Started to Code the Decision Tree

After a couple of hours of coding and debugging I got the first little bit of the model decision tree to work and spit out buy and sell decisions. The output looks like this:

4895    6584.58008 1       0.00000 Stay long
4896    6653.29004 0       1.00000 R Sell Confirmed by pdD
4897    6676.62988 0       1.00000 Go long
4898    6677.93994 0       0.00000 Stay short
4899    6662.66016 0       0.00000 Stay short
4900    6708.49023 0       0.00000 Stay short

As the decision tree is far from complete, only the first two orders – long and then short – make any sense. The first number is a code for the date, the second is the closing value of the NASDAQ 100 index on the previous day (so that it's easier for me to work out where I am than the obscure date codes). Then there are codes for buy and sell and then a verbal description of the decision and why it was taken.

Luckily, writing computer code is a core practical skill for professional economists (or you should have these skills if you don't!) we took programming courses as part of our first year undergrad study.

Should Have Done the Long Trade

Market went up strongly. Model is still long for Monday. But I'm still not in. I needed to take a break from trading. This is why I need an automated system.

Rescued the Bad Trade

I stayed up and closed at 7119.75 the bad trade where I went long at NQ = 7145. So in the end I only lost USD 500 on that trade and am still up more than USD 6k for the month. If I exactly followed the model, though, I would be up USD 13k! The model is now switching to long for Friday, but this trade is based on the adjustment I made for the 1987 crash (picture below from 1987) and doesn't have a lot of statistical support. So, this is a high risk trade and I think I will wait it out. Yeah, I'm not doing what the model says to do but at least I am not trading against it!

In other news, the Tribeca fund (TGF) starts trading on the ASX today . They only sold 63 million shares in the IPO out of a maximum of 120 million, which is a bit disappointing. Maybe, my thesis that it would trade above NAV will take a while to work out. My entry point into Pershing Square was really bad - lost around 4% already on it. I also did a trade yesterday to switch back AUD 20k from CFS Conservative Fund to CFS Geared Share Fund. ASX SPI futures are off 47 points but CME NQ futures bounced after the New York close and the model is switching to long, so hopefully my timing wasn't too bad.