you can dream up whatever occurs to you) to see if there is anything statistically significant that might cause you to introduce a condition necessary for taking the trade . Be careful not to curve fit though.

For example, if you find that your win rate for trades taken in the direction of the FTSE trend was over 60% but less than 40% for trades taken counter to the FTSE trend, then it would probably persuade you to introduce a condition only to take trades consistent with FTSE trend.

jon

Absolutely spot on jon, and trading with the index is to be No.1 parameter to come under the magnfying glass. Happy so far to have made money whilst hardly embellishing the TA at all, but clearly, any trading strategy should be as cost-effective as possible. I will be drawing a line under system improvement at quite an early point though.

 

[China Diapers]

This might be of interest:

Since 1928 there have been 294 pullbacks of at least 5%. Ninety four of them have been moderate (>10%), 43 have been severe (>15%) and 25 have been bear markets (>20%).

So in a statistical sense once you hit the 5% threshold your chances of a 10%, 15%, and 20%+ drop are as follows:

10%: 32.0%

15%: 14.6%

20%+: 8.5%

Interesting Data on Pullbacks « Market Montage

 

[tomorton]

Interesting China. I do keep reading 2012 is going to be the most massive bear market, maybe it will be, but maybe it's one of those things that you don't see until it hits you like a truck.

 

[tomorton]

Lot of short stuff shaken out by major rally today and dumped the Hargreaves Lansdowne long this am on the initial rally,

Experian short stopped out above stop order (not guaranteed) badly hit by big opening gap. Others stopped by trailing orders for small losses or small gains - Glencore International, CRH, AMEC, ICAP, Johnson Matthey, Old Mutual, Tullow Oil, Smith & Nephew, Antofagasta, BG.

New short orders entered tonight - new orders only if in line with main index now - Ashmore, HSBC, Int'l Consolidated Airlines, SABMiller, Standard Life.

Away a couple of days so things will just have to sort themselves out.

 

[tomorton]

Closed all.

 

[tomorton]

Annoyed at my performance last week: still without proper exit criteria, I let 80% of a potential profit go back into the market by not closing before the Jubilee holiday weekend. I'm making money but the big damage to my positions is being done after they get into profit.

Tomorrow's another day - HSBC, Int'l Consolidated Airlines, SABMiller, Standard Life sell orders raised.

New sell orders for Astrazeneca, British American Tobacco, Capita, Experian, Morrison (Wm), Resolution, Royal Bank of Scotland, Standard Chartered.

 

[barjon]

................still without proper exit criteria.............

As you've said so often yourself "it's exits that put money in the account, not entries". You gotta work on it

 

[tomorton]

Absolutely right jon, I need to nail the exit set-ups. Over the whole period of these trades, 4 months now, the biggest running drawdowns have not been where I have usually experienced over the years, losses on positions that closed at their stop-losses, but rather the differences between where I thought I should close for profits and where I actually closed. Your support is very appreciated and I know I can do better.

My instincts have been to close the whole portfolio and bank all profits, and these have been correct so far, although I have often either been unable to be at the keyboard for a manual close-out or have overridden my own conclusions because I couldn't rationalise them. I will stay on this track and hope to make the close-outs more objectve, but I am prepared in future to be able to over-ride rationalism in the pursuit of £.

 

[D70]

Hi Tomorton,

Can I suggest a few options regarding exits?

Each one has it's advantages and disadvantages but normally one or a combination of a few will draw the best results.

The trailing stop.
The profit target (with or without trailing stop).
The time exit (exit entry +1 day on the open, or by the close of entry +1 day) very common and excellent exit method if your strategy is looking for reversal.

As far as I see what you've done. Everything is in hand apart from the exit.
The system cant be relied upon until a methodical exit is put in place.

Even more important if you cant be at your computer at the key times!

 

[tomorton]

Thanks D70, this is helpful.

At present, I have half position set to close at profit target, remainder runs on trailing stops as per Capital Spreads system, but this is not capturing sufficient unrealised profit for my liking so I am seeking a manual exit trigger for these.

Timed exits is something I wondered about but have never used. It seems only sensible if a position is dithering halfway to the stop for days on end it hasn't the momentum to make profit target. I log entry and exit dates and will review average lifespans but I am thinking there's no need to keep a swing position open longer than 6 sessions waiting for profit.

 

[tomorton]

SABMiller and Standard Chartered shorts triggered late pm as markets cooled on Spanish banks aid package.

Some pending sell orders raised - HSBC, Astrazeneca, British American Tobacco, Capita, Experian, Resolution, Royal Bank of Scotland.

New sell orders added -
Aberdeen Asset Management
Ashmore
Aviva
Bae Systems
Barclays
Imperial Tobacco
Kingfisher
Legal & General
National Grid
Prudential
Xstrata.

