Does anyone have any insight as to why TZA is running so negative today.  It's running 5 and 10 times inverse IWM.  When IWM goes red TZA stays red too.  A certain amount of this is common but not so consistently all day long.  SPY and QQQ and their leveraged family seem to be behaving normally.

"You pays your money and takes your chances" to quote that wise sage Popeye.

Yeah it's been painful (especially at 2x leverage). And it still might get more painful over the coming days.  Have I wanted to sell? You bet.  But I know I can't beat the system's stats on my own.  So I hold on knowing that any mechanical system does what's best based on probability of many similar situations and that it may not choose what's best in any particular situation. (I don't know how to tell the difference between the two in realtime)  I figure venting on the board does no good so I sit down and shut up and wait to see the outcome along with all the others silently suffering this draw down with me.

One concern I have however is the system bases it's recommendations on "typical" market parameters and "this ain't Kansas no more" after the sell off we've had.  But then I refer myself back to my opening quote and think of another quote I've heard lately "it is what it is"  (It doesn't make me feel any better but what will when one is loosing $$$)

Have you drawn any conclusions from this experiment?

The system seems to work best with indexes.  Could you try IWM and QQQ?

Brian

Great job, tumbler.  

The first trade of any series on the traditional spy equity side of the spreadsheet seems to be based on a purchase amount $100,000.  Shouldn't this be only $40,000 for the 1st buy? (if you are following Matt's multi entry spreadsheet?)

Your ideas and work really get my brain pondering so many different possibilities. 

Thanks!

Tom,  paragraph #3 gets my vote!

zwyss,    You make very valid points that one needs to take under consideration when deciding whether or not to deviate from the basics of the system. 

Perhaps Matt can shed some light on the point you raise re: large drawdowns having been inadvertently "filtered"  out of the historic data during system design.

Thanks for the thoughtful input.

Tom,

On the subject of additional leverage for the SPY system.  I have been playing around with manually backtesting (my computer skills are limited in terms of computerized backtesting) using SPY for the first buy.  If there is a 2nd signal sell all the SPY and go into SSO.  Then sell it all and go into UPRO for the 3rd signal.  For the 4th I keep the UPRO and buy another 1/3 to add to the position to equal 4x leverage.

As I write this it seems like crazy risk by the 3rd and 4th leg of the trade but the drawdowns are not too bad.  Almost all the historic trade series end up positive.  The only ones that don't are the ones that don't have a positive last leg to them.  Those do have bigger loses, but again not immensely bigger.  And there are so few trade series in the history that don't end on a positive trade

I think the key to this working is the fact that the system looks to end a long trade on an oversold bounce.  So even when a trade is going poorly, all but a few end up closing in the plus column.

In order to compare it to the $100,000 back test one would trade $75k on the first 3 legs and use that last 25k for the final UPRO buy in the eventuality of a 4th leg.

Unfortunately I don't have any nice spreadsheets to post since all my work is penciled out longhand.  Also I used SPY data for all the legs of a trade and just multiplied the results by 2, 3 or 4 for the appropriate leverage of any given leg.  

On trades from 5/2010 to 5/2011 (that I did use SSO and UPRO data for this) I got a return of 67% for this technique vs 30% for the basic multi entry system over the past 12 months.  

After I found this I went back to 1995 and have worked forward to 1999 so far. 

                        Basic SPY System       "Mo" Leverage technique

1995                8%                                 17%              

1996               15%                                41%

1997               27%                                55%

1998               22%                                47%

1999               20%                                53%  

These seem to be fairly out sized returns.  I hope I haven't made some fundamental error in logic (or math) that proves these all wrong.