As you know, a couple days ago I sent out a video on the SPY
system and some stop loss ideas that I will be working on.
I'm happy to report that I've found what I'm going to use and
will be employing these new rules into the SPY swing system.
One of them is a
hard stop loss of
-6.5%,
this means that all future trades can only lose a maximum of
-6.5%!
Out of 257 trades, there was only been 6 trades counting this
one with a >5% draw down. Employing just a 6.5% draw down
only cuts out 3 of the past trades out of 257 trades, not bad.
However I have a secondary rule where the system will look to
re-enter the trade again sometime after it is stopped out (after
another condition is met), this will catch the trades that would
have been winning trades has the system stayed in. Again watch the
video
Now obviously this doesn't help our current trade, which is down
-15.16%, however this is a good change for the future and provides
a nice safety net of a max stoploss of -6.5%.
Also regarding the current trade, it's hard to say where it will
end up at. Currently it's down -15.16%, however remember that
the system will stop out after an oversold bounce, so who knows,
maybe it will stop out with a -5% or -6%, really we don't
know.
Anyway for the future our max loss will be -6.5%, which anyone
can live with.
Under the new system rules, we would have been stopped out at
-6.5% and then go long again at some point (to catch some of the
expected rise). Can you let us know when we hit this buy
point under the new system rules? I'm expecting a decent
bounce and would like to catch some of it.
Posted by lessarda on 11th of Aug 2011 at 04:48 pm
would you please show the same analysis for the two backtested
trades that the new rules would have affected (Feb 09 & Jul
02)? Thanks again.
Also, is the re-entry more a matter of resetting the system
below the stop as if the original trade hadn't been taken or are
you introducing entirely new rules/logic for that re-entries than
you already had for entries?
Once I have the coding done, I will show the stats. I
don't find this stuff by back-testing and curve fitting a bunch of
variables until I find something that looks good, I study the
charts and trades in-depth and manually
decide myself what makes logical sense and what looks
good, and then tell the programmer to program it in.
He's not finished coding in all that I want yet, when he's
finished I'll show the new results.
Posted by kingpin777 on 11th of Aug 2011 at 06:41 pm
I hedged 50% of my position today with a double short etf
(canadian version, hsd.to).
If we get some weakness tomorrow i'm reasonably covered (or a
wave 5 down).
With the bounce off 1200, my loss was cut in half (i went off
the reservation and delayed entries 1 & 2) and i'm comfortable
holding for a larger bounce.
Matt -- right now that buy looks great -- it makes me wonder
though if the system could take a series of 6.5% losses if the
market kept generally moving down? I thought the system might have
to somehow reaffirm that it was a bull market before buying in
again.
We will have to review that request. At this point I have
to just say its a possible until I speak with Matt but another
point would be the question somewhat assumes the system might not
have already bought and I cannot verify that is the case.
Posted by fishbait on 11th of Aug 2011 at 11:38 am
What is really needed for this system is a stoploss formula that
takes into account the volatility and price action. The
stoploss therefore would move up as the price moves up.
To keep the stoploss at -6.5% from intital entry really is not what
a system should do. I think this could be done by your
programmer and better serve the systems needs.
Posted by Robert50 on 11th of Aug 2011 at 11:35 am
Here is my prediction on the SPY system:
Those who stay in the trade, regardles of sell signals, will end up
with a 10% gain by Thanksgiving. LOL! Gotta stay
light!
Thanks for working that out Matt. I will be able to keep
following the system now -- wasn't sure I could before based on the
stress of this trade even mitigated with hedging and options.
Bravo!
Robert50 - The system will short below the 200 MA, but it has to
manage the current trade first and exit. Once the trade is
exited and if SPY is still below MA, then it will short. The
system entered the trade just above the MA, it does not stop out by
simply falling below the 200 day MA.
