SD'S 2019 RAMBLINGS

[sd]

A very nice Thanksgiving with family- 2 meals and the Turkey snooze syndrome- an early evening hiatus found me awake and curious about the backtest of the ROKU chart- so, I went back and limited the chart to show price action late in Dec 2017 up to March 2018. This allows a better expanded view vs the 2 year chart-
Essentially using the Elder impulse green momentum bar as the Trade Signal (TS) to take an entry- I decided I wanted to include 2 approaches on the TS signal- if above the 10 ema. One is a BUY-Stop Entry (BS)- to only enter once price climbed higher than the TS bar- and the other a Market Fill (MF) order that would execute at the opening price the next day- This is simply a visual layman's test-
The setup starts when the trader notices the uptrend in December of 2017, sees price pulling back from the Dec 19 high for several weeks, and then Jan 3 a higher green TS- trade signal bar closes above the uptrending 10 ema- Looks like the momentum should continue higher- but notice that the stoc/rsi indicator is well below the 0.50 center line - (will consider that later). The Buy-Stop trader places an order to enter above the high of the green bar- and it does not execute the next day-The market order trader finds that his order to buy fills close to the lower opening price $51.50 at a nice discount ($3.15 per share) from the closing price . MF trader sees that his entry bar closes as a red bar- which requires a stop-loss be set directly at the low of the red bar- The next morning, the stock has a gap lower open at $48 and MF trader is exited for a loss of $340.00 on his 97 share (SH) position. MF trader was lucky to have applied the red bar stop, as the stock continued to decline for the next 7 days , losing another $10 in value. Price Found a Low of $38.00 , as the red 10 ma had turned downwards (rolled over from the uptrend slope) , and 11 days went by before the price bars tried to get back above the declining ema- As is almost always true in the majority of sharp declines- the 1st thrust higher 1-22 closing above the 10 ema, looked promising, but didn't have enough buying momentum to continue the trend back higher-
A green price bar closed above the 10 ma 1-25 and that becomes the 2nd signal bar TS-2 - that closes green above the 10 ema - Keep in mind- this has potential as a 1st thrust to reverse the decline and move higher-the next day, price opens above the ts-2 close and moves slightly higher- The MF trader fills at the open, while the more cautious BS trader fills as price exceeds the TS2 high. Both traders have a position between $44 & $45.00- but the bar closes lower -and is Blue- less momentum.
The stop loss is placed at the very close 50 ema which also looks to be the low of the TS2 bar. The following day, price gaps down lower at the open, and the stop that was set at $42.00 actually gets filled at the lower $41.00 (Notice the big red Stoch-RSI is below the 0.30 level) Price then declines for the next 5 days, and makes a gap open low at the low of Jan 16- commonly called as a dbl bottom- and buyers step in Feb 6 and cause that bar to become a green bar closing just above the sideways 10 ma and above the 50. TS3- It looks promising- Yes?
TA advocates will be able to identify that the 10 ma and 50 ema are running parallel and this is a non-trending condition- a possible trading range as emas consolidate and move sideways- Note that the Stoch-RSI is still blood red under the 0.20 line- However, this exercise is starting with an analysis of just focusing on the green bars as signal bars above or below a MA. I realize you have to like this kind of chart stuff to even bother taking a look- but if you are trading by discretion only- it may be worthwhile to do a back check on your reasons to enter and to exit a position.
The TS-3 entry fills both MF and BS on a green bar nice move higher- Also causes a minor up move in the Stoch-rsi -getting it above the 0.20 level. but that subsides as Feb 9 sees a red pullback bar- that would have hit the stop-loss placed at the 50 ema- Had the stop-loss been placed below the low of the TS3 signal bar ($39) , and not raised, that would have captured the start of the uptrend- and changed the net results for the better...
As illustrated, the TS4 green bar signal was higher - and- if using that as the 4th entry - the MF and BS regained their losses by Feb 20 & 21 in what appeared to be a
strong upmove. And Notice the big upswing in the Stoch-RSI- going solidly into the +0.50 and then the green + 0.80 . Price closed Feb 21 @ $51 and MF and BS trader were singing "We're in the Money" after having been through a tough -almost 2 months to get back to profitability.
But- out of the blue, FEB 22, Price has a gap down open at $40.50, well below the TS4 stop set at the 50 ema @ $43.00- and so my calculations of the account value after that gap down lower are incorrect-on the chart. Each trader was holding approx 100 shares- and so their actual balance would be about $300 less than on the chart.
Both traders accounts would be about $4,000- $4,050 and so both are down about $1,000.00 or seeing a -20% decline in the account value in 4 trades.
Chart Example 1 - Dec 2017 - Mar 2018 initial entry with $5K
i.imgur.com/0YCehEV.png


WHAT CAN BE LEARNED FROM THIS CHART?
Initially, I would say that the Elder impulse bars cannot be assumed to overcome the trend direction- If the trend momentum is down or sideways, it does not favor taking a long position.
In downtrends, don't think the 1st thrust higher-PRICE ABOVE THE DECLINING FAST EMA - is to be trusted- if entered on, expect to see some retracement lower- set that stop at the low of the reversal bar and position size- This backtest is based on waiting to enter on a green bar signal once the green bar occurs after the 10 ma crosses above the 50 ema.
consider an indicator- or 2- The stoch-rsi did an excellent job of not confirming the occasional green bars- as suitable entry bars- preferably, the stoch/RSI would be climbing higher above the 0.50 line and end quickly in the 0.80 trending - all green- Perhaps RSI 14 would be above the mid line and climbing- Price bars can be shortlived and deceiving-
This chart just covers the 1st 3 months of a 2 year period- MF and BS trader are both losing money- but since we know this stock Rocks- certainly they will make a lot of money in the next chart.....EDIT ADD While this 'study' started Jan 2018- the prior trend in Dec 2017 had a sharp price reversal higher- above the 50 ema- and the stoch-RSI indicator never got above the 0.50 line while price went higher- This divergence - Price saying one thing, while the indicator fails to react positively- may be worthy of consideration in viewing the other charts.....

