Do Or Die

To the newbies who are unable to grasp the logic: Suppose you read on the internet and get all the motivation to trade for a living. You read further on the internet and pick a strategy which apparently makes 200% a year or 6.1% return at end of every month. Everything looks rosy to start trading for a living? Wait. The moment you put the theoretical strategy to practice, the returns diminish by 1/4. This is just a raw estimate to offset the costs of slippage, commissions, timings and human errors. In reality, most strategies who make money on paper start to lose in actual market. So now assuming you still have a strategy which makes 50% return a year, or 3.5% at end of each month. How much capital do you need to trade for a living this strategy after monthly withdrawals of 5k?? Say you start with my estimate of 500k. At the end of first month your capital is (500*1.035-5)= 512.5, at end of second month it is (512.5*1.035-5)= 525.4; and at the end of year you will have 700K ONLY. Now for the sake of God you are risking your money for "Trading for a Living" and the return that is left at year end is 40% only. Your account is supposed to grow at this minimal rate or you will never become rich (the risk involved in trading will not be worth the reward). You could be better off with your regular job and forget "trading for a living". I have been trading for a living since more than 5 years (check my first introductory post on TL). This may be maths for some but it is common sense to me. And hell, do not talk about margin/leveraged accounts. For starters, leverage amplifies the volatility of your goddamn PnL.

I can understand that. You can live on 100x22= 2200$ a month. But I cannot. And all this trouble so that the seed capital does not even grows. Good luck to those who can.

“Earth provides enough to satisfy every man's need, but not every man's greed”- Oscar Wilde “Hell has three gates: lust, anger, and greed” - Bhagavad Gita “Greed: A word commonly used by liberals, low achievers, anti-capitalists and society's losers to denigrate, shame and discredit those who have acquired superior job skills and decision-making capabilities and who, through the application of those job” rough the application of those job” -Neal Boortz “We are all born brave, trusting and greedy, and most of us remain greedy.” - Mignon McLaughlin "Three great forces rule the world: stupidity, fear and greed." -Albert Einstein "Nothing makes us more vulnerable than loneliness, except greed." -Thomas Harris "Calm self-confidence is as far from conceit as the desire to earn a decent living is remote from greed." --Channing Pollock 'From the first day to this, sheer greed was the driving spirit of civilization." -Friedrich Engels ------------------------------------------------------------------------------------------------------------------ The point I'm trying to make is most of psychological stuff is subjective and open to debate. The average people may not "come equipped with a standard issue probability based mind"; but it is the foremost requirement of trading. The form and magnitude or each upcoming move in market can only be based on probabilities; and never with certainty. But the media (including internet) gives a different impression to people. Analysts keep giving targets as if it is a prophecy. The general media does not encourages probabilities or factual conclusions but rather promotes theoretical debate. Irrational Exuberance by Robert Shiller is an excellent read on how media promotes certain biases. It makes sense but only after a person has achieved a certain skill level in trading.

