Many thanks to a couple of you sharp readers who gave my last post a closer look and said, "Hey, wait a minute, what about ....?".
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Honestly, I love challenges and I will be disappointed if after this post no one challenges me again!
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So here is what I have done. I have dreamed up five ways to test this thing and see if we can find some "rules" that are a little tighter and with some good odds for success.
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Here is Test #1. So far this one looks the best to me. But remember, if you see something I don't, you HAVE to tell me. I want to get it right and I want us both to have an edge in making money in the stock market.
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Here is Test #2. This is my least favorite of the 5. I didn't need the RSI noise on the chart because this strategy does not use RSI. My apology.
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Tell you what. If you find something that works as well (or better) than #1 or #4, will you please email it to me? I'll put it on the website, give your full credit, heck, if you have a picture I'll put that on too! Email: tsiTrader@gmail.com
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Thanks for the info,
ReplyDeleteI agree that your first option is the best,
if this works u could use UGL (leveraged gold etf) and short it also on the insight of red to double your profits...
Cheers
jack foley
Great work John, I really appreciate your sharing this. I don't see how to improve on option one except to use TrueStrengthIndex in conjunction. I notice that if TrueStrengthIndex is already near its yearly high range (over 40) and there is a buy signal, it is a bad entry. Also, you could use TrueStrengthIndex to decide whether to go short when you have a sell signal. If TrueStrengthIndex is between 0-50 when the sell is generated, go short. If it is already below 0, just sell.
ReplyDeleteGreat idea Jack. I never thought of the UGL play but, duh, that would be great. I am giving you the job of reminding us when the first trade is to be! Please, not any time soon :)
ReplyDeletegmadrone - I think you, Jack and I agree the first option is pretty tough to beat.
Your TSI comment really surprised me about the height of the TSI when the buy signal is given. I guess I never observed that and so now I will look for it.
The piece that I will add to this conversation is that when the TSI is high above ZERO, it usually (not always) takes some time for it to reach ZERO. Kinda like a skydiver does not reach the ground for some time. In the meantime, as the TSI drifts lower it hits air pockets and pushes it back up some. WHEN it goes north ANYTIME it is ABOVE zero, price also goes north.
Like a jet airplane that leaves a trail of smoke behind it, the TSI then leaves a trail of divergences behind it.
Look at the TSI in the months before the recent stock market mini-crash. You should see EXACTLY what I am talking about...... Anyway, this foretold the crash long before it happened. Also, this is EXACTLY what you will find on the daily chart of GOLD during the entire month of June. Too bad I was too dense to see it at the time. Maybe next time?
As they say, if it seems too good to be true, it probably is. I just went back through 2008 and used the same process to see where the buys and sells would have been then. That was a down year and this year has been an up year. It was not pretty, almost every long trade was a loser in 2008. In 2008, if you sold short at every point where you would sell in an uptrend, you would have done just about as well in 2008 as you did going long in 2009. At the turning points, neither side is great, as we'd expect. So, it seems you need a trending market and to be on the right side to use make good use of $BPGDM.
ReplyDeleteI was going to go back and look at 2006 and 2007, but StockCharts.com wouldn't bring up $BPGDM for me for those years.
This is only the gazillionith disappointment I've had trying to find a consistently profitable system, anyone else had that happen?
Garry
Garry - nice analysis and thanks for sharing. I do see exactly what you are talking about. The first half of 2008 was OK, actually, but the second half was a disaster with any method.
ReplyDeleteBack to the drawing board, I guess. Seems like a moving average of either GDX or $BPGDM would tell us if we are in trending up or down market. That may be the next qualifier to throw into the recipe. (?)
I use a 50 bar and 20 bar EMA on all my charts. When they cross and both are headed in the same direction, that is the trend. It works quite well when I look back at the GDX chart. I think we need to use different methods depending on which way the market is trending. The methods you've proposed in option 1 are great in up trending markets and we should use that. In down trending markets, we need to use the opposite approach and be selling short $BPGDM sell signals rather than buying on the buy signals.
ReplyDeleteI think we just need different rules depending on the trend and the ones you've proposed work very well as long as we're trending up. I note that right now, the 20 EMA has crossed below the 50 EMA and they are both trending down, so we are technically in a downtrend and should not try to use up trend rules. Rather than looking for buy points, until the MAs reverse, we should be looking for short opportunities.
Trend changes are definitely the toughest points to trade, and we appear to be in one now. It might be like the time between Jan and March earlier this year, just a short downtrend, or it might be more serious and take GDX down another 15%. If we get a sell signal here, I would take it, but not a buy signal.
Garry