cHART 2- In Feb and March 2018- Price is clearly in a downtrend under the declining 10 ma which is also under a declining 50 ema.
A swing low in the decline is made April 3 with a reaction 1st thrust higher - which pulls back and goes into a sideways base- but at a higher level - than the swing low- so this becomes a potential higher Low- and possible support- Price makes a 2nd thrust higher, that is volatile, pulls back, consolidagtes, but his higher moves changes the trend direction slope higher of the 10 ma- we get a small 2 day drop back below the 10 - a minor higher low and then a TS green bar entry signal- May 25- entry on 5-26
@ $36.00 Stop perhaps set close under the minor swing low that preceded.
I hope to continue this exercise in the successive charts up to the present day-
Some of the rules may need to be modified- for example- where to set the stop-loss is a critical consideration- but the idea behind doing this kind of exercise is to try to test a systematic and less discretionary approach to see if it actually can make money and reduce downside drawdowns.

i.imgur.com/6tbPcUE.png


CHART 3 ...in progress 11-29

CHART 3- jUNE- sEPT 2018-
3 TRADES IN THIS PERIOD- TS5 SIGNAL late May yields a 17% gain in 4 weeks until stopping out on a 2nd lower red bar.
TS6 signal--waiting until the green bar closed above the 10 ma -to enter, trends higher, but 7-24 a red bar closes, stop is placed
below, and is hit several days later on a lower red bar- Net breakeven trade.
TS7- a week after stopping out from TS6, a new green signal bar closes above the 10 ema-
Entry the next day @ $49.00, and followed by a gap higher and a new trend for 7 weeks- with a 49% up move at the end of this chart
Note that the 10 ma was penetrated a number of times with minor pullbacks, but no red bars. Stoch-RSI mostly in the green, but several
pullbacks- but stayed above the 0.50 line TS7 trade to be continued on the next chart
i.imgur.com/rh8JE0o.png

CHART 4 SEPT 2018-JAN 2-2019

This chart illustrates the TS 7 stop-out signal- that filled at $70.00 , 10-3- capturing a huge trend run from $49.00- That stop out on the 1st red bar in the trend became the start of the downtrend that continued for the remainder of the year-
A series of green bars formed above the declining 10 ma in November- but it appears to be prudent to be more cautious, and to wait until the 10 ma is above the 50 to respond- Yes, potentially one will miss some of the early upturn if the trend continued higher- but - as seen in this chart- consider the what-if it goes lower- as it did here. Also to note- the Stoch-RSI indicator did not respond positively to the formation of the week long green bars- staying below the 0.50 line-the entire time-
Looking for a Stoch-RSI as confirmation with a cross above the 0.50 line.
i.imgur.com/kV6z3Iz.png


CHART 5
ts8 & 9- A NICE UPTREND GAIN IS CAPTURED IN TS8- AND TS9 IS THE LEADING EDGE ENTRY TO A NEW POSITION-
EDIT-Looking back, the red signal bar to raise a stop on 3-13 was followed the next day with a bar that went approx $1 below the signal bar-
This would have hit the raised stop- and then would have been followed by several entries, and stop outs
i.imgur.com/Rf1BANi.png
aCCOUNT VALUE IS NOW $10,140.00
i.imgur.com/sJ9LGZd.png

CHART 6 - $20,000


wHILE IT DOES NOT SEEM probable- i have tried to apply an accurate approach to an outstanding momentum play - using some rules and entry /exit criteria.
Initially, this approach saw a -20% downtrend, but in the course of 2 years, saw a 400% gain , while limiting the downside Risk with a stop-loss based on a daily red bar as the reason to set a higher trailing stop-loss.
Seldom will we find such a momentum mover- as ROKU , but this exercise is not so much about the specific stock of Roku, but about applying a set of rules to enter and exit during periods of wide volatility- both to the upside and to the downside-
The premise of being willing to take an early stop-loss based on the 1st red bar- setting the activation price to be stopped out- and to delay the entry until the fast 10 ema is above the 50.... are both things that i selected as broad approaches to the market- But the results look promising- as this approach keeps one out of the massive declines, and reenters once an uptrend tries to resume-
Starting with $5,000.00 and seeing an initial 20% decline, the process ended up seeing a 400% gain over 2 years- $Net $20,000.00 at the present market value- Not bad over a 2 year approach..... Of course, this is all in hindsight- and not my actual positions- However, this exercise is to illustrate the potential of a systematic rules based approach- I did not try to "tweak" the basic study rules for entry and exit - tempting to use the stoch-rsi above the
Final chart:
i.imgur.com/c1q7pUo.png

[sd]