Hi, As mentioned this crisis in stocks is different in the sense that the sell-off has been triggered by global events. More specifically the risk has been transferred from corporates to the sovereigns. In past investors used to rotate money from leading industry groups to defensive industry groups. However, this time a lot of investments are being rotated from the developed markets to the emerging markets. Before deciding to invest/diversify in emerging markets at all it is worth to look at some other significant factors. Historically emerging markets tend to pose more risk during recession. One way of measuring investors’ perceptions of the riskiness of a country’s stock market is to look at how risky the country’s debt is. This can be quantitatively indicated by sovereign credit default swap (CDS) spreads. CDS spreads measure the cost of insuring against the possibility that a country will default on its debt, i.e. they are a measure of the extent to which a country has sovereign debt problems. The wider a country’s CDS spreads, the more likely the investors think that country will go bankrupt, and the more nervous the market is about that country. Let’s look at the current situation. From January 2010 to July 2011 (bull market), the average five-year CDS spread for developed markets in the MSCI ACWI index increased 206% to 263 basis points (bps); as a comparison the average spread for emerging markets actually decreased by 9% to 132 bps. At the end of January 2008 (bear market), in contrast, the ten developed world countries for which such data was then available had CDS spreads of less than 45 bps and were all among the 11 countries perceived to the be the least risky. Core eurozone economies such as Germany and the Netherlands still have relatively narrow CDS spreads. MSCI Germany (EWG) Market Vectors Germany Small Cap(GERG) iShares MSCI Netherlands Index (EWN) The other factor could be London Interbank Offered Rate (LIBOR), levels which can spook the US/UK markets. LIBOR has been trending higher in recent weeks with a change of +17% compared to previous month. A similar sudden rise in April 2010 triggered the largest price drop in last year. So now coming back to investing in emerging markets, the strongest theme could be: Domestic-demand Driven Economies These are China, India, Indonesia, Singapore and Japan. These economies are driven mostly by domestic demand and are thus isolated from some of the slowing global growth trends. Relevant ETFS are: iShares FTSE/Xinhua China 25 Index Fund (FXI) iShares MSCI Hong Kong Index Fund (EWH) iPath MSCI India ETN (NYSEArca: INP) WisdomTree India Earnings Fund (NYSEArca: EPI) iShares S&P India Nifty 50 (NASDAQ: INDY) CurrencyShares Japanese Yen Trust (FXY) Indonesia Index ETF (IDX) MSCI Indonesia Investable Market (EIDO) iShares MSCI Singapore Index Fund (EWS) First Trust ISE Chindia Index Fund (FNI) EGShares Emerging Markets High Income Low Beta ETF (HILO) is worthy of notice. The index consists of 30 stocks drawn from a 2500-company and 21-country universe. The top five are Malaysia with 18.0%, South Africa 17.3%, Brazil 13.4%, China 12.7%, and Thailand 8.9%. Sector-wise, HILO is heavy on telecommunications, infrastructure and utility stocks – much like dividend ETFs from developed markets. Infrastructure needs of BRIC: The four countries are similar only in their need for increased infrastructure spending. Using World Bank data, India appears to be the least developed, and most hard-pressed to develop infrastructure (China has the best). There is no Russia specific infrastructure ETF. EGShares INDXX Brazil Infrastructure Fund (BRXX) EGShares INDXX India Infrastructure Fund (INXX) EGShares INDXX China Infrastructure Fund (CHXX) The PowerShares Emerging Markets Infrastructure Portfolio (PXR) has market cap of $168.2 and holds equities in a diverse selection of countries including: China (13.3%), South Africa (11.3%), Taiwan (10.2%), Brazil (9.2%), Hong Kong (7.1%), Indonesia (6.7%), Malaysia (6.6%), Russia (5.3%), Chile (4.5%), and the United States (4.3%). iShares S&P Emerging Markets Infrastructure (NASDAQ: EMIF) contains exposure to China, Brazil, South Korea, Czech Republic, Mexico, Russia and Chile.

