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LiveTradingSystem Weekly Report

Live Trading System Weekend – Saturday Aug 19, 2023

Live Trade – Investing Angles has opened a discord room.

Hosted by David Lee (Twitter ID: SimpleMoneyZone).

See a brief explanation of the strategy and results.

#trading $SPX $SPY $SH $QQQ.

Live Trading System: hosted by David Lee (Twitter ID: SimpleMoneyZone).

Highlights of the Live Trading System:

  1. Achieved an impressive nearly 6% profit in our recent Type-B class long trade from July 27, 2023, to August 18, 2023.
  2. Secured a +0.6% profit on August 14, 2023 (Monday) this week through the successful exit of our Type-A long position at Monday’s market closing price.
  3. Maintained a cash position throughout the rest of the week, effectively navigating the market’s significant decline.
  4. Our trading account is once again approaching an all-time high.
  5. What’s in store for the upcoming week? Brace yourselves, as there might be some surprising developments on the horizon.

Trading System Review:

Copied from last week’s report:

“During this week, we executed a long trade on Monday which was exited on Tuesday. Unfortunately, this particular long trade did not yield positive results. Subsequently, I spent some time assessing potential improvements to our trading system to prevent such trades in the future. However, my conclusion was that no changes were necessary to enhance the system. The trade’s high-risk, high-reward nature was inherent, and moving forward, I intend to adhere to trading rules and hold positions until market closing time, even if the trade outcome is known. This strategy aligns with our meticulous system development and backtesting efforts, contributing to long-term trading success, in my opinion.

Furthermore, we initiated another long trade on Thursday at the market’s closing price, and the system maintained this long position throughout Friday and the weekend. Both of these long positions fall under the category of Type-A oversold long positions, which inherently carry a higher level of risk.”

What’s happening this week:

The strategic move made by our system to exit the long position on August 14, 2023 (Monday) at the market’s closing price has proven to be remarkably well-timed. It’s astonishing how the last profitable long trade stands as the only green candle in the midst of the past 10 days’ performance.

In the journey from July 27, 2023, to August 18, 2023, the market relinquished the gains that we worked diligently to secure over 35 trading days. It took just 17 trading days for the market to erase what we had achieved. Exiting at the precise peak of the market, guided by my refined mathematical formula, feels like a stroke of luck.

Since August 15, 2023 (Tuesday), we have been in a cash position, exercising patience while we await the next promising trend opportunity. It’s important to acknowledge that not every trade will yield success. Perfection is not the goal, but rather, relying on our trusted system and judiciously assessing each opportunity and its associated risks.

In the realm of trading, two constants are risk and probability; all other factors remain beyond our control. The essence of a robust trading system is our capacity to embrace risk, accept losses, and remain composed, irrespective of the outcome. Our most steadfast allies in this pursuit are time, trend, and discipline.

I urge everyone to maintain patience and a composed mindset, irrespective of the circumstances. Strangely, achieving a string of victories can prove to be more challenging and distressing than experiencing losses, a concept that defies intuition. Ultimately, time will be the ultimate judge. Rather than celebrating victories, let us celebrate our adherence to the rules.

System Status and Market Outlook:

Copied from last week’s report:

“Last week, we accomplished a significant achievement by realizing an almost +6% profit and expertly exiting our long position near the market’s peak, effectively evading substantial drawdowns. However, we did encounter a setback on Tuesday when a long trade initiated on Monday’s market closing price resulted in a loss of -0.9%. This loss could have been mitigated if we had exited the trade at the market’s closing price on Tuesday. I’m committed to ensuring that such mistakes are avoided in the future.

We entered another long trade at the market’s closing price on Thursday again, using a full position in $SPY, and have maintained this position over the weekend. We continued to strategically initiate long trades based on the system, aiming to minimize exposure to significant drawdowns while trying to catch the bottom. The trading system seems to be cautiously providing the bullish trend with some leeway. However, it’s essential for the bullish trend to substantiate itself incrementally, given the limited time available for the bulls. Friday marked a successful survival for the bull, but an even more crucial test awaits this upcoming Monday. It’s plausible that a sell signal could emerge as early as Monday.

As we currently hold a Type-A oversold long position, it’s important to recognize the inherent high risk associated with such trades. The approaching Monday is set to present an exceptionally challenging test for the bullish trend. It appears that the system isn’t anticipating a bottoming process at this juncture. The system’s viability hinges on the strength demonstrated next Monday, which is crucial for maintaining the long signal.

Any signs of weakness in market price or market breadth during Monday’s session could undermine the stability of the long position. In the event of market weakness on Monday, the system would necessitate an exit from the long position. Subsequently, if the system misses this long trade on Monday by a wrong judgement, and the market experiences an upturn on Tuesday or shortly after, we’ll be required to await the next Type-B long trade for reentry. Alternatively, if the market’s trajectory heads downward once again, we’ll be looking at another potential Type-A long signal, and the cycle repeats.

Moreover, it’s noteworthy that we’re approaching conditions (a few days away) that could trigger a short signal should the current long position prove unsuccessful or so. The outcome of Monday’s market movement will be instrumental in determining the trajectory of the system position.”

