Trading Systems – Up & Running

trading systems

trading systemsAs usual, there was plenty of excitement in the market news this week. The opposite held true for our weekly system trading results. The first three of our systems entered long positions after Monday’s close, and a fourth system entered a long position after Friday’s close. None of these positions posted spectacular gains or caused any sense of concern this week.

The best performing systems were the ones that entered Monday and captured the rest of the week’s gains. None of the systems suffered losses this week.

Let’s break down each of their transactions and returns:

System 1 – Buy & Hold (+0.21%)

trading systemsWhile the QQQ suffered a bit this week, the SPY logged its fourth straight positive week. Buy and hold investors would have seen an increase of just under 1% from Monday’s open through Friday’s close. Since our portfolio wasn’t eligible to make a purchase until Monday’s close, we entered the week at 168.15, which leaves us sitting on a current profit of .21%.

Since this is a buy and hold portfolio, there aren’t any decisions to make about what to do next week. This portfolio will just sit around hoping for higher prices and good earnings reports.

System 2 – IBD Market Calls (+.21%)

trading systemsBecause we were already in a Confirmed Uptrend, System 2 jumped right in at Monday’s close of 168.15. There were no changes in the market outlook from IBD this week, so System 2 finished the week with the same .21% profit as System 1.

Unlike System 1, System 2 may find itself back in cash next week. While the S&P 500 has only accumulated one distribution day, the Nasdaq has already logged three. It doesn’t appear likely, but if the bottom were to fall out of this market next week we could see IBD revert back to a Correction. This would send our portfolio to cash, but probably not in time to lock in our small profit.

System 3 – 10/100 Moving Average Crossover System (+.21)

trading systemsWith the 10 day SMA already well above the 100 day SMA, this system entered into a long position at Monday’s close. While this was not an official buy signal, it was the first day the portfolio was able to be traded and the trend direction was up, so we jumped in. Despite Tuesday’s down action, the price never broke the 10 day line, so it is still quite far from a sell signal.

Since the 10 day line is so far above the 100 day line, there is very little chance that we will get a sell signal for System 3 in the next week. A sharp decline, however, will definitely take out our slight profit.

System 4 – 89/13 Day Breakout System (+0%)

trading systemsWhile the first three systems entered into long positions at Monday’s close, System 4 did not receive its entry signal until Thursday, when the market finally closed above its 89 day high. Since we received our entry signal on Thursday’s close, we made our entry on Friday’s close at 169.17. This left us exactly even for the week.

Now that we’ve established a long position, we will look for an exit signal at the 13 day low. The current 13 day low is 160.22, so that is where we would set our stop if this was a real portfolio. This would represent a 5.5% drop from the SPY’s current price, which is by no means a long shot based on the Nasdaq’s struggles this week.

System 5 – 3 Day High/Low Mean Reversion System (+0%)

trading systemsSystem 5 looks for a market that is trading above its 200 day line to break below its 5 day line and close down three days in a row. While the SPY is certainly well above its 200 day line, it also stayed above its 5 day line all week. This left the system sitting on its hands all week. It looked like we were going to test the 5 day line after Tuesday, but then the SPY put in up days for the rest of the week.

If the SPY were to follow the Nasdaq down in the coming week, there is potential for us to see a buy signal. We would need the price to break below the 5 day line and than make lower higher and lower lows for three consecutive days.