Please go back and watch my video from 2 days ago, I show that
if you did that you would stop out of a lot of nice trades.
here's that video from 2 days ago
Of course, the system will still take a few long trades below
the MA, just like it will do a few short trades when it is above,
again this is covered in the FAQ
Posted by hurricanemalta on 11th of Aug 2011 at 05:50 am
Matt
Thanks for update here.
Ok a 6.5% stop loss is set on the single entry fine.The present
trade had a 1st entry at 130.22.I presume the stop would be
immediately set at approx 121.75 so EVEN INTRADAY we would be
stopped out by now.Correct?So a flash crash would definitely see us
out .
Moving on...BUT the multi entry keeps making entries below the
initial entry.In our present trade we entered ALL systems first at
130.22...BUT the last entry of the multi was 120.26 below the
1st entry stop loss of 121.75...I am sure you see my
point here already..we are stopped out but still making
entries.Obviously that is not your plan here so how will the multi
be effected.Bottom line we would still be taking entries
on the multi even when the stop for the 1 st entry has been
hit.I am wondering if you are thinking the rules for the multi will
NOT be changed at all and there will be NO stop for this system as
it's purpose is to enter at cheaper levels.
I am sure others have already thought the same thing as me
here.
hurricanemalta - yes that's correct, under the new rules, the
system would have stopped out for a 6.5% stop loss on Aug 4th at
$121.76 and would still be in cash from that date.
Regarding the multi entry version, logically it wouldn't have
taken the 4th entry because the price would have been below 6.5%!
Think about it, that's how the logic would work, once stopped
out below the 6.5% stop loss, no more entries would occur on the
multi entry system, regardless if it's the 2nd or 3rd or 4th entry,
doesn't matter, the 6.5% stop loss stops the trade.
Again as I stated in the video, there's more to the system than
this because some of the past trades, like the Mar 09 trade was
down 10% but ended up making 20% etc. Therefore once the system is
stopped out, it will look to re-enter the same long trade when
conditions are better.
anyway guys, I have to go to bed and see if I can get 2 hrs
of sleep, been up all night working
no not really. I gave you guys the stats, it only affects
3 trades and that includes this one. So it affects 2 previous
trades with 4th entries and this one.
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New SPY system stop loss rules, etc
Posted by matt on 11th of Aug 2011 at 03:08 am
As you know, a couple days ago I sent out a video on the SPY system and some stop loss ideas that I will be working on.
I'm happy to report that I've found what I'm going to use and will be employing these new rules into the SPY swing system. One of them is a hard stop loss of -6.5%, this means that all future trades can only lose a maximum of -6.5%!
Here's a video and statistics.
VIDEO new Stop loss rule and system addition
Out of 257 trades, there was only been 6 trades counting this one with a >5% draw down. Employing just a 6.5% draw down only cuts out 3 of the past trades out of 257 trades, not bad. However I have a secondary rule where the system will look to re-enter the trade again sometime after it is stopped out (after another condition is met), this will catch the trades that would have been winning trades has the system stayed in. Again watch the video
Now obviously this doesn't help our current trade, which is down -15.16%, however this is a good change for the future and provides a nice safety net of a max stoploss of -6.5%.
Also regarding the current trade, it's hard to say where it will end up at. Currently it's down -15.16%, however remember that the system will stop out after an oversold bounce, so who knows, maybe it will stop out with a -5% or -6%, really we don't know.
Anyway for the future our max loss will be -6.5%, which anyone can live with.
I hope this helps
Matthew Frailey
Buy point under new rules
Posted by starfox on 11th of Aug 2011 at 12:34 pm
Hey Matt,
Under the new system rules, we would have been stopped out at -6.5% and then go long again at some point (to catch some of the expected rise). Can you let us know when we hit this buy point under the new system rules? I'm expecting a decent bounce and would like to catch some of it.
startfox - under the new
Posted by matt on 11th of Aug 2011 at 03:30 pm
startfox - under the new rules, the system would have bought at the close of 8/8 at 112.26.
Thanks, Matt...
