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List et al,
Well that was one heck of a ride! We closed everything out an hour or so
before the close and are in cash (equities and futures).
As I said, we were waiting for the proper "contrary" and we are now in
possession of a real sell signal.
I'm not sure what we'll be selling short on Monday. We will be shorting our
S&P futures naturally. But we'll need to do some calculations to determine
how many to short in keeping with our money management philosophy. I'm not
sure if we'll be shorting stocks or just buying some OEX Put options and/or
our normal QQQ, DIA and SPY indices. I don't think we'll be quite as heavy
on the short side.
The problem being a contrarian is we trade opposite everybody else and we
have to dance with the lady that brung us. That means, we trade all
signals, no matter how nervous we feel. We know we are only going to be
right 4 out of every 5 trades, on average, and we never know if the next one
is IT.
Now the following is to encourage those of you who have fairly good signals
(like buys and/or sell signals) to make sure you take a good look at the
ValueLine 1-1 stocks that we've been trading. Here are the actual results
with my brother's granddaughter's account being an absolutely great example
since he can't do futures in it or sell short.
[OFF TOPIC] [NOT MEANT FOR BUSINESS, TROLLING or WHATEVER] MY
DISCLAIMER!
As an aside, I have some trade summary data to report. Before I do, I'd
like to state officially that we're NOT looking to sell anything, we have NO
web site, no newsletter, and are not registered CTAs. Even if we proceed
with a newsletter sometime in the future, that's months away and our system
might turn to crap by then, so everybody should consider himself (or
herself, to be PC) warned. We're just private traders. Now that I've
reiterated the disclaimer, a little stronger, here are some of our UNAUDITED
results.
First, my brother started trading equities, in addition to futures last
June. We now have a complete 12 months of data in his accounts. He was
profitable 11 out of the 12 months. Even with a couple of our famous
screw-ups (like that big loss last November) he finished the year up 100%
(he made a 100% return on capital). I don't want to give the numbers
because that's his business, but we're talking mid six figures. Of course,
the account is sort of back at it's original size because he had to pay
Uncle Sam his due and he bought a lot for his retirement home and another
country club membership to go with that new lot. Still, all in all a
successful year.
Second, on a lighter note, he opened up a Crumy Trust (I think that's a
college trust and I'm not sure how you spell it) for his granddaughter on
November 15,1999. He funded it with $10,000. Now, he is not allowed to go
short in this account, so he's limited to only trading our buy signals. He
closed out her positions today and put her in cash (money market fund
actually). Her account balance, as of the close of trading today, is
$24,231.84. Again, this is unaudited, but since we're not trying to sell
anybody anything, too bad. His trading technique for Lucy's account is as
follows. When we get a buy signal, he mentally goes down the list of the
top 10 to 15 stocks we plan on trading in our own accounts (from the
ValueLine 1-1 selection process I laid out earlier). He selects the top 3
or 4 and buys these. I think she held LSI, AMD and one other one. Not too
bad for a young lady who just turned 1. :) His target is $40,000 by
November. I only wish him well, because that means I'll be on the same
merry-go-round.
On a final note, he opened up a $5,000 account for our sister also on
November 15, 1999. Now she's always been the free spirit in the family and
just started to mature in her mid 50s. She loved the Grateful Dead, has a
couple of giant dogs (Newfoundland or however you spell those monsters) a
new yellow VW Beatle and a new house that I'm sure her cats and dogs have
already trashed. She lived through the 60s and 70s and can't remember much,
if anything of it. :) I on the other hand already had two kids in the 60s
so I wasn't able to not remember anything until after the divorce in the
70s. Anyway, enough reminiscing, her account balance, as of the close of
trading today is approximately $10,000 (I didn't ask my brother for the
exact number and he might have lied to me anyway :)).
I guess what I'm trying to say, is that working with the ValueLine
recommendations has a limited track record with us and has come through with
flying colors, and has even compensated for those times we screwed up.
[The RANTINGS of an OLD F**T]
Happy trading to all. I'm in a great mood after this week, so I thought I'd
share some additional thoughts with the list and try to encourage everyone
to keep working to find that Holy Grail. A little proviso is to try to
experiment with various, different approaches and not use anybody's tools.
Develop your own. It's hard but can be done. As I've said several times,
the only indicator we use in MetaStock that came with the software is the
moving average. We use it on our own indicators or within our own
indicators. Everything else in the 14 levels of calculations uses addition,
subtraction, division and multiplication and that's it. You don't need to
be a genius. You do need to develop a "feel" for numbers and the market.
We don't use anything else! Nothing fancy. No advanced math, even though
all of us have degrees in things like statistical economics, engineering
math, math and statistics, etc. There's no easy way to do this. You need
to spend the time and effort and grind it out. I firmly believe that the
first year or two should be done without a computer, but that's my opinion
and I've been working with computers for over 40 years now, and that you
should paper trade a system at first. Secondly, don't use optimization
tools. It either works or it doesn't and it works with numbers that make
sense, not two out of a basket of 300,000. We don't optimize! We tried it
and found that it cost us too much money. It's highly overrated, in our
opinion, but we did spend a couple of years playing with MetaStock doing it.
We do back test any new indicators we develop. We're firm believers in back
testing, however we feel the more recent results are more important that how
the indicator worked 5 years ago. Took us a while to understand that
because of the dynamics of the market, you need to constantly monitor your
indicators, etc. Actually, we constantly monitor our trading rules, but
that's another rant.
I hope everyone has a great weekend.
Guy
Paranoia...you only have to be right once to make it all worthwhile!
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