Hi, Please refer to the following points before using the ETF list: Trade very cautiously ETFS where daily volume is less than 10,000 shares. Their returns can deviate for short intervals as much as 5% from their benchmark. Do not trade in inverse or leveraged ETFs unless you have a good understanding about them. An inverse (short) ETF does not exactly falls by the same percentage as its benchmark gains. Similarly a 2x leveraged ETF may not mirror a change in its benchmark by double magnitude. Select an investment premise/theme, then, select an ETF. Do not go vice versa by selecting and ETF and then choosing an investment theme. (I will shortly elaborate on this). Single country ETFs have higher trading costs than broad region specific ETFs. The expense ratio can differ widely; Vanguard ETFs tend to have the lowest expense ratio. Please research carefully the expense ratios and tax efficiency before investing. Thai Fund (TTF) This 4-star ranked fund, run by Morgan Stanley, focuses on large, established Thai blue chip firms, most notably in consumer cyclical, financial services, real estate and industrials. iShares MSCI South Korea (EWY) It out performed in 2009, 2010 and most of 2011 so far. Recently it has been crushed and can be bought at attractive prices (oversold). WisdomTree Emerging Markets High-Yielding Fund (DEM) It invests in the top two most important components of emerging markets- growth stocks as well as high dividend yield paying stocks. iShares MSCI Malaysia (EWM) The Malysian Economy thrives on the China/Japan neighbor theme. iShares MSCI Peru (EPU) An exchange traded fund for Peru has bounced this week following solid economic data. Peru is responsible for about 6% of world gold production; and gold will likely keep moving up until we enter the last phase of recession. South Korea iShares (EWY) South Korea has good potential and likely a long-term buy. EWY currently looks oversold. WisdomTree Local Asian Debt (ALD) Asian countries are well-equipped to pay their bills, the yield on the basket is venerable and Asian currencies will likely rise against the greenback over the next 5-7 years. iShares MSCI Germany (EWG) News that Germany’s economy expanded a mere 0.1% pushed stocks lower on Tuesday. German has the best fundamentals in EU and EWG is currently oversold. SPDR S&P Emerging Middle East & Africa (NYSE: GAF) Ghana is projected to be the fastest growing country in 2011 in Africa and among the top in world. Ethiopia, Congo and Angola are other top growing countries in Africa. The Broad Emerging market ETFs are: iShares MSCI Emerging Markets Index Fund (EEM) PowerShares FTSE RAFI Emerging Markets Portfolio (PXH) SPDR S&P Emerging Markets ETF (GMM) Vanguard Emerging Markets ETF (VWO) GlobalShares FTSE Emerging Markets Index Fund (GSR) Schwab Emerging Markets Equity ETF (SCHE) GMM has 18% weight in financials with significant country weightings in China and Brazil. The EEM is well-diversified across sectors, but has a decided tilt towards Asian emerging markets. The DEM is tilted towards Taiwan. Latin America Regional ETFs iShares S&P Latin America 40 Index Fund (ILF) SPDR S&P Emerging Latin America ETF (GML) Productivity is likely to pick up in Latin America (unless are headed for double dip recession!) and top performing sectors could be commodities producers, basic materials, transportation and communications. European Emerging Markets Regional ETFs iShares MSCI Emerging Markets Eastern Europe Index Fund (ESR) SPDR S&P Emerging Europe ETF (GUR) Middle East and Africa Regional ETFs SPDR S&P Emerging Middle East & Africa ETF (GAF) Market VectorsGulf States Index ETF (MES) Invesco PowerShares MENA Frontier Countries Portfolio (PMNA) WisdomTree Middle East Dividend Fund (GULF) Frontier Markets Claymore/BNY Mellon Frontier Markets ETF (FRN)

Re-posting with the images:

Rande: The cartoon below depicts how the average joe gets involved in stock market. They are fed with misinformation and prone to biases. Someone who wants to take trading as a career or intends to 'trade for a living' will approach the markets differently (the 'trader' whom I was referring to).

Let me make a correction. By 'Trader' I mean a professional or someone who intends to 'trade for a living'. Not the average joe who reads on the internet about chart patterns and tries his luck at daytrading. Lets get precise. There is heck of misinformation on the internet, media and everywhere which makes people with average IQ make stupid mistakes. Again, the problem is not about the mindset but misinformation. Again, its lack of information which feeds the 20 bias in the mentioned book by Michael Pompain. I'm thankful for your detailed post... but my perception is different. It could be because I've spent so far time with people who consider trading as a career; while you've been with individuals.

:rofl: Thats the whole problem, no one bothers to say what greed is. People say stick to your trailing stop loss, don't be greedy tp book profits; if the MAE suggests otherwise it may be good to keep profit targets (be greedy as per that definition).