QQQ VS SPY
QQQ has outperformed SPY over the past 2 years, but with greater volatility.
The greater volatility and momentum is both to the upside and the downside swings-
The Performance chart of the Q's and the SPY illustrates the difference, with the 2 year return for SPY @ 23%,
and the 2 year return for the QQQ tech sector approx 33% to date.
I will start a "backtest " the q's and modify some of the rules applied in the ROKU study.
Notice the periods of declines that would have caused a lot of anxiety to hold through

i.imgur.com/3gMkGhm.png

Starts with $5,000 in Jan 2018
Entry rule- Enter after a green bar forms once the 5 ma is above the 50 ema.
no entry is allowed when the 5 ma is declining below the 50 ema
Will also consider a 2nd trade using the 10 ema as was done with ROKU.
I will also use the STOCH-RSI above the 0.35 line -as an entry confirmation - and not allowed if Stoch-RSI is declining below the 0.40 line
once a red bar has Closed , raise a stop-loss to within 0.5 % of the low of the bar (or- perhaps 1 ATR value)
2 year chart-
i.imgur.com/M9hRJBi.png

Chart 1- Gets a trade signal & fills on Jan 3, and a decently strong uptrend follows- Stoch-RSI goes straight up to above the 0.80 level- Price trended strong for 4 weeks, without a daily close below the 5 ema until Jan 30 with a 1st blue bar close below the ema, followed by 2 blue bars that fail to resume the uptrend, and then the red signal stop bar follows-Stop would have been raised to the low of that bar, and would have been filled the next day as price gapped lower at the open.
Igt was a net winning trade - gaining $143.95.
However, the next 3 trades all became losing trades, as a strong trending period did not ensue-, more of a sideways trading range....Note that using the 5 ma vs the 10 ma is that it is a faster moving average- and should make declines and upturns ahead of the 10 ma.
In a similar time frame, ROKU also had a series of losing trades initially- losing 20% of the starting value in that 1st chart look.
This loss is less than 4% in Chart 1 through April 2018.
Chart 1:

i.imgur.com/333QLIM.png

CHART 2 April 23- 2018- Sept 1 2018-
Trades 5, 6, 7 , with trade 7 going into Chart 3-
Finally recovering from the initial losing trades
i.imgur.com/cjD5YrE.png

CHART 3
Picks up trade 7 from 8-1 stops out $179- a lot of give back to the low of the red bar
trade 8 9-14 enters $183- and stops out @ $4,980.00 account value 10-4-
From there, Price declines sharply and hits a low of 143 in late December-

Essentially, the 2018 year was not productive for this trading approach- but the downside pullbacks were indeed limited by the "rules" of not allowing trades below the declining ma under the 50 ema- Capitol preservation is important -perhaps more important than trying to force a winning trade-
I think the earlier -4% loss seen is very minor .... and is a controlled loss by the RULE-
While i am more aggressive and do not wait for a red bar to raise a stop, this backtest exercise of a broad index is informative-
Chart 4 will pick up this same approach into 2019
Chart 4 2018-
i.imgur.com/gzMM1UI.png

cHART 5
i.imgur.com/JwYucbO.png
i.imgur.com/kYs9qa0.png
cHART 5 BRINGS US UP TO THE PRESENT DAY-
The present account value- still active -is $6,106.00 or approx a 22% gain since the entry in Jan 2018.
The qqq's started 2018 @ $155.00 and presently -23 months later - are at $205. seeing a gain of 50 pts/155 = a 32 % return over 2 years - or 16% annually.
The trade approach with the stop criteria and the entry criteria did not exceed the return of the Q's-
The approach saw a respectable 22% gain, with a minimal drawdown- compared to the drawdown in the qqq's.
We haven't seen the impact of the red bar on the present trend - so the actual net results will be lower i assume.
One of the key components is the reduction in the drawdowns % by employing an exit strategy based on a stop-loss on the red bar, and a rule to not reenter the trade during down trends!!!!

This is certainly a good starting point to examine one's strategy

Now,

[sd]

FASTER SIGNALS, FASTER STOPS,BETTER RESULTS?
iNSTEAD OF A 5 & 50 EMA, Changing the parameters to see if it improves the results:
Faster moving averages for stops- stoch-rsi for confirmation to enter earlier-
Chart 1:

i.imgur.com/31HNn90.png
EDIT COMMENTS:12.14 Chart 1 -Trade 1- Entry start after a Bull green bar above the emas as the signal- Easy up trend, prices hold above fast ema for 4 weeks before a 1st close bar below the fast ema- stop raised from the 20 ema to the 10 ema below that bar. Note S_RSI drops below the 0.8- Stop hit 2 days later Feb 1.
Trade 2 - Price decended for 6 days, and a large green engulfing bar closes above the declining averages- S-RSI at the 0.33- but the fast ema did not cross until 2 days after my Entry 2- There were 2 bars that closed below the fast ema for stop out 2. This needs to be reevaluated- Trade 3 straight forward- resumption of trend trade-

Chart 2 i.imgur.com/pABoGoM.png
EDIT COMMENTS- Trade 4 waited on a S-RSI level above 0.40 - but had a fast ema cross the 10 several days prior- The 1st thrust higher from a decline is often not a success- but with several greeen upside bars and closing above the declining emas, the entry could have been signaled by the 4-12 closing bar instead of waiting for ST-RSI to catch-up.
Trade 5 is triggered by the green reversal bar after price puts in several red bars from Trade 4 to make a higher low- Trade 5 fills at a gap open high, and gets stopped out after a stop is raised to the bottom of the red bar. Trade 6 should have seen a stop raised on the blue bar 5-15 that likely would have been hit 5-22 which would have been a small $1.50 gain and then a higher reentry after the Green bar that follows- However- 2 aspects- fast ema had a large pull-away from the others with momentum, and so a pull-back revision occurred but S-RSI was still holding above the 0.80 level. The alternate reentry 5-25 would have been @ $167.40-
as price moves sideways, the emas converge and cannot be used the same as stop-levels as when trending.... As long as S-RSI is in the green- above 0.80, no cause for concern.




