Tuesday, July 24, 2018

Tactical and Strategic Trading

After seeing a big profit disappear again a few times, I think I am going to adopt a combination of strategic and tactical trades now that I am trying to trade two contracts. One contract is always held in the direction of the model for as long as the model is long or short. This is the strategic trade. The other contract is in the same direction but can be closed out for the day when there is a big profit already. That is the tactical trade. Yes, day trading but the kind of daytrading where you put a trade on at the beginning of the overnight futures session and close it at the market open or vice versa. I had planned to do this but deferred it to stage 4 or 5 of the experiment. But I think I need the psychological boost now. I will make trading decisions using a chart with 2 to 3 hour candles. On a chart at that frequency most days break down into a rising and a falling period or a weak (when the market goes sideways) and strong period. I will close the tactical trade if it has made a profit and the next half of the day looks like being weak or going in the opposite direction to the model. Anyway, let's see if this works.

It probably was necessary to suffer through the pain of seeing a big profit on two contracts disappear a couple of times to be willing to have two contracts on overnight Australian time.... I tried adding one contract tactically before but was too nervous about it to set a wide enough stop.

Today the strong period was during the overnight (the market went down, in the model direction) and the weak period was during the US daytime when the market went up in the opposite direction to the model.

I was just stopped out by the Google earnings report... Even more wishing I had closed one contract at the market open... This was a "tactical" rather than model stop. So, I got short again (tactically and strategically) at 7425.5 with the stop at 7441. This is very close, but was the second pivot resistance level when the model originally went short and so with the current model stop rules, that's where the stop stays.

Actually, the model is bit ambiguous today, but following the rules for these situations, we should still be short...

I was just stopped out at the model stop. That means I'm out for today. Tomorrow morning I will re-evaluate the model direction. This is definitely looking like a losing month, similar to April, which was the initial model development month.

This model trade that was initiated on Friday lost 0.86%.

I researched the previous cases of similar ambiguous model signals so far this year.  There were only two previous cases, which were where the signal said to switch to short but was ignored because the turning point was from a value of the indicator that was close to zero. Both those times, staying long was the right thing to do. Maybe, in the absence of getting stopped out, staying short will turn out to be the right thing to do today. We will see. Either way, it is a very small sample to base any conclusions on.

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