Posted by lessarda on 11th of Aug 2011 at 04:48 pm
would you please show the same analysis for the two backtested trades that the new rules would have affected (Feb 09 & Jul 02)? Thanks again.
Also, is the re-entry more a matter of resetting the system below the stop as if the original trade hadn't been taken or are you introducing entirely new rules/logic for that re-entries than you already had for entries?
Once I have the coding
Posted by matt on 11th of Aug 2011 at 06:47 pm
Once I have the coding done, I will show the stats. I don't find this stuff by back-testing and curve fitting a bunch of variables until I find something that looks good, I study the charts and trades in-depth and manually decide myself what makes logical sense and what looks good, and then tell the programmer to program it in.
He's not finished coding in all that I want yet, when he's finished I'll show the new results.
Understood...I was just referring to the affected trades from the development period
Posted by lessarda on 11th of Aug 2011 at 07:11 pm
vs. the post-release current trade. The comments in recent days on curve-fitting miss your point here.
Outstanding info Matt. Another reason
Posted by Robert50 on 11th of Aug 2011 at 04:03 pm
Outstanding info Matt. Another reason to stay with the trade if you were inclined to sell!
gap down tomorrow, up next
Posted by Robert50 on 11th of Aug 2011 at 04:15 pm
gap down tomorrow, up next week? Looks that way. Would be healthy as steve pointed out.
I hedged 50% of my
Posted by kingpin777 on 11th of Aug 2011 at 06:41 pm
I hedged 50% of my position today with a double short etf (canadian version, hsd.to).
If we get some weakness tomorrow i'm reasonably covered (or a wave 5 down).
With the bounce off 1200, my loss was cut in half (i went off the reservation and delayed entries 1 & 2) and i'm comfortable holding for a larger bounce.
We'll see how it plays out.
Well I'm sure we have
Posted by matt on 11th of Aug 2011 at 04:12 pm
Well I'm sure we have plenty of people members who sold on the close of the 8th who couldn't take it anymore
trade's not over yet....still a
Posted by marketguy on 11th of Aug 2011 at 05:13 pm
trade's not over yet....still a chance we undercut the lows (and god only knows what may happen then)......
Maybe, Matt, but breaking discipline
Posted by Robert50 on 11th of Aug 2011 at 04:24 pm
Maybe, Matt, but breaking discipline is counter-productive to a mechanical system, as you have pointed out. Capitulation I guess.
how about a rule that
Posted by bkout3 on 11th of Aug 2011 at 04:50 pm
how about a rule that if 70% of us can't take any more pain and bail out the system doubles down? LOL
ha ha, yeah that's good
Posted by matt on 11th of Aug 2011 at 06:45 pm
ha ha, yeah that's good one, I wish I could program our feelings into it.
Matt -- right now that
Posted by bkout3 on 11th of Aug 2011 at 04:02 pm
Matt -- right now that buy looks great -- it makes me wonder though if the system could take a series of 6.5% losses if the market kept generally moving down? I thought the system might have to somehow reaffirm that it was a bull market before buying in again.
We will have to review
Posted by tom on 11th of Aug 2011 at 03:20 pm
We will have to review that request. At this point I have to just say its a possible until I speak with Matt but another point would be the question somewhat assumes the system might not have already bought and I cannot verify that is the case.
great point
Posted by rikkwan on 11th of Aug 2011 at 03:13 pm
good thinking star!
Posted by bkout3 on 11th of Aug 2011 at 01:30 pm
good thinking star!
hard % stop
Posted by fishbait on 11th of Aug 2011 at 11:38 am
What is really needed for this system is a stoploss formula that takes into account the volatility and price action. The stoploss therefore would move up as the price moves up. To keep the stoploss at -6.5% from intital entry really is not what a system should do. I think this could be done by your programmer and better serve the systems needs.
