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Rudolf,
Our signals are not subjective, we are. :) Just kidding! We trade a
purely mechanical system for our Intermediate Term Signals and for our short
term signals.
This Intermediate Term Signal (ITS) is used to trades our equity accounts,
primarily options. We currently have January 2001 80 Calls which we will
sell whenever we get an ITS sell signal. All of our other equity trades are
traded in the direction of this signal, but are based on knowledge of
certain markets, ValueLine, etc. We are planning on switching our option
trading to SPX options from QQQ since, duh, our signal is directly related
to the S&P. We will also be buying options further out to minimize the time
dilution factor.
We also use this ITS in combination with our short-term signal used to trade
S&P futures. Here we used it to develope our trading rules. What I mean by
this is that when we have a longer term buy signal in effect, we bias our
short-term trading rules to make it a little easier to go long and more
difficult to go short. Whenever selling against the trend, we try to make
it a little harder and when trading in the direction of the trend, easier.
Since we're contrarians, our signals are pretty good at identifying
inflection points. Anyway. we have found this technique improves our
short-term trading system by a substantial margin.
Right now, we are trading on the cautious side because of the election and
other uncertainities and have decided to not trade against the "trend" (our
ITS direction). Our ITS signal is currently running 100% correct for the
last 2 years (we changed some weights in the past year) while our short-term
signal runs 75% correct (for the past 15 years). Anyway, someone once said,
"you can't go broke taking a profit." I think it was Bernard Buruch but I'm
not sure, and that's why we have made our last three trades. We're just
locking up some profits and minimizing risks.
Guy
"Suppose you were an idiot... And suppose you were a member of Congress...
But I repeat myself."
-- Mark Twain
-----Original Message-----
From: owner-metastock@xxxxxxxxxxxxx [mailto:owner-metastock@xxxxxxxxxxxxx]On
Behalf Of rudolf stricker
Sent: Tuesday, November 07, 2000 8:30 AM
To: metastock@xxxxxxxxxxxxx
Subject: Re: Taking a little profit
Guy,
On Mon, 6 Nov 2000 18:08:47 -0800, you wrote:
>Well, we have another conflicting situation and we decided to play safe.
We
>closed out all of our S&P futures at a profit and went to the sideline
>because we got a SP39 short term sell signal for tomorrow morning, while we
>still have a Buy signal on our intermediate term signal..
Did I get it right, that you work with an individual / subjective
combination of a _short term_ (i.e. high-frequency HF) and an
_intermediate term_ (i.e. low-frequency LF) signal?
My 1 cent: I also use a HF signal (for better "timing") and a LF
signal (for better "strategy"). Overall results are much better, when
I use a systematical combination of both signals:
The LF signal has 3 states: "Stay out", "Enter or Leave", and "Stay
in". The HF signal then does the "timing": HF "Enter" is only valid
during LF "Enter or Leave" and LF "Stay in", whereas HF "Leave" is
only valid during LF "Enter or Leave" and LF "Stay out".
Including these "rules" into the system optimization process, has a
lasting positive influence on my results. - Just my 1 cent ...
mfg rudolf stricker
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