Three Trading Systems (Wk8) – Two Additions, Dry Powder and “No Psychics”

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Welcome to Week 8 of the Three Trading Systems series!  This series looks at three trading systems, forward-testing in real time.  We get to see what happens during a draw-down, what happens when we win, Trading System ideas, discussion and more.

I’m always taking feedback – from the markets especially but more importantly from readers like you. ¬†Since¬†coming back last year I’ve found one thing:¬†the readers at this site¬†are really amazing people. ¬†You’ve been gracious with your suggestions, coding fixes, and trading ideas, and quite frankly I really appreciate having you around. ¬†And so, every week I get back to work to make more content and give those ideas back to you, too.

One such idea came from Nick recently, who wanted to see a “Golden Cross / Death Cross” (in other words a 50 day and 200 day moving average cross-over) on an index Exchange Traded Fund like STW (in Australia).Golden Cross_Long ShortObviously, the market you trade should¬†have an Index ETF as well – there are ones for the S&P 500 or FTSE and I’m sure the BSE ūüôā

Given that¬†the Golden Cross has had a lot of press lately, I did up this system and tested it. ¬†The results are decent – better than buy and hold. ¬†Seeing as I have another “Index” system in the ROC and 50 Week Moving Average, I was wondering if you guys would like to see those two “Index timers” as part of the Three Trading Systems series.

They would look something like this:

Golden Cross Index Timer (All Ords)

2016_01_30_XAO GoldenCross Timer

ROC and Moving Average Index Timer (All Ords)

2016_01_30_XAO ROC Timer

Now, let’s see the current system results.

Current Three Trading System Results

Below is the chart of the returns since the Three Trading System experiment started (The All Ords are in Yellow):

2016_01_30_Comparative

It is great watching these, because I’ve re-realised one thing: no one knows the future.

What makes me comfortable during the downturn Рi.e. having a little or no position in stocks Рis the exact thing leads me to miss out on gains as the market turns around.  The Leap of Faith system has only a handful of stocks in it, which was nice in the recent falls Рbut now that market has bounced a little the Dow/Gann system is coming back better.

There is only one solution to not knowing the future, and that is to follow a tested system.

Starting this series with a draw-down is OK¬†too, as long as the system allows me to have enough capital to trade when the market turns around. ¬†In other words, it allows me to keep my powder dry for the next upward¬†move. ¬†Think about March to December 2009, after the Global Financial Crisis, where many people made 50% returns or more. ¬†You can’t do that if you¬†have¬†no capital left to trade with – so again, the only solution is to follow the tested system and its stop losses.

Leap of Faith Trading System

Starting Value: $50k,  Current Portfolio Value (since November 2015): $49,420.50

1 Year Equity Curve (with largest winner taken out):

2016_01_30_GapUp2

Current Trades:

2016_01_30_LOF

Dow/Gann Trading System

Starting Value: $50k,  Current Portfolio Value (since November 2015): $50,326.71

1 Year Equity Curve (with largest winner taken out):

2016_01_30_DowGann2

Current Trades:

2016_01_30_DG

Moving Average Channel Trading System

Starting Value: $50k,  Current Portfolio Value (since November 2015): $48,090.13

1 Year Equity Curve (with largest winner taken out):

2016_01_30_MAC_EC2

Current Trades:

2016_01_30_MAC

I hope you’ve enjoyed this post. ¬†Please leave a comment below!

Happy trending,

– Dave McLachlan

More¬†Posts and Videos in the “Three Trading System” series:

  1. Three Trading Systems (Wk 11) – All Filters On, New Buys
  2. Three Trading Systems (Wk 10) – Leap of Faith System Index Filter Switches On
  3. Three Trading Systems (Wk 9) – When There’s Nothing Doing, Do Nothing
  4. Three Trading Systems (Wk8) – Two Additions, Dry Powder and “No Psychics”
  5. Three Trading Systems (Wk7) – Lessons, Ideas, Tests, Drawdowns
  6. Three Trading Systems (Wk 6) – Thank you, Drawdowns, and Trading System Talk
  7. Three Trading Systems Series Week 5 – Can I Ask You a Question?
  8. Three Trading Systems Week 4 – Buys, Sells and YTD Returns
  9. Three Trading Systems Week 3 – Current Trades and YTD Returns
  10. Three Trading Systems Week 2 – Current Trades and YTD Returns
  11. Three Current Trading Systems – Buys and Sells and YTD Returns

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January 31, 2016  Tags: , , , , , , , , , ,   Posted in: Trading Diary

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