Trading Bots and Skill Analytics Launched

May 27, 2008: 10:38 AM CST

The Tyro Trader, who formally wrote for the Tyro Trader Blogspot, has recently launched a new blog dedicated to information pertaining to automated trading “bots” and his experience as he develops and trades an automated system.

The new site is entitled “Trading Bots” and has great potential and should hold the interest of those developing, or wanting to learn more about automated trading.

So far, Tyro has links to articles on automated trading and is detailing his experience as he develops and puts these systems into actual practice.

“Individuals have the luxury of trading manually or using automation. The big hedge funds and quant houses aren’t so lucky. Automation is giving individuals more opportunities, not less.”

Also, I discovered another site that is dedicating itself to system development and testing, entitled “Skill Analytics.”  Author Damian writes, “This blog is intended as a way for me to journal my own exploration of computerized financial trading systems.”

Both sites are new and have great potential, so if you’re interested in automated trading or systems trading/research, visit the sites and follow their journeys.


Sell in May and Go Away – Views Since 2002

May 26, 2008: 11:10 AM CST

We’ve heard the market adage:  “Sell in May and Go Away!” but does it really work?  Historically, the market has performed better from the October – May period than it has from May to October, but I wanted to show you the last few years starting with 2002 and conduct visual inspection of this strategy.

Success is based on Index price being higher in May than in October.

Let’s start in 2002: – YES, the strategy worked perfectly

2003: NO, the strategy failed

2004: YES, the strategy worked (though not perfectly)

2005: NO, the strategy failed

2006: NO. However, May registered the annual high before falling 8%, but the bottom occurred in July, not October.

2007:  NO – However, The high (before October) occurred in July, keeping you out of the mid-year decline, but you would have lost money buying in October.

Based on this lookback to 2002, prices were higher in May and lower in October 2 out of 6 years.

Interestingly enough, if we change October to September, then the strategy worked 4 out of 6 years.

In every year observed except 2003 and 2005, there was some sort of turbulent move to the downside during the summer months, and selling in May would have prevented this downside move in the Index.

This is an unscientific observation, and is mainly created to inspect visual performance of the S&P 500 index over these years with a special emphasis on the time period between May and October.

Whether or not ’selling in May, 2008′ will be beneficial is yet to be seen, but we’ve already had a large volatility move to the downside earlier this year and we could still have more should the economy continue to slide.

Nevertheless, the tendency for the market to perform poorer during the summer is interesting to review and does have historical precedent (see CNN Money article “Sell in May and Go Away” and many other sources).

According to the article, “Over the past 50 years, from the end of October to the end of May the S&P 500 index has gained a cumulative 2,806 percent (7% per year)…. Now, what would happen if you bought in May and sold at the end of October? The S&P 500’s cumulative gain over that period for the past 50 years is 24 percent (0.4% per year).


VIX Inflects off Lows

May 25, 2008: 11:32 AM CST

The VIX (Volatility Index) inflected off 2008 lows and support just as the US Stock Market met resistance, which set up a nice confluence that could have clued you in to odds of lower prices in the broader indexes recently.

First, let’s see the Weekly Chart to see when the last time we reached these levels and the potential support that was met at 16.

The 200 period weekly moving average came into play last week as the index tested this level just as the Indexes tested their 200 period average as potential resistance.

The VIX has fallen from near 26 to 16 since March, 2008.  When the VIX hit the 16 level, it reached a level not seen since July, 2007 (almost one year ago).

Let’s look at the Daily chart to glean possible clues there:

The index is clearly in a downtrend (as the market has been in a short-term uptrend) and could be facing overhead resistance.  Because the VIX has a tendency to be more ’spiky’ than the Indexes, it is much more difficult to peg resistance zones than support zones, but in a trend, moving averages can provide support or resistance to prices.

Prices fall faster than they rise, and so the VIX has a tendency to rise faster than it falls (as this chart clearly indicates) so should there be further downside in the US Markets, expect this index to spike as well.


Dollar Index Rolls Over

May 24, 2008: 4:09 PM CST

Some traders imagined new life for the US Dollar Index, and while that may be the case long-term, in the short-term, the Index has created a false breakout only to roll back to the downside and could make new lows.

Let’s look at the daily chart:

While a positive momentum divergence did precede the breakout of the 20 and then 50 period moving average… price rolled over to shatter both averages once again, and is poised to test prior lows and could exceed those lows.

A negative momentum divergence preceded the break beneath these averages.

What clues could the weekly chart have told us to help with our forecasting?

Although price may have looked strong on the daily chart, we see that price merely made a clean price swing back to the falling 20 period weekly moving average, which has served as significant resistance over the last few years.  In fact, for FOREX traders, this could have been an elegant entry into some of their favorite currency pairs as the structure turned back down to form a price swing to the downside.

Price is coming off a new momentum low, which could also forecast lower prices are yet to come.

Also, the trend of the dollar is important not only to FOREX traders, but for commodity traders, as we saw the $CRB Index notch yet another weekly all-time high on Friday, thanks in part to Crude Oil’s stratospheric rise this week.

Continue to watch the set-ups and structure of the Dollar Index for potential intermarket relationship trades or investments.  Check out the Market Club for signals, commentary, market scans, and information.


Ideal Intraday Trades before the Holiday

May 23, 2008: 9:36 PM CST

Let’s jump right into the intraday action and ideal trades (looking from the benefit of hindsight) that formed throughout the day.

Let’s examine a new format, using the Dow Mini futures contract (@YMM08) viewed using what I see each day on TradeStation:

(Click for full size image)

Price was already on a move down when the cash market opened and the selling stabilized into the ‘close,’ forming a trading range type of environment.

Strangely enough, the ‘ideal trade’ set-ups, looking with hindsight, occurred as simple “Bollinger Band Fade-Trades,” meaning go long whenever the price reached the bottom of the Bollinger Band indicator and go short when price reached the upper band (recall that bands are 2 standard deviations from a 20 bar mean).

The ovals represent ideal trades within the intraday structure.

There was a positive momentum divergence which occurred through three price swings as the morning opened which led to a quick counter-trend ’scalp’ trade long and the momentum oscillator, as well as the moving averages, became essentially useless as price formed a consolidation zone (parallel trend channels – not drawn) from 12,470 to 12,520.

Once we anticipate the type of day we expect (range-bound or trend), then we can hopefully adjust our trading tactics and indicators which make the most sense to use, as well as adjust our risk level and trading aggression (or conservatism).

Despite the consolidation zone for half the day, the market actually formed a type of “Trend Day” where the price opens at or near the highs and closes at or near the lows of the day.  The consolidation at the end of the day made for an interesting looking chart for Market Profile traders.

Pulling the camera back, we see that the Dow Jones Index is in a much more bearish orientation than it was last week.

The negative momentum divergence which had been building is now resolving to the downside, with price breaking its areas of support via the 20 and 50 period moving averages, as well as the prior support about the 12,700 area (which was prior resistance).  This area is now invalidated on the chart due to the weakness in price and the close beneath this zone.

Visually, the chart appears to have more ‘open space’ beneath price than above, meaning odds have now shifted to favor lower prices in the short-term.  We’ll continue to watch to look for signs of continuation or growing momentum to the downside and adjust risk levels accordingly.

 Page 506 of 650  « First  ... « 504  505  506  507  508 » ...  Last »