SPY system adding new rule - in-depth explanation

    Posted by matt on 14th of Oct 2021 at 10:30 am

    I'm adding a new rule to the SPY systems that will help us catch more of days like today, I've seen this happen so many times so I might as well make it a rule

    So yesterday morning the QE BTS went to cash - was a profitable trade. The exit signal is generated on the previous day, and the system then exits on the next day's open (because statistically the market likes to gap up from overnight and in the past the system stats are higher by exiting on the next day's open vs the previous day's close.

    Here's an image of the QE BTS system  where you can see the recent 2 trades. Regarding this last trade, price rallied over the 9 day MA, which was your reversion to mean bounce trade. The system then decided to hold that trade because my bpt momentum indicator was green. This indicator turned red on Tuesday, which generated the sell signal for Wednesday morning. 

    HOWEVER, notice that the momentum indicator had turned back green on Wed - again the system had already made its decision to exit on the previous day. However in my observation of this phenomenon in the past whenever the momentum indicator is red and then turns back green on the next day's open where the system was going to exit - usually the market rallied higher - thus what we are going to do in the future is on the morning that the system is supposed to exit - I'll check the bpt momentum indicator and if it has turned back green - make the decision to KEEP holding the trade long - with a stop t that day's lows.  Again this decision isn't based off today's rally - I've seen this occur probably 10 times in the past in real time. The munutia is that there's no way to code that into the system because these are daily close systems - the system makes its decision at the closing candles, and thus I cannot add a rule to the system to have it change its mind on an opening candle - it's a change I'll manually do and communicate 

    anyway there you go, otherwise this week I'll probably work on backtesting the CCI sub system to that ETF basket

    OpEx whipsaw Wednesday.... you've got

    Posted by profmel on 14th of Oct 2021 at 10:37 am

    OpEx whipsaw Wednesday.... you've got a winning system so don't let screwy options expiration week color your thought process. Maybe you can look for an OpEx trade system for stuff like this????

    As I've stated - options

    Posted by matt on 14th of Oct 2021 at 10:40 am

    As I've stated - options have nothing to do with that rule - I can point out that happening 20 something times in the past - it's something I observed years ago, was not something I just decided based on today's move and options - I say as much in the post

    Gotcha! Thanks

    Posted by profmel on 14th of Oct 2021 at 10:44 am

    Gotcha! Thanks

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