Y viva Espana.

 

[tomorton]

Barclays - half position closed at profit target, half closed for small loss on trailed stop.

Sell orders on British American Tobacco and Imperial Tobacco raised.

 

[tomorton]

Divergence between views of main market suggests to me we are at a tipping point, price will possibly bounce away from where we are with dramatic speed.

The 3-day swing chart view of the markets is the FTSE is in a bear trend, since the breach of the 07/03 swing low on 29/03, confirmed by the lower swing low on 11/04, lower swing high on 02/05, a further lower swing low on 01/06 and a further lower swing high on 11/06. The last 4 sessions have been a consolidation following the bear flag 01-11/06 and the market will break down soon to test 5229.

However, the Dow and Nasdaq100 made swing highs on 29/05, and both have breached their respective highs of that date. The Nas seemed to lead the way on 07/06, as it often does. The S&P also made a swing high on 29/05 but did not manage to breach it with any conviciton on Friday. This does not mean the trend has reversed to a bull, but it does suggest that the US has finished selling for now. I'm not comfortable being short if the US markets have stopped selling.

If the 3-day swing rule is relaxed to 2 days only, the FTSE looks a lot more bullish. Swing low 21/05 arrested the bear trend, and was followed by a low swing high 28/05, nothing to worry about. However, the next swing low, 01/06 could only manage to get a little below the 21/05 low and actually closed above it. In 2 sessions the market breached the 28/05 high and price went higher again. This scenario makes the last 4 sessions a bull flag and suggests we're going up - to around 5700.

Either way I will be scaling back my shorts asap tomorrow and may consider placing longs from tomorrow night.

As has been asked elsewhere on T2W, what are the Greeks doing this weekend?

 

[tomorton]

Hi Tomorton,

Can I suggest a few options regarding exits?

Each one has it's advantages and disadvantages but normally one or a combination of a few will draw the best results.

The trailing stop.
The profit target (with or without trailing stop).
The time exit (exit entry +1 day on the open, or by the close of entry +1 day) very common and excellent exit method if your strategy is looking for reversal.

As far as I see what you've done. Everything is in hand apart from the exit.
The system cant be relied upon until a methodical exit is put in place.

Even more important if you cant be at your computer at the key times!

Hi D70 -

I forgot to get back to you on your helpful post. I did look over the durations of my swing positions on FTSE100 equities since starting tracking these 3 months back. I was surprised to find the average overall holding time was under 3 sessions. It was the same in each month as well, between 2.5 and 3.0 sessions from entry to exit, inclusive.

Suprprisingly, it was exactly the same outcome for the position that were stopped out at their initial stop loss level as for those I manually closed for a minor loss and still exactly the same for the positions that were in profit when closed, regardless of whether I closed them manually, or they hit a profit target or hit a trailing stop. I could not be more surprised, I was sure I was going to find the holding periods were longer across the board and consdierably longer for winners than losers. Not so at all. Seems I have hit on the natural harmonic frequency of these trades, at least in this market.

 

[D70]

Hi D70 -

I forgot to get back to you on your helpful post. I did look over the durations of my swing positions on FTSE100 equities since starting tracking these 3 months back. I was surprised to find the average overall holding time was under 3 sessions. It was the same in each month as well, between 2.5 and 3.0 sessions from entry to exit, inclusive.

Suprprisingly, it was exactly the same outcome for the position that were stopped out at their initial stop loss level as for those I manually closed for a minor loss and still exactly the same for the positions that were in profit when closed, regardless of whether I closed them manually, or they hit a profit target or hit a trailing stop. I could not be more surprised, I was sure I was going to find the holding periods were longer across the board and consdierably longer for winners than losers. Not so at all. Seems I have hit on the natural harmonic frequency of these trades, at least in this market.

There are various historical traders I've read about that spoke of the natural rhythm of the market and that you get buy day, hold day, sell day and vice versa. It looks like your conclusions echo this market timing.

I think 95% of traders overlook this "time" aspect to trading.

Nice work.

 

[tomorton]

Many shorts stopped out yesterday, remainder closed manually this am and started rotation into long positions. The markets had perhaps got a bit overbought on RSI etc. so not expecting great profits immediately. Probably also need a higher swing low before able to fill all the longs I would like, the higher the better, anywhere above 5254 would do, providing above the US lows of 18/05.

On fundamentals, the Greek elections don't seem to have been a disaster, but they haven't made anything better either, so we're back to where we were 2 months ago. The Spanish bank aid scheme is just increasing their and the country's debt even further. But at this stage in the game, I suppose all the Eurozone is left with is the least poor option in each country in crisis.