The market is determined to take back our profits from November. We are pausing here for the year while we are up on the quarter and up on the year to research some new portfolio strategy setups that allow us to manage risk and reduce volatility better. We will start again in January.
It is good to be up on the quarter and up on the year in a market like this where we limit our trades to day trades and also trade very frequently. I had anticipated bigger gains this year but I'm not going to fight this market that continues to be massively choppy.
In live trading for the 200K account, last month we were up 49.3K. We are down 32.8K this month including today's loss of -$15,750 on the 200K Portfolio. The 50K Portfolio was down -$5,550 in live trading. The hypotheticals were -$20,38.0 and -$6,114 respectively.
I am pausing to research and I will be using the Money Management Algorithms to research intra-day stop losses for the portfolios. The Money Management Algorithms allow the strategies to "see" each other and monitor the intra-day equity curve to apply intra-day stop losses or profit targets based on the total portfolio and not just the individual strategies.
We could possibly implement a setup that would stop trading for the day if the portfolio was down -3K. We could also realize that we should wait until the portfolio is down 3k to start trading or to wait until 11:30 am to start trading. These are ideas that are very hard to test. You can apply this rule "by the seat of the pants" without back testing but often times these types of rules make your drawdown worse. You may find that if you stop on a -3k loss, you end up missing many winning days.
This is a very labor intensive research and it is very difficult to do this type of research while also monitoring trades. I will be in research mode as we prepare for 2023.
As a subscriber you can continue to trade the Stock Index Portfolio 16 MIT without the BLITZ 5, scale back on contracts or wait until we start again.
The noise in the market has spiked the volatility in the account to levels that are too high. It is difficult to quantify and measure this type of noise in the market in real time. The VIX is also very confusing as it surged nearly 10% yesterday while the market also rallied.
We have been anticipating some bullish price action into the end of the year but continue to get burned on long trades as the bulls continue to prop up the market into very weak fundamentals.
The gap up long trades have been one of the more profitable trades in recent years. Today's gap up rolled over into a choppy 100% retracement. If the market had taken out yesterday's lows on the rollover, the results could have possibly been profitable on the day as we were net short and making up profits at the lows but the chop and prop machine came in and trading continued to be difficult.
Today was the largest losing day in the current portfolio and a worse case drawdown as well and we just re-adjusted the setup.
I researched CPI last night and there is nothing about the CPI report that should have kept us from trading as the daily P/L's on CPI are a normal distribution and net profitable the last four years by more than 50K on the E-minis. The CPI report came in at 7.1% instead of 7.3% expected. It is still a higher number but the bulls are better on the down trend in inflation. The number generated a very fast 500 point rally in the Nasdaq which created a big gap up. The move was then given back during the trading day in a choppy downtrend that looked like a pullback that was about to rally but ended up being a 100%+ reversal. 110% pullbacks seem to be the new Fibonacci levels.
We also take a look at FOMC days and show how the portfolio is up about 28K this year on the FOMC statement, but down on FOMC minutes. FOMC minutes are released three weeks after the FOMC statement. Tomorrow is the last FOMC statement of the year.
In Electrical Engineering we studied the Signal to Noise ratio. That analogy is perfect to describe this type of market environment as the noise is off the charts and much greater than any trade signal I can see at the moment.
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