Friday, July 16, 2010

System Position Update

Below are the results of the swing system trades. Currently, this exit represents a hedge-point for the newest release of RVS and portfolios are hedged to limit the risk for the current trade. The trend following enhancements to the RVS model are now holding the short position till its deemed to be expired. Then the position will be closed. This means that the trade could extend for quite some time. I would like to add that though I have been using this blog to communicate with clients I will not be publishing all the trades or the latest model triggers via a public blog. It has been a very good mechanism to confirm, communicate and reference live and funded trades. We allocated around $50,000,000 on the ES trade, while the TF trade which took 35 points on this run, had around $20,000,000 allocated. I do think we were effective during very challenging markets.

This weekend I am releasing the updates to RVS and additionally, I am releasing some amazingly powerful forex systems with outstanding risk and targeting controls. We will be allocating a large amount of our assets to the forex markets, which I am excited about, but has also been very demanding from a development perspective. 

Regarding my take on the markets, I see a possibility for a bounce and the new RVS method sees this as a hedge-point, however, I reiterate my comments regarding the dollar and the markets as a whole, therefore, I expect to be much much lower over the near-term. And as I pointed out on Wednesday, the market cycle is a very large hurdle to overcome. If prices were to over come that cycle in the 1100 area in the ES I would view that as a significant achievement. 

In so far as I can be helpful, I will try to keep updates on my blog regarding the major inflection points in the markets - as I have done recently. However, there is reason for me to potentially a private (though not charged) blog where I can ensure a constructive and positive interaction on a proprietary basis. 

Today, i found the following chart on THEMAXFACTOR blog: 
Max has used my charts in the past and apparently possesses, at the young age of 15 in Switzerland (where apparently you don't have to go to school and you can spend all day trading the markets), the capability to produce high quality trades. Max made some very good comments regarding draw downs and risks and I appreciate that he has consistently reference my charts on his blog. This goes back to my previous posts regarding allocation amounts. However, what Max may have achieved in confidence/arrogance has not been matched by analytical ability. 

I would like to point out that one of the nice characteristics of these systems, especially the dailys is that they take the smallest positions early and the largest late. In the ES system we built a 20 contract position in the model (which trades live) with an initial 2 contract entry. This ensures in fact the the drawdown risk is significantly reduced and enabled an average price in the 1070's, which will look like a great fill when looked at several months from now. Therefore, the point regarding being deep in the red is curious and misguided. The market situation has been in a highly dangerous posture and may or may not have made it to ideal levels to short, this is why an initial position is initiated and the positions are built in the manner that they are. Additionally, there is a self assessed performance analysis and risk analysis basis for these systems to self-manage their trading risks, probabilities and allocation sizes based on their performance in the markets that they trade. This has been a considerable effort for me to build but is very exciting and has opened tremendous opportunities in markets that make the TF and ES look calm, Forex and commodities for instance. I do recommend that Max demonstrate more of what his most intriguing post and concept are as he seems to follow them very well as can be easily seen via the portfolio shown below. 

As most market participants know, trading and arrogance are not bedfellows though they are common occurrences and it seems even in Switzerland. For an example of "garbage in and garbage out", I highly recommend looking at Max's trades and his portfolio which has taken quite a few 50% draw downs lately and did not fare welll today...(included below) It is easy to know what to do when you don't have to do it. Its also easy to back date posts or post trades in posterity, As I have real money trading and real clients, I am keen to share the good and the bad and I have an interest in presenting thing in a way that builds a understanding and integrity, therefore, I make a deliberate effort to leave my posts unchanged and also post information as I it develops with no filter. I do hope that this effort is obvious. 

So, shorting the ES in the 1070's certainly was reasonable and trade risks within reasonable tolerances. The advantage of trading a daily system like this is that you are not likely to get into situations, like BP, where you catch the knife for 50% haircuts. This is also the reason, that I like to allocate 10 to 30% of the equity in an account to risk positions rather than more and also why I focus on index trading for equity style investments.

I have been overwhelmed with the recent development efforts and enhancements fto the RVS/HLA and Cycle models and risk management systems - which have been a mind numbing process of refactoring, rewriting and re-architecting and finally reimplementing the derived model functionality, trade controller and risk management infrastructure - a few times. Usually just about when I thought I was nearly totally done. This combined with fairly substantial capital allocation/management decisions has left me practically no time and mostly no energy to follow through on personal and exploratory opportunities (Vimal among a few others please accept my apologies)

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