Chart3
i.imgur.com/ZDxJg5k.png
Edit Comments- Trade 6 works with S-RSI holding above the 0.80 level and stops at the 20 ema until price makes a Close below the 10 ema- S-RSI breaks below 0.80 on a lower blue bar before the stop is hit on the red bar. Trade 7 - Green bar signal S-RSI coming out of oversold- Tr 8 stops out -small loss, TR-9 gains

chart 4
Account value had risen to $5,443 by Trade 10, but a downtrend occurs.
Instead of waiting for the fast ema to cross the 50- to the upside for an entry-
the entry signal is the stoch-rsi rising above the 0.80 level, with a stop to be placed below-
in trade 11, price momentum fails, a red bar forms, and the stop executes lower on the gap down open the next day. $161.00
Acct value declines $5,263.00
i.imgur.com/xs7YTSM.png
Edit Comments: Trade 9,10, sideways trading ranges- The price action break higher 11-7 deserved to be an entry signal TR 11 in the downtrend- I had noted that - During a downtrend with all emas inverted, one should wait for a s-RSI above the 0.80 level -or the fast ema to cross the declining 50 ? to ensure the reversal had momentum- Both of the trades in the downtrend would be losses. - Account value would be $5,237 for the year- vs 5,443.00 if not trying to trade into a decline.

edit-12-14 CHART 5
CHART 5 SHOWS the price reversal from the downtrend in Dec 2018- While there were several prior reversal green bars shown, the entry signal was based on a rising ST-RSI above the o.50 line. There was a substantial gap from the 50 ema, and as price bars close above the 10,20,30 the entry was realistic and conservative.
i.imgur.com/6wyuWOl.png
During the initial weeks of the emas trying to rise higher with price, the fast4 and 10 ema were below the 20 & 30 , so stops would naturally have to allow for that trend
resumption. By mid Feb the Emas were in proper upsloping alignment. on 1-29 a red bar forms and is cause to raise a stop-loss to just below the low of that bar. It is not followed with another lower bar, does not stop-out. on 3-7 , a red bar drops lower, a stop is then raised below the low of the bar, and is stopped out the next day zas price gapped down at the open, the stop would have been filled at the low- 3-11 gives a reversal higher green signal bar, and entry is made at the open 3-12 - Price goes higher until a lower bar on 3-24 closes under the 5 ema, followed by a lower bar 3-26- This would bring the stop-loss higher from the 20 ema -and potentially would have been hit 2 days later on a bar that dropped slightly lower (not noted on the chart). This would have protected some initial profits. @ $176.00 x 31.8 = $5,597 and required a reentry for Trade 14 $181.00 entry , 30.92 shares.

cHART 6 -mAR-jULY 2019
Trade 14 captures a very smooth up trend where price closes above the fast ema for weeks until late April with a couple of lower Blue bars- May 2 a red bar closes lower, and a stop-loss is raised to the low of the bar, which sells May 6- A downtrend follows, with a couple of reversal bars (blue) Mid May as a 1st rally- that fail to hold and do not initiate a Buy signal. June 1 the downtrend bottoms, and a potential reversal of the downtrend- sees 2 blue bars Close above the declining fast ema- just like what occurred in Mid May- and cannot be trusted .... Then a green bar is initiated, followsed by a second higher green bar above the 30 ema- and will be considered as a viable signal to enter the next day-- Side mention- I think a Buy-stop entry on these reversal of downtrends would be prudent to ensure price does try to go higher after the signal day. Trade 15 is still trending on this chart through July 15.

i.imgur.com/hvO4bRI.png

Chart 7
Trade 15 started on Chart 6 31.69 shares @ $181.50 stops out
i.imgur.com/4b6STCm.png

cHART 8 TRADE
i.imgur.com/4b6STCm.png

Final trade summary-

i.imgur.com/nsQa0nK.png

12.14 update- I tried to keep these trades representative of what actual conditions would likely present and not to try to optimize the charts to favor this approach-

The bottom line is that this approach gave a limited 19% return, vs the qqq's present 32% return over 2 years- but greatly reduced the downside element of Buy and Hold.

This broad approach tries to employ the concept of staying with a trend as long as it lasts, and allowing a certain amount of limited price volatility - It also allows one my age to be less conservative with their asset investments as the downside Risk is quickly identified by the price action.
The purpose of this simple backtest exercise is to define what this approach is designed to do- Capture a majority of the upside momentum, stand aside when the momentum is to the downside, and to not get whipsawed in a minor upside move in a declining trend-
The "system signals" could have been improved by recognizing sideways price action due to the Sto-RSI under the 0.50 level in the sideways price action, but i wanted to include trades in those ambiguous periods as something human nature would encourage me to do if i was watching the markets daily.
I would think that one could optimize the approach with such things as earlier partial entries, raised partial stops etc and possibly improve the return to within 75% of the Buy and Hold return- Perhaps a 24% return could be achieved - vs a 32% -
The one thing to understand is that this type of trend recognition approach greatly reduces the periodic market downturns that may exceed -20% - that the Buy and Hold community has to go through. And the potential is that one of these days, the -10% will become the -20% and go on to become the -40% decline seen twice in the prior decade by baby boomers - If someone just views the past 10 years bull market- How little do they know!
While this exercise on trend trading was primarily for my own test of it's application in my trading- I think combined with a momentum allocation approach, it has good potential to provide better market returns with reduced downside Risk. Of course, Periods of sideways whipsaws will need to be recognized and exposure limited perhaps-
While this is a good single stock exercise, is it a starting format for other investments outside of technology?
12.15 review -
Reviewing the trades, I realized i should have included an earlier green bar trade during the downtrend before trade 11-
That trade 11a- would have lost -2.9%, and trade 11b would have lost -3.32-m Nov1 and Nov 28 both had green bars on an upcrossing fast ema- in a clearly recognized downtrend- If I was to modify the "rules" to apply in a downtrend green bar signal- it has to apply to all downtrending conditions- One option is to stay out of those downtrending trades altogether-when the emas are inverted- the momentum is clearly to the downside-. Of course, trade 12 comes off the trend reversal and becomes one of the larger winning trades- +5.7% gain-
Trade wins and losses in Sequence 16 total trades, 11 winners, 6 losers including adding the 11a trade in . reduces the net gain projected earlier-
+5.6%, +.91%, +.60%; -1.2%, -2.56% , +5.18%, -2.19%, -.55%, +1.11%; -1.09%, -2.9% (11a), -3.32 (11b), +5.7%, +1.12%, +2.8%, +4.7 (still active -gain calc @ 10 ema.)
Now that the basic approach guidelines have been outlined- I would want to see how results could be improved by addressing the trades taken during emas inversion (downtrends) - There can be a lot of gain captured coming off a downtrend's pullback when reverting to an uptrend-