Not any major flaw, maybe a typing error. I said: I meant a 50 % gain in capital after monthly withdrawals of 5K. I did not use a calculator (wanted to think like a noob myself) but I'm sure it will not be a major flaw. EDIT: more specifically if you have a strategy which makes 50% a year, while in reality you need to withdraw 5K/month; the initial capital requirement will be around 500K. And regards to being real, someone in mid-20s who wants to start a family will need monthly withdrawals of 5K+. Marriage could be a big commitment if your spouse is not working (or she prefers to be a full time mom).

Precisely my point. But what I see is people start talking psychology stuff to newbies who use RSI before trying to understand what internal relative strength means. The noob has no clue about MFE/MAE and he gets the goddamn advice not to become 'too greedy'; he is not told what exactly greedy means. Say a person has learned enough to become profitable, or maybe has started recognizing his strategy edge. At that point it may be relevant to talk about psychology. In initial stages, I will advise reading material which DIRECTLY relates to practical trading from sources in article above. Most stuff related to learning trading will be relevant (in general) to anything worth achieving in life. Winning attitude, discipline, focus (internal locus of control... and of course keeping away from biases I referred. And regarding Mr. Brett, always keep in mind he is a public guru. He gets paid for talking about psychology. Howsoever honest a man he may be, he is likely to develop a natural bias to talk more than required.

Not to talk about the costs involved in "learning to trade"

As mentioned in first post, I'm out of almost all of my investment stocks (avg holding 18 months) and currently most trading is short-term. Buyers are stepping in and the market on both Thursday and Friday was relatively stronger than Low of August 8th. On Thursday, the the day began with a large drop, but prices in afternoon reached a balance area supported by buyers; there was also a short-lived test at 3pm while yesterday the market closed near lows which may signify exhaustion. More importantly, buyers were willing to participate at prices generally higher than last Monday’s and Wednesday’s (August 8-10) low closes. The bottom line is that market in last two days has been trading relatively stronger than prior week. As expected RSI has shown a considerable improvement as marked in the chart. Prices have certainly been taken to levels that are normally viewed as very attractive. This was about internal relative strength of the broad market itself. I will look forward to buy stocks on Monday which have been trading relatively stronger than the market. Ticker Date/Time Change Since 8/10 ^GSPC 8/19/2011 0.3636 XLB 8/19/2011 0.5973 XLE 8/19/2011 1.5414 XLF 8/19/2011 -0.2467 XLG 8/19/2011 0.0614 XLI 8/19/2011 -1.3211 XLK 8/19/2011 -1.9164 XLP 8/19/2011 2.6755 XLU 8/19/2011 7.2517 XLV 8/19/2011 2.8164 XLY 8/19/2011 -0.0294 The leading sectors of Financials, Technology, Consumer Discretionary and Industrials (XLF,XLK,XLY, XLI) continue to trade relatively weaker than market. Hence my current strategy is to buy stocks for gains in 3-5 days while carry shorts initiated on 3rd August. I will take long trades on Monday only IF the market shows strength. What can be the reward for such anticipatory trading? (acting at the first sign of a double bottom). The move up can be dramatic – and fast. The risk is that selling once again overwhelms buying, driving would-be buyers back to the waiting room once again. Some strong stocks which have been trading relatively stronger than the broad market in last 2 weeks and belong to the defensive group are: Ticker Date/Time Change Since 8/10 ADM 8/19/2011 5.7648 AES 8/19/2011 5.1653 CAG 8/19/2011 2.4648 CCE 8/19/2011 4.7158 D 8/19/2011 3.5160 DTE 8/19/2011 5.1804 ED 8/19/2011 5.5739 EXC 8/19/2011 4.8731 FE 8/19/2011 5.1902 GIS 8/19/2011 2.4607 KMB 8/19/2011 4.4430 KO 8/19/2011 4.9093 MAT 8/19/2011 2.7778 MO 8/19/2011 5.5419 PCG 8/19/2011 5.0497 PEP 8/19/2011 2.9012 PG 8/19/2011 4.1873 SO 8/19/2011 5.1012 TE 8/19/2011 5.6034