What I anticipate for the coming week:

Looking back, we skillfully turned a challenging oversold long trade into a profitable venture by holding the position for just two trading days, exiting with a gain on August 14, 2023 (Monday). As detailed in the previous weekly report, this trade posed considerable difficulty, making its success all the more satisfying.

Believe it or not, the landscape is currently positioned for a potential Type-A oversold long trade, while conditions for initiating short trades appear more constrained due to the prevailing oversold state. Although we are on the verge of meeting the final requirement for initiating a short trade, the market’s oversold status, as indicated by my proprietary indicator, presents a hurdle. This means that even if the final condition for a short trade is met on Monday, we might not actually trigger a short signal. To gauge whether the market is genuinely oversold on Monday, I will closely monitor a specific volume oscillator that becomes available around 6 pm Eastern Time.

Let’s not become disheartened by our lack of profits from short trades thus far. Remember, we’ve only experienced the initial leg down. The paramount objective was securing profits from our long positions at the market’s peak. Short trades entail their own set of challenges; our system is picky in ensuring all conditions align for a precise risk assessment and trade setup. Consider short trades as bonus opportunities in the market.

If this coming Monday witnesses even a modest market advance, regardless of whether prices turn green, it could potentially trigger a Type-A (oversold) long signal in the near future. Alternatively, if a corrective bounce materializes and the system perceives it as a short opportunity upon meeting the last condition, we might execute quick shorts while awaiting further long trade opportunities.

In broad strokes, triggering a long trade currently appears more achievable than initiating a short trade. I encourage everyone to delve into the psychology of our live trading experiences below. Wishing you all a restful weekend ahead.

The Psychology of Our Live Trading:

It is important to note that the only thing we know about our trading system is the probability and win/loss ratio, but we do not know the distribution of winning and losing trades. So, everyone please be patient. Don’t be fearful and doubtful when new trades are coming out. Don’t regret when you took the trades. When the trades are done, don’t think about them again and move forward. Don’t feel excited when you win a trade and don’t feel frustrated when you lose a trade. Trading is a process, and everyone should celebrate when they follow the rules.

Everyone deserves a weekend! Please feel free to ask me any questions, and we can set up a Zoom meeting. Making money should be as simple as possible. Fewer trades and instruments can lead to more profit, a healthier portfolio, and faster account accumulation, especially when dealing with larger accounts.

Trading System Backtesting Statistics

  • I just reviewed the backtesting statistics of the system and found that it holds cash for about 25% of the time, with 60% of the time allocated to long positions and 15% of the time allocated to short positions. This is a low-frequency swing trading system that averages about 2 trades per month. Over the past decade, the system has generated a simple interest return of approximately 400%, with the potential for even higher compound interest returns.
  • The win/loss ratio for long positions is around 4:1, while for short positions, it’s around 2:1. This suggests that the system may hold cash for roughly one week per month. As such, patience and confidence in the system are key to long-term success. The overall win rate for the system is around 80%, with a 75% win rate for long positions and an 85% win rate for short positions. It’s worth noting that the maximum drawdown for the long position is around 5%, while for short positions, it’s 7.5%. Therefore, to avoid significant drawdowns and potential damage to your trading psychology, it may be beneficial going long using 100% $SPY and going short using 50% $SH.
  • Regarding holding periods, the long position for Type-A (oversold) lasts around 8 trading days, while Type-B (breakout) long positions last around 16 trading days. Short positions typically last around 5 trading days. Therefore, patience and discipline are critical in achieving long-term returns. However, it’s important to note that these time periods do not take into account stop-out cases.
  • Overall, the system has been performing well in recent months, but it’s important to continue monitoring its performance in real-time.

How to follow the Trading System:

  • It is very user friendly and time friendly to follow our Trading System.
  • Live Trading Signals are sent as soon as they are confirmed.
  • Trade changes occur only at market closing price or shortly after, if the signals cannot be confirmed until market closing price.
    • This ensures that everyone has the same entry and exit price.
    • I am using MOC order myself (TOS or Fidelty has it)
    • I also have extended hours trading available.
  • Stops are set in advance. Intra-day stop out alerts may not be sent.
  • Stops are updated every night if necessary.

Trading Strategies:

I have been reading Sun Tzu’s “The Art of War” and would like to emphasize its three core ideas: 1) use strength to defeat weakness, which means taking easy trades over difficult ones, 2) be patient and wait for the right moment to strike, and 3) calculate potential losses and avoid failure.

The job of the system is to find the easiest way to make money once the market shows its hand. My job is to take all the trades as long as the system gives a signal. Your job is to acknowledge that we only have an 70%-80% win rate and 2~3:1 win/loss ratio based on backtesting only and be responsible for your own trade once the signal is triggered by the system. We won’t have a 100% win rate forever, that’s for sure. But I have the courage to take all the trades 100% as they come, and I will be responsible for my own trades 100% as they come, whether they result in a win or not.

Please retweet my pinned tweet at the top of my profile. Thank you for your support!

Disclaimer: Trading stocks involves high risks, and you can lose money. You are responsible for your own investment decisions.

Live Trading System: hosted by David Lee (Twitter ID: SimpleMoneyZone).

Fresh signals coming soon! Don’t miss out. #trading $SPX $SPY $SH $QQQ.

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