[sd]

There was some announcement today that Trump feels that an agreement on Tariffs with China is in the early stages ahead of the 12-15 Tariff deadline- or so i interpreted as to the reason the markets reached a new high today-.
This prompted me to be a buyer and to go back in +85% long if the buy-stop and limit orders fill.
I had recently exited on tight stops in most positions in my account as well as my spouse's - and so this whipsaw will see me chasing to enter about 3% higher entry than I exited.
The rationale for this type of approach is that it allows me to try to overweight sectors in momentum- such as technology - and now healthcare- and to control the Risk aspect of higher momentum sectors with trailing stops- I feel my YTD performance on whaft should be a conservative retirement account is presently above 16% - with a very low % drawdown over the year- less than -4% - so the net Risk has been far less than the net gain- The ultimate "proof" in the stability of this approach would have been
explored in 2018 when the markets lost almost -20% from August into December-24 2018.
fortunately, I had - through the use of stops- accumulated a larger cash position and was able to be a buyer last Dec 24, 26
While the "Rule" says to not buy in a downtrend- at -19% , how much lower can one go ?...... i guess I was hoping for something similar, as i had stopped out quickly with a fairly large cash position this past week- hoped to see a moderate decline lower at the least- Market didn't deliver- have to take the wounds and go back long with buy-stops as the insurance that price continues higher.,
Present YTD return with this approach grossly underperforms the market's return of +24% -in the neighborhood of + 16% YTD ; but the volatility has been controlled and minor . I think the longer term approach of this trend following system succeeds well when the market eventually puts in a major pullback- -10, 20 30 etc.
Only time will tell - I have to note that I failed to take the earlier trend continuation signals until today- Which was a discretionary decision ...

[sd]

I went back in Long Friday- after stopping out with some close stops
The slight -3% decline in the market this past week put me in an 80% cash position- with the Biotech exposure not getting stopped out oddly enough.
As i review the YTD stock performance for this year QQQ-34% ytd SPY 30% ytd and the relatively smooth Equity curve 17% , My net modest return underperformed the QQQ's by -50%, although I eventually held a large % in the broad large cap technology position (VGT) and VGT actually has delivered a 42% YTD gain !
Photo is the equity curve as well as the QQQ's and SPY for this past YTD.
i.imgur.com/TkSROx3.png
A 1 year return snapshot would be faulty to view as the "norm" - and not the benchmark for which to try to base an investment/trading approach-
A 2 year look back at the markets performance -This time with VGT included - gives the 'real' story- that the large gains we have enjoyed in 2019 came at the expense of large losses and give-back of profits from the highs of 2018- VGT appears to have handily outperformed the Q's initially in 2018 as well as 2019. And the Q's outperformed SPY by a wide margin as well- But note the larger volatility swings made by the 2 outperforming tech ETF's-
i.imgur.com/R12zMcj.png
Going Back until 2009- Technology -Q's outperformed Spy and VGT - in 2016- VGT starts to have better momentum than SPY- and that has continued to the present day.
i.imgur.com/yeRsPtP.png
Also, the greater volatility declines associated with technology's greater reward are examples of Why one should be able to limit one's losses during larger market declines.
THE REAL STORY OF THE MARKET'S PERFORMANCE- FROM THE 2018 SEPTEMBER HIGHS: SPY dropped -19%, and Tech lost more -23% for the Q's, and -24% for VGT. All within a 3 month period!
i.imgur.com/Dn8yijU.png
i.imgur.com/oUEL4Y8.png

While reviewing these charts-it reinforces the need to employ a method to reduce the potential downside risks and to protect a majority of the upside profits.
The tighter the stop, the greater the capture of net profits- or reducing the losses of a brand new position that goes South....The balancing point is to find the level where stops are outside of typical average volatility, but since volatility is variable -it's inevitable that some whipsaws- and account churn - become accepted and the trade to resume-once the trend resumes. The % gap between where the stop executes below the prior price high , and the gap between where a reentry is executed- is a net missed gain had one not sold and held through-

Ultimately, the purpose of doing a backtest with a rules based approach- tries to eliminate the discretion from the entry and exit criteria. This should yield objective measurable results to evaluate the approach - and so I need to complete the present backtest I had started - on DEC1- got up through Chart 4.
Time consuming to do, but between Now and Jan 1 , I hope to have a focused approach that I will apply that will capture a good % of the trending periods and keep me out of the declines- Seeking Capitol preservation combined with investing in some higher Risk sectors with momentum on their side...