Well, Psychology is the scientific study of the human mind and its functions, esp. those affecting behavior in a given context. I always felt that psychology stuff is for dizzy eyed nerds who read through their thick glasses. Or maybe for unfortunate souls (psychologists) who get paid to listen and appreciate rants of the extremely disgruntled. As a contrast traders are an awfully smart breed who can buy 10k shares faster than you blink. Traders tend to be aggressive and outgoing. Streenbarger said it on his very popular blog. He is (was) among the exceptional public guru whom I respect. I would also like to quote him on trading personality traits: Okay, I do not intent to bash psychology stuff in the Trading Psychology forum. So I'm sharing here few resources related to approach and attitude which I found worthy of reading. The Phantom of the Pits was the first book which really helped me regarding trading mindset.I skimmed through it and found the following chapters helpful: 4. Preparation for Trading 5. Rule One 6. Part Two 7. Trading with Rules One and Two 13. Behavior Modification The Third Rule The book is freely available on many websites on the internet because there are no copyright issues. You can also download from here: http://www.mypivots.com/articles/booktext.aspx?bookname=Phantom%20of%20the%20Pits There was a research paper (which I'm unable to find now) which chimes with my observation about people turning into professional traders. What it suggests is that a relaxed attitude toward performance may be more helpful than a driven one: the highly achievement-driven trader may create his or her own internal noise, interfering with sound decision-making. Having said that, for those looking for the 'psychological' aspects mostly discussed on forums like "sit tight on your trades", "follow your stop losses"; I would strongly recommend the book Behavioral Finance and Wealth Management by Pompian. Part-2 of the book contains a detailed review of the most commonly found biases (around 20). It is complete with general and technical descriptions, practical applications, research reviews, implications for investors, diagnostic tests, and advice on managing the effects of each bias. You can practically jot down a bias each time in trading diary whenever it effects you. The last thing I would like to say is about a certain trait called "Locus of Control." It relates to everything worth achieving in life and not just trading. People with internal locus of control tend to: Show remarkably higher organization skills in their work/research. For example, keeping notes and PnL logs, learning from a experienced trader whenever they get a chance to, constantly looking to update their skills and so on. Exhibit a hard work ethic to achieve skills necessary to succeed. Are inquisitive as they figure out the whys of the markets. People with external locus of control tend to: Finding blame on things which they have no control (called Regret Aversion, infact they are prone to a lot more biases than the person with internal focus). Inability to focus on task at hand exists. Small set backs are seen as massive roadblocks. Posting a comment will only take you 2 minutes, but it will be the strongest motivation for me to share something better.

There have been significant structural changes in US Equity Markets over past few years. Daytrading NYSE was a totally difference ball game (way easier) until 2008. There have been some research that HFT provides liquidity and reduces spreads. However, the factual reality is totally different- HFT is silently bleeding the system. The irony is that regulators tend to restrict short selling, talk about new taxes and what not to restrict retail traders; but they are unwilling to put a simple cancellation fee of 1 cent (say) per order to discipline HFT. Prices are nothing but the result of traders’ order submission discretion, which in turn is influenced by overall market structure. If the way that orders are submitted is changed, it changes the sub-minute price patterns as well. Currently it is all It is noise, subterfuge, and manipulation. Knight Capital Group has examined the significant structural changes in US Equity Markets and how those changes affect traders and investors. To download the excellent reports, click here and here. Mentioned below is some synopsis from the study pertaining to retail intraday traders. The average trade size has come down dramatically. If the average Joe trader sees thick offer and punches BUY for 1000 shares, he may end up chasing those offers which cancel lightening fast. (in illiquid stocks) The quote rates in 2007 were about 100 times lower than the peaks of today. This simply means 'more noise', there is way too much data now to decipher trade signals. Now the most troubling news: This orders cancellation/execution or quotes-per-trade ratio shows the relative number of' 'fake' orders in market. The quotes per trade ration has gone from manageable 6 in 2007 to a formidable 50 in these times. The size on the bid/ask is very likely to be fake. To see more clearly how HFT manipulates, see the Nannex reports. http://www.nanex.net/Research/EMini2/EMini2.html http://www.nanex.net/research/MsgRates/EquityMessageRates.html Posting a comment will only take you 2 minutes, but it will be the strongest motivation for me to share something better.

