Thursday, July 16, 2015

Q & A

Current market update here

Our market updates are very simple. We post buy/ sell signals when we see change in the market direction. There is no ambiguity, there are no ifs and buts. However, trading is a different theme. It involves diffferent strategies. Hence, there are bound to be many questions to our stakeholders and to the readers of this blog. We will try to answer some of those questions sent to us below but please read here if possible:

1) Why don't you post VST updates regularly?

ST updates are based on daily charts - posted at the end of the day or beginning of next trading day.
IT updates are based on weekly charts - posted at the end of the week
LT/ VLT updates are based on monthly charts - posted at the end of the month/ quarter/ year etc

But, VST updates are based on change in the direction on an hourly basis. During the day, we are busy with trading. We take time to continue our work. Seldom do we have time to post VST updates. If this were a fee based subscription service, then yes, we would post VST updates. 

2) How much % do you collect in a swing trade?

It depends on the swing. There is no fixed %. During the last sell signal (please click on the last 3 blogposts to review) that was issued on June 3rd, SPX was 2114. we clearly marked the supports for SPX in my previous posts. Based on the supports, we closed 25% of the position on  June 15th at SPX 2075, 25% of the position on June 29th at SPX 2070, 25% of the position on July 7th at 2060 and final close of the remaining 25% of the position on July 10th at SPX 2075 when the signal flipped to buy. 

We believe in scaling out of positions, if you understood our trading methodology. We collected 2% during that swing trade. 

3) So, your portfolio performance is? 

YTD, we are up by 11% in our accounts. IT/ LT positions did not collect much. Most of the profits are due to ST trades, some due to VST trades. We couldn't post regular updates during the early part of the year but we had enough staff to continue trading/ investing.

Past years portfolio performance here

4) During June 2015, the market was swinging between SPX 2010 to SPX 2050. You posted sell signal only but you could have played the upmoves  as well.

Our trading is based on certain indicators and guages, 90% of them technical. Our indicators were heavily leaned towards a sell even though in hindsight we can call the market's direction during the last 45 days as "chop" or "box". Using our scaling out methodology, however, we were able to take advantage of the chops and posted good gains. Hence, no regrets about not playing the upmoves inside the box. 

5) What position size do you use?

We have answered this question elsewhere on this blog. 

Ideally, it is suggested that we should invest only 5% of the capital in one ticker (eg: AAPL or NFLX). So, for every $ 100,000 invested, the position size in one ticker should never be more than $5,000. 

However, we trade individual stocks very few times. Most of our concentration is on market ETFs like SPY, QQQ, DIA. Hence, we use 75% of the allotted capital to SPY. The remaining 25% is either used as standby capital or sometimes traded on individual tickers with capital control.

We have 30% of our capital in LT positions.
We have 20% of our capital in IT positions.
We have 40% of our capital in ST positions, and 10% in VST positions.

6) For individual investors who have $  5,000 - 10,000 as capital, what do you suggest?

With only $ 5,000 to invest, how can you manage a single ticker and still be profitable. I would say you are better off trading ETFs on a ST basis but be very nimble. 

7) What if your signal is wrong?

This is a very good question. We humbly accept that there are no guarantees in this market. We believe that our signals are mostly correct. But, if we are wrong, then we do have stops in place at 2% for the ST signal and 5% for the IT signal. 

8) Do you change strategies during earnings season?

Earnings are reported 4 times a year for all US exchange listed companies. As you might already know, predicting the direction of the ticker based on earnings is a very very risky business. Hence, we would not rather trade the earnings of individual tickers. If we must not trade during earnings, we should be in and out of the position during earnings which does not seem ideal for trading. 

To answer your question, we do not change strategy during earnings. 

Hence, we feel that it is prudent to invest on ETFs like SPY rather than be in and out of individual tickers during earnings, and other events.

If you have more questions, feel free to send them to me. GLTA!

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