I spent the remainder of today completing the Nov 30 backtest of the qqq's with a simple approach using emas to define the trend, Elder impulse colored bars to signal a potential trend change- and one simple indicator vs many- Stoch-RSI as a momentum indicator-
I had hoped for better results overall- but i also did not try to optimize the trades over the 2 years to suit I disagreeumptions-
So, the qqq's had a 32% return over 2 years with unlimited volatility swings (in 2018 it lost 26%) and in 2019 had several large declines. -10, -9% etc.
This trend trading approach does not seek to enter at the beginning of the trend reversal, nor sell at the very top - it simply tries to capture the majority of the trending move while reducing the potential for a large downside move. i think it's particularly effective for ETF/index investing- and not so for individual stocks as they carry inordinate Risk - News/ earnings etc-

Now that i did this exercise on the more volatile QQQ's- and i like the net results due to the limitation of the downside risk- I can extend this type of backtest to other funds/etfs and perhaps have a specific approach that will allow me to try to find the best momentum sectors and over allocate to them, employ the approach with appropriate stops-to limit the downside , and essentially try to get some Alpha from this approach

[sd]

I revisited Trade 11 a, 11b, and 12-All in a downtrend- Using the 1st green bar as an earlier signal to enter with a buy-stop for the next day at the high of the signal bar- still generated 2 losing trades, but not as severe in 11b. The big difference came in trade 12 with the earlier entry yielding over an 8% gain- the largest of all the trades. I also see that several other of the original trades should be adjusted to react on the initial green bar vs delaying - Trade 4 -for example - would not have waited on the stoch-rsi - and been a net breakeven. Trade 15- shows waiting on the stoch-RSI - but a buy-stop above the green bar would have entered $3 lower than the trade shows- both adjustments would have made a slight 1-2% gain - Trade 6 had a lower bar that would have caught the stop-loss so it's likely a net breakeven....
i.imgur.com/dacxBTp.png
As a backtest this is useful as a starting point of reference, other possible improvements could be considered- Since the stop to sell is always based on price weakness and retracement, the price had to come back from a much higher level- Since the average win is just 2.42%- with one trade +8%, 3 trades over 5%- combining a partial limit sell seeking to capture a stronger up move before retracing should be the next phase of this backtest-

[sd]

Started vacation this afternoon and seeing that everything I own is working along with the market indexes, I elected to put the remaining 10% cash to work-
Added to biotech,ARKG, industrial automation (ARKQ) , and the broader Technology sector with VGT- Outperforms the Q's- and is inexpensive to own. I am presently 100% invested- and all positions are in net profitable territory- Truly the Sweet Spot to be in- but we haven't had any volatility since my reentry this past week-
Trying to overweight Tech, and healthcare-biotech- but did take a small position in VDE last week - that did make a bit of an upturn this week- And one impulse single stock Buy- SNAP - a small trading position that had an upgrade to $20.00 that I thought would perhaps move quickly- finally showed some initial signs of life today.
And After a position in AAPL last week--
While the trades all have moved higher this week- the markets making across the boards new highs as well- something will inevitably occur to derail this idyllic up move- Will that occur tomorrow or next week or beyond- no one can say- How to react when it occurs? What is the Plan? Can I apply the initial "test" of the qqq's to 12+ different positions? Will it prove to be worth applying this approach across different positions? I will assume so-it will be interesting to see what evolves.

[sd]

As we close in on year end, getting ready for 2020- and some New Year Horse Race picks....I would have to note that AAPL appears to be the best DOW performer of 2019!
It is up 103% in 2019! WOW! Jim Cramer recently admonished that one should Own AAPL- and Not Trade it - AAPL is widely held by institutional managers, individuals, and included within many funds and ETF's.
Since the Horse Race is about short term trading- and none of us picked AAPL to be this year's default .... what will be the big winner next year?
Attached is a 2 year chart of AAPL- Some interesting stats- AAPL is up over 100% in 2019- Very Impressive! And it is Close to the analyst price max- although Webbush raised the target to $350 this week. A clear Momentum gainer net 2019- But consider the wider picture of what occurred in 2018.
In 2018, AAPL closed Jan 2 167.20, Saw an October 3 high $227.84 ( a 36% net gain) and then downtrended to a Dec 28 low $ 155.41 for a -7% loss on the entire year!
A Buy and hold approach would have seen that 36% earlier gain evaporate alltogether and become a loss- While 2019 would have rescued the Buy and Hold devotee, The combined return of the 2 year investment 167.20 to 284.27 = a lesser 75% gain or a decent 2 year average of 37.6%.
That is still a very decent averaged return, but quite a difficult Drawdown/ decline to stomach in 2018- after having nice gains-
The question I would ask of those that come to this board- How would you have traded this stock these past 2 years using a consistent approach?
Would the approach capture the gains and reduce the periods of
Reduce the drawdowns? Capture the gains? For those visitors to this Horse Race, The Question is : How would you have traded/invested AAPL these past 2 years?
MERRY CHRISTMAS!
i.imgur.com/XjFGB9U.png

aS I REVIEW THE PAST YEAR PERFORMANCE... by most average measures, I outperformed the Avg-stock market return of 7% - substantially - almost a 20% ytd RETURN... But Dec 24 was the absolute bottom .....and I did some buying that day and Dec 26- but as reflected in the overall returns, my gains were modest compared to what the market delivered, Also worth noting is that my periods of drawdowns were less than the markets -2 to -4% vs the Markets drops. Less Risk = Less reward....
i.imgur.com/gra256t.png
Worth reviewing again- with AAPL as the focus of the backtest....