LOL, I just glanced that article. But I think they were talking something like troubles have been around for decades but Germany just signaled the crash. The US Equity markets affects everyone globally and it was rising happily all this time.

The signs right now are that the motor of the European economy is starting to slow down significantly. That was confirmed with the release of second-quarter figures that showed gross domestic product growth of a mere 0.1% at a quarterly rate in the second quarter of the year, significantly lower than the 0.5% most economists had been predicting. Germany will lead the global downturn

Foremost, apologies to the author of the very popular book “Trading for a Living”. I skimmed it very long back and felt most things talked in the book are just basics. This article has nothing has nothing to do with the book. “Trading for a Living” is an over-hyped and abused phrase on internet forums. What this article talks about is its plain meaning and few thoughts of achieving the same. This is absolutely no technical, scholarly, high-tech or expert talk; just something which a beginner (total noob) can understand. Meaning of Trading for a Living There seems to be a LOT written about “trading for a living”; however, it literally implies making enough money from the ‘trading the markets’ to substitute a regular 9-5 job or a traditional business. As a practical consideration, trading should be reported a primary source of income to IRS. In reality, trading profits should be sufficient to take care of lifestyle expenses. How much profits are sufficient? This will vary depending on where you live, but for someone in 20’s looking to start a family it can be minimum 5K per month. It can be minimum 20K for someone supporting a family with nice lifestyle in metro city. Achieving the Goal of Trading for a Living So what do you need to make a minimum of 5K$/month? Well, keep aside technical strategies and stuff; you need a risk capital (trading capital) in the first place to generate such returns. Elementary math suggests for someone who wants to make 50% a year will need starting capital of more 500K to support withdrawals of just 5K/month. To support a family you will need sufficient capital to support monthly withdrawals of 10K+. The capital should grow at some rate too or else you end up withdrawing each month everything that you make. People aged under 25 are not likely to have saved that much money to bet on the table from their regular job/business. So for the young it seems Trading for a Living is a pipedream, unless he/she is willing to work at a proprietary trading firm. People aged 30-35 are likely to have saved 500K. But will it be prudent to buy own house/luxury or risk the money in trading? Trading is risky, everybody knows. People aged over 40 should be able to afford a trading venture. BUT will they be willing to get out of the habitual financial comfort of 9-5 job or regular business to start something formidably new? A Practical Solution: Do not shoot for ‘trading for a living’ unless you are financially strong Do not fall for cumulative equity, compounding formula, and similar stuff. It all looks good on paper, but if you refuse to withdraw and allow returns to compound, you cannot pay for your expenses. ‘Trading for a living’ is a totally different ball game than just 'profitable trading'. You do not really need 500K to start trading. Use part of your savings to grow them fast by careful investing; it requires less time than trading short-term and allowing to grind at regular job. This also helps in building experience in the markets. Investing here refers to medium to long term trading- trades initiated with an expected holding time of 3 weeks plus.

This is a discretionary method... and like all other discretionary pattern methods it can be subject to hindsight bias and availability heuristics. This method will be helpful to only traders who use RSI regularly in their trading. (refer Relative Strength - Internal ) Similarly for people who trade using chart patterns will be able to better relate Trading Regime Analysis Using Chart Patterns- Part 1 and Part 2. If you're using any of techniques talked about on internet (versus using custom indicators), and wish to tell me about it, I can give a better contextual reply.

