Someone asked me a couple of questions about specific trades
on the SPY system, which brought up a good point that I forgot to
address in the FAQ.
As you know, for the system All new trades are entered at the
close; Shorts are exited on the close, while Longs are exited on
the open.
However there is ONE except to this!Profit Targets-
which
can be hit any time
during the dayto trigger an exit.
The system has
various profit
targetsbuilt in to exit trades in certain conditions when
these % targets are met. .
Most of the time the profit targets are never hit, in fact
there has only been 4 occasions when the profit targets where hit
during the entire 16 years: All of which were Shorts
1 - May 6th 2010
2 - May 21st 2010
3 - Jan 22nd 2008
4 - April 14th 2000
Obviously The profit target is the ONLY exception that the
system would have where a trade could be exited any time during the
day instead of only at the close (for shorts) and open ( for
longs).
No there are no stop losses for the system. I will put
this in the FAQ, as I stated, I have some things to add to
the FAQ this week to clear up some common questions.
If you want to set a crash stop, go ahead, but you need to make
it wide say 15% or so. I was not able to get a standard stop
loss to work with the system because what would happen is that a
stop would get hit, and then the system would have closed out the
bad trade at better prices, so stops always had a negative effect
on the system.
Here's why: The system is a revision to the mean type of system,
so when it gets into a bad trade such as a bad Long entry, instead
of stopping out on a sell off, the system will exit the bad long
trade ONLY after an oversold bounce! It does this because get
a reversion to the mean in indexes and this has the effect of
causing your losing trades to be smaller. Therefore standard
hard stops don't really jive well with the system. I plan to
look at other stops, such as a time based stop that only comes into
effect after a certain time, vs set from the beginning, that's one
of my future goals. But for now if you feel that you need a
stop, then just set a hard stop, but make it wide, say 15% or
so.
Newsletter
Subscribe to our email list for regular free market updates
as well as a chance to get coupons!
SPY system - Important Note!
Posted by matt on 2nd of May 2011 at 03:42 am
Someone asked me a couple of questions about specific trades on the SPY system, which brought up a good point that I forgot to address in the FAQ.
As you know, for the system All new trades are entered at the close; Shorts are exited on the close, while Longs are exited on the open. However there is ONE except to this! Profit Targets- which can be hit any time during the dayto trigger an exit.
Matt, Thanks for the update. This brings
Posted by cclammers on 2nd of May 2011 at 11:08 am
Matt,
Thanks for the update.
This brings up the question, are there stop losses set by the system and if so are they triggered during the day or just trade exits at the EOD?
No there are no stop
Posted by matt on 3rd of May 2011 at 01:33 pm
No there are no stop losses for the system. I will put this in the FAQ, as I stated, I have some things to add to the FAQ this week to clear up some common questions.
If you want to set a crash stop, go ahead, but you need to make it wide say 15% or so. I was not able to get a standard stop loss to work with the system because what would happen is that a stop would get hit, and then the system would have closed out the bad trade at better prices, so stops always had a negative effect on the system.
Here's why: The system is a revision to the mean type of system, so when it gets into a bad trade such as a bad Long entry, instead of stopping out on a sell off, the system will exit the bad long trade ONLY after an oversold bounce! It does this because get a reversion to the mean in indexes and this has the effect of causing your losing trades to be smaller. Therefore standard hard stops don't really jive well with the system. I plan to look at other stops, such as a time based stop that only comes into effect after a certain time, vs set from the beginning, that's one of my future goals. But for now if you feel that you need a stop, then just set a hard stop, but make it wide, say 15% or so.