[sd]

AAPL BACKTEST -ELDER IMPULSE - ENTRY AND EXIT SIGNALS

Starting a 2 year backtest of trading AAPL based on signals generated by Elder Impulse Bars and multiple emas to determine trend direction and momentum.
Initial testing is to be straight forward, and consistent application of the suggested signals- Once completed- Revisions, tweaking, discretionary alterations can be considered. This will potentially give measurable results over different market conditions. System will underperform while markets are trending higher with minor pullbacks in the uptrend- but will keep a trader on the sidelines during stronger market declines. The 2 year period will demonstrate both periods of uptrend and downtrend .
Starting Account value is $10,000.00
The Entry signal is a GREEN bar Close- The entry will follow at the open the next day with a Buy-Stop requiring the price to be at least as High as the closing bar price.
The initial stop-loss will be at least below the low of the green signal bar- during periods of Entry signals generated within a narrow trading range- The stop-loss placement should be below the range- or in a choppy range, below the lower of the most recent week's lows.

Once price is trending, and the emas are in sequential order, price is holding above the fast emas , the stop-loss could be kept wide- until a blue bar closes below the fast ema- the stop then is raised to the 20 ema. During downtrends, no entry is allowed while the Stochastic-RSI is in the Red -0.20 level- A green bar generates the next day BUY with the Closing bar price the entry stop level- in the downtrend. nOTE THAT THE 1ST CHART IS MISLABELED AS THE 30 EMA- RED DASHED LINE IS THE 20 EMA
RED BAR- any red bar requires a stop-loss to be set at the low of that bar.

1st chart TR1 is the 2 year view
i.imgur.com/XjFGB9U.png


2nd chart TR2 COVERS 3 TRADES- ENTRY = E1, E2, E3, STOPS = S1,S2,S3
The initial entry Jan 3- gets a small gain and stops out Jan 23 as the stop was raised to the 30 ema following a blue bar closing below the 4 ema. Net + $152.00
E2 2-14 entry Stops out 3-19 for a net gain + $631.00 - Account value $10,783.00
E3 4-4 Entry..on a gap higher open- no bars close below the fast ema, so the stop-loss would be trailed at the 50 ema- on 4-19 a red bar forms but does not
reach the 50 ema stop- The stop is then filled on a gap lower open 4-20 for a LOSS of -$160.00..
Account Value $10,622.00
chart:
i.imgur.com/7M7Biyk.png




CHART TR3 ILLUSTRATES 3 ENTRIES- E4,E5,E6
Trade E4 gets a May 1 green signal bar, Fills May 2 at the higher gap open., Runs until June 15 -stop hits- $185.00 Nets + $885.00 Account Value $11,507.00
Trade E5 -is in a sideways consolidation- June 1 signal fills June 2 at the higher open, bar closes low & red- The stop would immediately
be raised to the low of that red bar- Note on the entry- the logical stop during a narrow sideways range should look to a low bar within the range-the
prior red bar on the initial entry would be a reasonable stop placement, followed by immediately raising the stop to below the Entry bar that closes as a red bar.
Trade E5 sells at S5 for a small gain $78.00 Account value $11,585.00
Trade E6 sees the signal bar 8-1 as price makes a gap higher . Entry is 8-2 @ $198.00 and the trade trends higher and will continue into the next Chart TR4
i.imgur.com/6DcrnlP.png

CHART TR4 SEES OVER A 25% GAIN AS OF S6-$12,521.00 , BUT THEN MOMENTUM STALLS -At that point , the Buy and Hold investor that bought the open Jan 2 @ $165 would have seen a hefty gain up through the high of October 3 $228.00 =+38%. But, Price ended up declining until the low of December $145.00 for a -12% decline from the Jan entry. The price bases for several months, and the "signals" end up being losing whipsaw trades-
Notice that the "rule" to not go long if Stoch-RSI is in the red zone prevented a few green bar trades to be entered on- but it was not until the major decline on Dec 1 that a green bar formed where a buy-stop order would not have been activated as price continued lower ! May be worth revisiting the entry signals when the emas are trapped in the trading range- or a higher Stoch-RSI reading- and, the Stoch-RSI duration could be given a higher setting- from 30 to 40.or higher - during periods of sideways price action with the ema's... or- The Buy-stop could require a slightly higher entry price.-since it seeks a momentum move to generate the green bar.- A few considerations to eventually review...But the bottom line is keeping an 11% gain vs a losing position is promising.
i.imgur.com/ogLDF6v.png


Next chart looks at the capitol being invested in 2019.
Chart TR5 Starts in Jan 2019-While the stock market rebounded on Dec 26, AAPL continued lower into the 1st week of January-
Jan 16 saw the 1st green signal bar, and E11 filled the next day, only to be stopped out 3 days later for a small loss.
At this time, there was an early upside cross of the fast ema above the 10 ema, but the remaining emas were not . Jan 25 a new green signal bar forms, the fill would have been 2 days later as the red bar high likely would have activated the buy-stop - Close....
This E12 trade trends and then bases through the month of Feb, and stops out early in March . The blue bars closing below the fast ema prompted the stop to be brought up to the 20 ema, hit by the 1st red bar - Notice the stoch-RSI solidly stayed in the green zone above the 0.80
The E13 signal mar 11 fills the next day, and this trade goes through March and most of April - The slowing momentum of a blue bar close under the fast ema- prompts the stop to be raised to the 20 ema. The stop would have been hit April 30 on the red bar dropping through the 20 ema. $13,068.00 is the account value-
The next day -May 1 has a tall gap higher green signal bar - I would have taken the next day's Fill on a buy-stop , and that would get stopped out for a loss.
$12,506.00 account value .
i.imgur.com/DAjPhuw.png