Hi, This follows from: List of ETFs for Sector Rotation. Testing is done on SPDRs (XLB, XLY, XLP, XLE, XLF, XLV, XLI, XLK, XLU). Rules: Track the monthly changes and past 10 day changes Trades are made only once each month Using past month data, buy the ETF with largest gain and short the ETF with largest loss Do not buy an ETF if it is overextended on the upside- has been advancing for each of the past 6 months Do not buy/short an ETF if it is over extended in short-term- past 10 days change is more than 10% (refer here for mean reversion) You maintain a market neutral portfolio- keep a long and short position Performance: Profit= 123.96%, CAR= 12.96%, Winners= 56.14%, Losers= 43.86% I'm posting the code here so that people can test or improve it. Immediate improvement could be avoiding long positions when market is extremely bearish and avoiding short positions when it is extremely bullish. Also, a stop-loss should be maintained for each position. For comparison, see here the Fidelity Sector Rotation strategy. Posting a comment will only take you 2 minutes, but it will be the strongest motivation for me to share something better. Statistics: Statistics All trades Long trades Short trades Initial capital 10000.00 10000.00 10000.00 Ending capital 22395.72 16685.38 15710.34 Net Profit 12395.72 6685.38 5710.34 Net Profit % 123.96 % 66.85 % 57.10 % Exposure % 98.92 % 58.59 % 40.33 % Net Risk Adjusted Return % 125.31 % 114.11 % 141.57 % Annual Return % 12.96 % 8.04 % 7.07 % Risk Adjusted Return % 13.10 % 13.73 % 17.52 % -------------------------------------------------------------------------------- All trades 114 66 (57.89 %) 48 (42.11 %) Avg. Profit/Loss 108.73 101.29 118.97 Avg. Profit/Loss % 1.62 % 1.24 % 2.13 % Avg. Bars Held 30.04 30.70 29.13 -------------------------------------------------------------------------------- Winners 64 (56.14 %) 43 (37.72 %) 21 (18.42 %) Total Profit 27585.36 14455.14 13130.22 Avg. Profit 431.02 336.17 625.25 Avg. Profit % 6.28 % 4.66 % 9.59 % Avg. Bars Held 35.28 35.30 35.24 Max. Consecutive 7 9 3 Largest win 2358.63 1855.25 2358.63 # bars in largest win 64 64 64 -------------------------------------------------------------------------------- Losers 50 (43.86 %) 23 (20.18 %) 27 (23.68 %) Total Loss -15189.64 -7769.76 -7419.88 Avg. Loss -303.79 -337.82 -274.81 Avg. Loss % -4.35 % -5.14 % -3.67 % Avg. Bars Held 23.32 22.09 24.37 Max. Consecutive 6 4 5 Largest loss -1177.85 -1089.78 -1177.85 # bars in largest loss 23 23 23 Amibroker Code: SetBacktestMode(backtestRotational); SetTradeDelays(1,1,1,1); // everything delayed 1 day SetOption("UsePrevBarEquityForPosSizing", True); SetOption("MinShares", 1); SetOption("AllowPositionShrinking",True); SetOption("AccountMargin",100); Totalpositions = 2; SetOption("WorstRankHeld", Totalpositions + 1); SetOption("MaxOpenPositions", Totalpositions ); SetOption("SeparateLongShortRank", True ); SetOption("MaxOpenLong", 2); SetOption("MaxOpenLong", 2); perf= TimeFrameGetPrice( "C", inMonthly, -1 ); perf1= TimeFrameGetPrice( "C", inMonthly, -2 ); score= 100*((perf- perf1)/perf1); score= IIf(TimeFrameGetPrice("C",inMonthly,-1)>TimeFrameGetPrice("O",inMonthly,-2)AND TimeFrameGetPrice("C",inMonthly,-2)>TimeFrameGetPrice("O",inMonthly,-3)AND TimeFrameGetPrice("C",inMonthly,-3)>TimeFrameGetPrice("O",inMonthly,-4)AND TimeFrameGetPrice("C",inMonthly,-4)>TimeFrameGetPrice("O",inMonthly,-5)AND TimeFrameGetPrice("C",inMonthly,-5)>TimeFrameGetPrice("O",inMonthly,-6), 0, score); score= IIf(abs(100*(C-Ref(O,-10))/Ref(C,-10))>10,0,score); PositionScore = score; PositionSize = -100/Totalpositions; m = Month(); newMonth = m != Ref( m, -1); PositionScore = IIf(newMonth, PositionScore, scoreNoRotate);

