Heads up on S&P

If SPY manages to close above 113.51 we will have to go long. Here is a chart (click to enlarge):

Note that the indicator is drawn with our "standard" parameters (2,7) and not with "optimum" parameters. I still have not came up with an optimization algorithm that I'd like. Working on that. All I can say is that it will  make our stops wider like on the chart below:

An article from wikiHow

Though a "recipe" this article provides is quite vague and even naive to some extent, the idea of being in equities when they move up and staying in stable value options (money market) when they go down is what we preach, research and implement.

I am planning to return to this article and show that the approach suggested is better than doing nothing and that the ATR stop based system we follow is better.

Here is a link: How to Manage Your 401k Investments and Choose Your Funds

Back-testing and optimization

All investment plans, methods, systems and parameters of those systems need to be constantly evaluated and adjusted.

Ideally, evaluating of a system would include all of the following steps:

1. Back-testing (using in sample and out of sample historical data)

2. Paper trading (forward testing)

3. Live trading

Today I am reporting some results of back-testing I've done. Here is what my favorite source of definitions - Wikipedia - says: "Backtesting (or back-testing) is the process of evaluating a strategy, theory, or model by applying it to historical data. Backtesting can be used in ... studying how a trading method would have performed in past stock markets".


There are many articles on the Internet on back testing. Here is one recent that talks on common mistakes in back-testing How to Backtest Your Trading Strategy Correctly

Up until now I have been visually back testing the system using historical charts some of which I published. I have been mostly using 7 week period and 2 as a multiplier for our ATR-based entry and exits. These parameters work well for most securities and on most time frames from monthly all the way to intra-day.

Vacation time

I'll be on vacation next week. I expect to update the signals on September 17.

We are staying in cash and bonds still despite this rally. I'll update the table and charts this coming long weekend.

Happy Holiday everyone!