Here is my prediction on
Posted by Robert50 on 11th of Aug 2011 at 11:35 am
Thanks for working that out
Posted by bkout3 on 11th of Aug 2011 at 08:45 am
Thanks for working that out Matt. I will be able to keep following the system now -- wasn't sure I could before based on the stress of this trade even mitigated with hedging and options. Bravo!
Not sure about this one by 200 day
Posted by Robert50 on 11th of Aug 2011 at 05:53 am
Watched the video, but if the system is below the 200 day, you would think it would go short, not add another long....
Robert50 - The system will
Posted by matt on 11th of Aug 2011 at 06:00 am
Robert50 - The system will short below the 200 MA, but it has to manage the current trade first and exit. Once the trade is exited and if SPY is still below MA, then it will short. The system entered the trade just above the MA, it does not stop out by simply falling below the 200 day MA.
Please go back and watch my video from 2 days ago, I show that if you did that you would stop out of a lot of nice trades. here's that video from 2 days ago
http://bpt-videos.s3.amazonaws.com/SPYsystemthoughts/SPYsystemthoughts.htm
Of course, the system will still take a few long trades below the MA, just like it will do a few short trades when it is above, again this is covered in the FAQ
Obvious query others will be thinking too I guess.
Posted by hurricanemalta on 11th of Aug 2011 at 05:50 am
Matt
Thanks for update here.
Ok a 6.5% stop loss is set on the single entry fine.The present trade had a 1st entry at 130.22.I presume the stop would be immediately set at approx 121.75 so EVEN INTRADAY we would be stopped out by now.Correct?So a flash crash would definitely see us out .
Moving on...BUT the multi entry keeps making entries below the initial entry.In our present trade we entered ALL systems first at 130.22...BUT the last entry of the multi was 120.26 below the 1st entry stop loss of 121.75...I am sure you see my point here already..we are stopped out but still making entries.Obviously that is not your plan here so how will the multi be effected.Bottom line we would still be taking entries on the multi even when the stop for the 1 st entry has been hit.I am wondering if you are thinking the rules for the multi will NOT be changed at all and there will be NO stop for this system as it's purpose is to enter at cheaper levels.
I am sure others have already thought the same thing as me here.
Thoughts?
Thanks
hurricanemalta - yes that's correct,
Posted by matt on 11th of Aug 2011 at 06:04 am
hurricanemalta - yes that's correct, under the new rules, the system would have stopped out for a 6.5% stop loss on Aug 4th at $121.76 and would still be in cash from that date.
Regarding the multi entry version, logically it wouldn't have taken the 4th entry because the price would have been below 6.5%! Think about it, that's how the logic would work, once stopped out below the 6.5% stop loss, no more entries would occur on the multi entry system, regardless if it's the 2nd or 3rd or 4th entry, doesn't matter, the 6.5% stop loss stops the trade.
Again as I stated in the video, there's more to the system than this because some of the past trades, like the Mar 09 trade was down 10% but ended up making 20% etc. Therefore once the system is stopped out, it will look to re-enter the same long trade when conditions are better.
anyway guys, I have to go to bed and see if I can get 2 hrs of sleep, been up all night working
Q: to Matt on New rules: Can a NEW SHORT TRADE come as a 3rd, 4th below -6.5%
Posted by cubby on 11th of Aug 2011 at 07:43 pm
New rules: Can a NEW SHORT TRADE come from a 3rd, 4th below -6.5%?
Thank you
no, remember the system only
Posted by matt on 12th of Aug 2011 at 02:02 am
no, remember the system only shorts bounces, it wouldn't short a breakdown sell off
Matt..I imagine the whole possibility of a 4 th entry occurring has now been seriously reduced under this new idea.In fact one would think that maybe a 50,25,25 entry would now be a consideration
Posted by hurricanemalta on 11th of Aug 2011 at 06:50 am
no not really. I gave
Posted by matt on 11th of Aug 2011 at 09:58 am
no not really. I gave you guys the stats, it only affects 3 trades and that includes this one. So it affects 2 previous trades with 4th entries and this one.