I love the basic vb smileys... can they be allowed in posts

Does anyone else thinks that the basic smileys are not so lively (change them)? :helloooo:

It's not my method... just the basics of technical analysis Feel free to ask.

OK, I did test two very basic tests of sector rotation on SPDRs (XLB, XLY, XLP, XLE, XLF, XLV, XLI, XLK, XLU). I do not enjoy programming and hopefully some one will improve these tests. Trading Rules: Keep a log of month-to-month performance of the sector ETFs. At the beginning of each month, buy the strongest of 3 sectors based on their past month returns. Alternatively to test a market neutral strategy, at each month buy the strongest and short the weakest of sector ETFs, maintaining 3 positions at all times. There are NO stop losses. Summary: A long-only always-in-market strategy shows returns similar to SnP 500. A market neutral strategy made 63.86% (CAR of 7.23%) comparative to 200 day MA crossover strategy returns on SnP 50029.6% in the same period These tests are only to show the edge or the advantage sector rotation can give you against a broad market index trading strategy. This is not a trading system. Market-Neutral Performance No. of Trades 141 Winners 58.16% Losers 41.84% Amibroker Code SetBacktestMode(backtestRotational); SetOption("UsePrevBarEquityForPosSizing", True); SetOption("MinShares", 1); SetOption("AllowPositionShrinking",True); SetOption("AccountMargin",100); Totalpositions = 3; SetOption("WorstRankHeld", Totalpositions + 1); SetOption("MaxOpenPositions", Totalpositions ); SetOption("SeparateLongShortRank", True ); SetOption("MaxOpenLong", 3); SetOption("MaxOpenLong", 3); //Monthly Rotation perf= TimeFrameGetPrice( "C", inMonthly, -1 ); perf1= TimeFrameGetPrice( "C", inMonthly, -2 ); score= 100*((perf- perf1)/perf1); PositionSize = -100/Totalpositions; PositionScore = score; m = Month(); newMonth = m != Ref( m, -1); PositionScore = IIf(newMonth, PositionScore, scoreNoRotate); Long-Only Performance No. of Trades 177 Winners 63.84% Losers 36.16% Amibroker Code SetBacktestMode(backtestRotational); SetOption("UsePrevBarEquityForPosSizing", True); SetOption("MinShares", 1); SetOption("AllowPositionShrinking",True); SetOption("AccountMargin",100); Totalpositions = 3; SetOption("WorstRankHeld", Totalpositions + 1); SetOption("MaxOpenPositions", Totalpositions ); //Monthly Rotation perf= TimeFrameGetPrice( "C", inMonthly, -1 ); perf1= TimeFrameGetPrice( "C", inMonthly, -2 ); score= 100*((perf- perf1)/perf1) + 100; PositionSize = -100/Totalpositions; PositionScore = score; m = Month(); newMonth = m != Ref( m, -1); PositionScore = IIf(newMonth, PositionScore, scoreNoRotate);

The X's and I's are the most liquid in the list (ticker symbol starting with X or I). The others are mentioned as indicators only. As a general rule keep away from ETFs where avg daily volume is less than 10,000 shares