Trying to Learn the Lesson about Narrow Stops Again

Yesterday the model said to go short NQ (NASDAQ) and long ES (S&P500). I started off the day, doing exactly that, though I entered the trade badly and ended up down on the NQ part of the trade relative to the ES part of the trade. Then, I closed the ES long for a small profit and based on "pivot points", I set a stop loss at 7010 - 50 points above my entry point. As you can see from the chart, the market briefly went through the stop but then turned and ended the day near where it started. So, I lost a lot more money than the model did. If I had set the stop at 1% (7030) or kept the hedge without stops, I would have ended the day with only a small loss. Really, it was fear of missing out on making a profit on the ES trade that screwed me up.

I also did a long CL (crude oil) trade yesterday and was stopped out too. Then the market also turned around and actually ended the day higher. The lesson I am learning from that one is to stick to the stock market for the moment so I can set wider stops and not worry about the potential loss from multiple positions going wrong.

The model is again short NQ and long ES for today. I was going to sit out for today, but writing this post has inspired me to put on that hedged trade. For the record, I sold NQ at 6969.75 and bought ES at 2729.50.

Weekly Update

Another successful week. Now up USD 8k for the month and USD 6k since the trading experiment started. On Friday I was long NQ when I should have been short. I only lost USD 150 luckily (though double that relative to what I would have got if I had done the correct trade). This was because of an error in a link in a spreadsheet. That link is now fixed. The model says short NQ (NASDAQ), long ES (S&P 500), long CL (Crude) for Monday. I think the short NQ is only a short term correction in NQ and probably it will switch back to long by Tuesday. It is a bit of an unusual feeling to see myself keep winning trades. I said to Moominmama that it felt like I was cheating or something. She said: "Please don't feel like that, please make lots of money :)". So far, this month I just have had to stay long, which isn't so easy for me as I tend to be bearish. And apart from Monday it looks like that staying long will continue to be the challenge for a little while till the model actually shifts to the short side. So, for the meantime we are still in phase 2 of this experiment, which is to see if I can stick to what the model says to do. Only, when we've been through both a long and a short phase successfully, will we be able to say that I think.

These 13F Tracking ETF's Have Horrible Performance

13F is a form lodged quarterly by US based investment funds. A 13F following strategy takes the stock picks from top hedge funds as revealed by their 13F forms. Two ETF's that follow this strategy are ALFA and GURU. But both have horrible performance with negative alpha of of -5% and -7%, which is rather ironic. Does this strategy no longer work?