CHART TR6 MAY - AUGUST 2019- aN INITIAL DEEPER DECLINE FOLLOWED S-14- with no whipsaw signals in the decline-
June 3 gives a green buy-signal for entry June 4 - Price was choppy, with numerous Closes under the fast ema and the stop-loss at the 20 ema was not hit until Aug 2-
a solid 8 weeks Trend. Price declined on several red bars, and a Green entry bar formed on 8-8 but the high buy-stop did not fill until 8-12 fills at $203.00- Price prints a red bar 12-15, so a stop was tightened and then followed the 50 ema- Bars turn green and solidly above the fast ema without any penetrating blue bar lower close as a warning to the big red bar 8-23 which would have hit the stoploss-50-ema $203.00 essentially a breakeven trade-
E17 trade entry will be picked up in the next chart Account value $13,865.00
Chart TR6: Trade e 15 captures a nice gain, while e16 is a net breakeven.
i.imgur.com/j5Ifdex.png

Chart TR7 takes the trade up through DEC 27 -2019
Trade E17 nets a gain but is stopped out on a period of low momentum- and a 1 day drop below the 1st red bar -and a reentry signal for TR E18 is shown the following day.
TR18 captures a good period of trend, and would be stopped out below the trailing stop at the 20 ema with a gap down red bar Dec 2. A reentry for Trade E 19 would still be in the AAPL trade to the Dec 27.
i.imgur.com/xRpry3h.png

Initial results provide protection from larger drawdowns, capture an equal 2 year % gain, and is a good starting point to review how this could be improved , as it applicable to trading/investing in other stocks, funds, etfs etc. Periods of whipsaw trades 7,8,9, really chopped up the gains that had been accumulated. Since these all occurred during a period of tight ema consolidation in a narrow range- it is worth considering what could be recognized during such a range to not get whipsawed - perhaps a wider stop-ATR would have proved to be an advantage
Future considerations could use some technical criteria to modify the stop to capture more of the upside move- Factors such as considering placement of a trailing stop based on a multiple of the ATR value- (Average True Range) ( AAPL $4.17) noting what the average volatility 1.49%, Beta 1.23.
Will try to review some of these variables in the future.

[sd]

12-30-19
"Continuous improvement is better than delayed perfection.
Mark Twain"

I like the concept because it gives promise to those that strive to get better at what they do. Work, Trading, Relationships.... seems universally appropriate.
It also implies the time to take action is not when everything is perfectly figured out- Evolve. Do the Process with Intention, as perfection is an illusion.

Stopped out Friday in the trading account on ARKG,ARKK,,ARKQ in large part to the lower volume these funds have. and today in the Vanguard also ARKG and the IBB. On today's opening weakness, I also tightened stops to ensure net gains from the recent reentry. While AAPL had pushed down towards the 10 ema this am, it recovered and looks to be making a higher Close $291.70 - a new high while the averages all have closed down - Vix jumped up + 10% today-

[sd]

Final thoughts - 2019 was an exceptional year for the markets in terms of low volatility and upside momentum. SPY closing with a 33% net gain for the year and shallow 4,5,6% pullbacks! Both are uncommon! My Trading/Investing was on and off at times during the year, and not as focused as I would have liked. A net 16% return vs SPY.
Definite underperformance- and it will cause me to consider how I can improve on the stops- and getting back in sooner on the whipsaws. In a more volatile year, this approach would have likely performed better- particularly if we would have had some 10% + declines. Woulda-Coulda-Shoulda- ....
Having a process that includes stops is essential for my peace of mind- but had I held the positions I was in through January for the remainder of the year -without stops- I would likely have had a significantly higher net return- Going forward in 2020- I plan to continue primarily positioned in ETFs as I did this year, with a much smaller position of stocks- The general consensus is that the market is now trading at a relative high valuation that likely won't be supported by future earnings- at a historical normal PE.... So, the conjecture is that we should see a correction of sorts in 2020- but if Tariffs get resolved, and the economy continues to grow at a decent GDP, the Fed continues it's market benign policy of having the markets back... and if the Impeachment fiasco dissolves and it looks like the Republicans will keep their majority in the senate in the upcoming elections- A lot of IFs...I would assume that a left leaning democrat challenger would worry the markets- and the large businesses that would face increased taxes as well as the relative Rich....And what is the "Repo" concern for the Feds actions? Sounds worrisome!
Capitol preservation will have to continue to be a priority in 2020.

i.imgur.com/r8sELOi.png

[sd]

1-02-20 ist trades-of the decade- Adding to Tech (VGT) Buying TSLA, Lite with Buy-stops above the prior close. Also small caps

[realdeal]

January Effect
as January goes so goes the market

The January Barometer was first introduced by Yale Hirsch in 1972. The story goes that if the month of January is up, then so goes the rest of the year. Conversely, if the market suffers in the month of January, then the rest of the year will be tough sledding.

The January Effect is a perceived seasonal increase in stock prices during the month of January. Analysts generally attribute this rally to an increase in buying, which follows the drop in price that typically happens in December when investors, engaging in tax-loss harvesting to offset realized capital gains, prompt a sell-off. Another possible explanation is that investors use year-end cash bonuses to purchase investments the following month.


www.investopedia.com/terms/j/januaryeffect.asp

[sd]

So goes the Whipsaw by Day 3 !!!