Saturday, 10 March 2012

Week of 2012 MR 09

SPY rose by 0.2% this week, to its highest weekly close since Nov­ember 2007. My account fell 0.1%, while my loss floor, after some gyrations, ended up rising by 0.1%.  (It looks like a rise of 0.5% on the chart because last week’s floor should have been -3.7% but was drawn as -4.1%; this will be fixed next week.)

Daily % gain
size
Max lossFinal
Gain
Symb  Buy Fri   Mon   Tue   Wed   Thu   Fri Beg   End
 
TZA  FE29 +4.5  11 +4.1  11 +5.5  22 +2.4  21 -1.8  21 -5.8  21 −9.9 −9.4 +2.5%
TNA  MR09           -1.3  10 −15.1 −14.4
SPY +9.4 +9.0 +7.4 +8.1 +9.2 +9.6
me -2.0 -2.1 -1.3 -2.0 -2.0 -2.1
floor -3.7 -3.5 -4.7 -2.0 -2.0 -3.6

Euro news: Greece says the bond-exchange is a go.  The ISDA has ruled that the bond-exchange counts as a “credit-default event”.  Presumably, all the banks that sold credit-default swaps on Greece can now pay off those bets using the billions of newly-printed LTRO money that was recently handed out by the European Central Bank.

US news: The Federal Reserve Bank has dropped hints that there will be no QE3 announcement at next week’s meeting.  Presumably this will cause the market to plunge (it usually does).  If the market drops 20% by June, maybe they can announce QE3 then.  I’ve been expecting a June QE3 for a year now, in order to assure Obama’s re-election.

MACD-based swing trades

Starting this week, the “Acct Profit” column below shows the effect of the trade on my account balance, so the +2.5% gain from TZA, being 21% of my account, yields +0.5% of overall profit.  This trade raised my account balance from slightly better than -2.6% YTD loss up to almost -2.0%

Ticker
Symbol
Buy dateBuy priceSell dateSell priceAcct Profit
ModelActualMAModelActualMAMA
TZA MR 02 12:00 FE 29 15:00 $19.63 $19.11 MR 07 15:00 $20.56 $20.53 +0.3% +0.5%
MR 06 11:00 $20.99
TNA MR 09 11:00 $60.06 $60.11 (Not yet)

TZA:  Ding ding ding!  The first completed swing-trade using the revised rules is a winner!!!  Okay, +0.5% isn’t much, but it’s positive.  My trading robot bought the second tranche within seconds of the expected time, and it happened to catch a price that was within a penny of the expected value; unfortunately, the second tranche turned out to be a loser that dragged down the overall gain—this happens quite a bit and we just have to put up with it in the pursuit of probabilistic profit.  The final sale of TZA occurred during the expected minute for nearly the expected price.  Overall profit was quite a bit larger than expected because of the beneficial “mistake” in the purchase time for the first tranche.
      The price of TZA continued to fall for several days after the sale, making me feel good about the sell-time that my model came up with.  (If only it had sold a day earlier for twice as much profit!)

TNA:  The robot's first bullish trade!  It bought at the right time for only 0.1% more than the right price; then an hour later it wrongly announced that TNA had been sold due to trailing stop!  Trailing stops are handled automatically by Schwab, so the robot didn’t actually do anything, but it thought the shares were gone so it stopped checking to see when to issue a “sell” order for them.  Problem was that the Schwab pricing data doesn’t include hourly highs or hourly lows, which were coming in as zeroes, and $0.00 is a very low price so surely (the robot thought) there would have been a trailing-stop trigger.  Fixed to use Schwab’s quoted highs and lows for the day-so-far, which should be close enough except on extremely weird days.
      TNA fell after the purchase, but not by much and it seems there is a good chance that it will go back up on Monday, unless some bank or other fails over the weekend.

TRIX-based trend trades

Still haven’t put this thing into production.  That “10% trailing stop” with 3× leverage turns into a potential 30% loss, which is more risk than I can bear.  So far, I’ve looked into using a 5% hard stop (sell if price ever falls to 95% of original purchase price for first tranche).  That works, but it means the max-loss floor never gets raised, so lots of unrealized gain would stay at risk for weeks until the final sale.  This needs more work.  Since TRIX(176,15) is rather negative right now, I should have several weeks to think about this before a potential “Buy” signal might show up.

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