Comparing Overlapping Systems (Part 1)

I have this oscillator that comes in handy. The details of the oscillator are unimportant, but I’ve found three different ways to use it as a signal to enter into a short-term (“swing”) trade on SPY. The duration is anywhere between one and twelve days, depending on the system being used, the exit etc.

My problem was this: the systems all trade SPY. Two use mean reversion (one long, the other short), and the third uses long momentum. The systems overlap! How do I determine which systems to trade?

If you are using multiple trading triggers or systems on the same instrument, it’s really important to know how these systems will work together. Is it better to use just one system and discard the others, or should you use all of them and divide up your resources (if necessary) between the systems?

How do you go about comparing these systems in a meaningful way? Here’s what I did.

Continue reading Comparing Overlapping Systems (Part 1)

Writing Puts, Or Just Pretending To.

Which color do you like better? Green or brown? I’m partial to the green curve myself. That green curve comes from writing puts…sort of. Writing puts can be a lower volatility play that makes you money in choppy or flat markets, falls more softly in down markets, and seriously under-performs when the market goes on a tear upward.

Continue reading Writing Puts, Or Just Pretending To.

“Matt’s Breadth Indicator” Update

Happy new year! It’s that time again, when everyone with a blog does a wrap up of the previous year. Here’s my look-back.

Many of you follow along with the “+/-30% per quarter wider-market breadth indicator”. Which is too much of a mouthful, so I’ve humbly named it after myself instead. I wanted to provide an update since I’ve been tracking it for awhile.

Continue reading “Matt’s Breadth Indicator” Update

TRINdicators

When I start to write a blog post, usually my process is this:

  1. Come up with a really bad pun for the title.
  2. Write the rest of it.

Bad puns are an important part of finance, and life in general.

A blog reader contacted me recently to chat about various technical analysis indicators, and one he mentioned was “TRIN”, aka the Arms Index. If you’ve been reading my blog awhile, you know that technical analysis makes my skin crawl…at least the kind that debates whether the chart shows a double top or a head and shoulders pattern. Interpreting shapes in financial data is just another form of tasseography. Give me quantities that I can quantify!

That said, some classical “TA” indicators can be useful. For example, RSI is useful because it can be tested and be shown to work for some systems. Continue reading TRINdicators

The “SPY RSI No Lie” Swing Trade System

She's thinking about how financial blogs can be a bit boring when they have too many graphs.
She’s thinking about how financial blogs can be a bit boring when they have too many graphs.

 

Here’s a free system for you. I call it the “SPY RSI No Lie” system. It’s called that because I like stupid titles, and internal rhymes are an added plus.

I read a post on Jeff Swanson’s System Trader Success recently about using a short-period RSI value to trigger trades with the S&P 500. Jeff’s post was more from a theoretical standpoint, as it used the SPX index (rather than a tradable ETF or future) and also traded on the same day the RSI is calculated. The index issue is easily translated to SPY or an equivalent ETF. Calculating the RSI of the day before the day is actually finished is, well, technically impossible. But in practice, it’s doable in a sort of almost/kinda/fuzzy-round-the-edges sort of way. I thought I’d take a look at an easily tradable system.

Continue reading The “SPY RSI No Lie” Swing Trade System