New start for the New Year

In order to tailor to the new format using $100,000 as an initial investment portfolio, I deleted the 2010 portfolios and started 2 new one. Needless to say the portfolios in 2010 resulted a loss and that's what the experiment was about - learn from the mistakes, march forward and not to repeat the same mistake again. The mistake was not following the stops loss strategy properly and led to the bigger loss in certain positions. On top of that I had an error with the calculation on the trailing stop loss formula on the spreadsheet.

The 2011 portfolio will start with $100,000 each on the Ocean Portfolio and TSP Portfolio. Daily moving averages cross-over will be the primary indicators as the entry point. (refer to the strategy listed on the lower right-hand side of the page). Stop loss trigger will be using a combination of ATR, RSI, ADX and Moving Averages indicators.

There were small positions in both portfolios to start off the new setup.

Happy trading and have a wonderful New Year.

Ocean

SPY looks good - up trend

 

20 EMA is above 50 EMA, the trend is up

Year 2010 is coming to the end

December is half gone and the year of 2010 will soon be over. The overall stock market is considered to be good following last year's huge gain. The SPY of ETF index fund which is equivalent to S&P 500 posted a gain of 7.8% year-to-date. Meanwhile my first year Ocean Portfolio using ETFs as the investment portfolio has been disappointed due to my improper used of stops and subsequently let the loss accumulated.

In coming year,  I will continue to use moving averages with cross-over as the lead indicator for trend following. I will use daily average instead of weekly and I will apply the ATR, RSI, ADX indicators as extra filters for profits and stops as opposed to the fixed percentage that I used this year. 

In general, my method is as follow: the daily moving averages (DMAs) for trending following will be 20 and 50 days, when DMA-20 crosses above DMA-50, the trend is up. When DMA-20 crossed below DMA-50, the trend is down. I will start off with $100,000 each as the hypothetical portfolio for two portfolios I am tracking. (1) Ocean Portfolio and (2) TSP portfolio - the government retirement system for federal employees. I hope these two portfolios will achieve better results in 2011 than this year.

New positions established as of Oct 1 market closed

The general markets began to show sign of strength indicated from the moving averages and momentum indicators such as RSI. By following the market trends, new positions are established as follow:

Ocean Portfolio:
1. Long: EEM 20%
2. Long: EWZ 20%
3. Long: EFA 20%
4. Long: VWO 20%
5. Long: TUR 20%

TSP Portfolio:
1. Long: IWM 50%
2. Long: EFA 50%

(out AGG 100%)

Trader's Pick:
1. EEM 50%
2. TUR 50%

Ocean Port and Trader Pick port go cash

Sold all inverse ETFs in Ocean portfolio and Trader Pick portfolio. YTD returns on both portfolios are negative. I will wait for a clear setup to re-enter.

Still holding the same positions for all simulated portfolios

It's been a while for me to add new posts here. Currently the three portfolios are still holding the same short positions except the TSP port is in AGG ETF bond. My short experiment in this blog is frustrated and the results showed that it is difficult to go long and reverse to short using the weekly chart by following the trend with crossover moving averages unless the trend exists for a rather long period of time. It doesn't feel good no matter when it is either long or short but the markets go against the holding positions either way.

To play it more conservative in the Ocean Portfolio, I may try using the ETF bonds such as AGG, TLT or SHY when the trend is down and get back into long ETFs when the trend is up. As for now, I am betting the market is trending down for now and so I am holding the shorts until the next signal shows.

A reader had asked me if the EFZ in the Ocean Port hit the stop yet. It did but I was holding it because I used the other 50% of ETF (SH) for gauging the 12% stops which the entire port did not hit the 12% yet.

I had been looking at the pairs trading strategy which I will try it using the Trader's Pick portfolio as an experiment. Basically "Pairs trading" is buying long and selling short with a pair of equities at the same time where they are highly correlated. You get in the position when they are diverged away from each other and you close out all positions when this pair "Return to mean". By doing that, you can profit the difference in gain and loss from the pair. Pair trading sometimes is referred as "Market neutral" with the principle of hedging. If you want more info or definition about Pair Trading or Market Neutral, please google it and it will give you much more information on this subject. It is profitable and stable than other trading strategies. So they say ...

Ocean

Added remaining 50% on EFZ (inverse)

S&P 500 index closed below its major signal of 50 weekly moving average as closed of June 4. It indicated to me that the market may still be going down more. I added the remaining 50% capital into the inverse EFZ in the simulated Ocean Portfolio.