Where is Oil Headed (Continued) 7/25/15 ?

Where is oil headed? I am not a typically contrarian investor. I follow technicals and am willing to shift my position based on the way the mood shifts in the technicals. My current charts on OIH and USL is posted below.

Right now the technicals show a downward trend and that we are at another juncture of support. A breakdown of this support will generate even lower prices and a better bargain for bottom fishers. I for one like low oil prices as it means less pain at the pump. It also fuels travel and business. Without pontifying about the world economy and other matters where there are enough articles out there on the net, the situation currently on oil is down. Only question is will it find support or keep going down?

I will consider up only when my technicals change and show the signal change from down to up and the price is above the Supertrend line..

Making Money with Automated Trading – My “Smart” Trade-bot 7/19/15

Is it possible to have an automated trading program running on an algorithm would make me money consistently? After 9 months of development work on weekends, I think I have come one step closer to achieving that. Using Ninja Trader software with Bloodhound I have created an algorithm that will run less than 2 hours a day and will trade Nasdaq e-mini futures (/NQ) generating 100%+ returns in a year per the back test. I tested the system from end of June last year to end of June this year. The test shows that it would have generated a little over 120% return. I prefer to have an exit based on the trading logic but also using a wide take profit of 160 ticks and a trailing stop loss of 120 ticks. I figured in trading commissions and a 1 tick slippage. If my assumptions are optimistic, and we had 2 ticks slippage it should still be very positive.

Here is the equity curve generated by the program based on trading 1 contract of NQ… it looks good but the drawdowns can be 25% and maybe worse in real-time. The win rate is about 55% and that means this will generate 8 losing trades in a row of about 3% loss on average per trade, some time in a year. Money management is a key and one cannot be over leveraged. The equity curve is based on 1 contract. Multiply it by a larger number of contracts and the returns start looking even better. I believe it is possible to trade this with an account of $10,000 per 1 contract traded.

The big question is how useful is a back test going forward? I ask that all the time. Yes, the future is unlikely to be like the past. But when the markets behave in a more volatile fashion is that not a time when randomness is left behind and you have bursts of more predictable behavior? And if I take out my emotional participation and let the trade-bot run on its own then I should have a more objective repeatable result.

Next steps is to run the program using a paper account using real-time live data and see what the results are over 3 months. Using real-time data and forward testing the program I will have another piece of information before going to real money. The equity curve needs to show similar behavior over time in forward testing. There are many pitfalls to doing automated trading. I wish I had a giant hedge fund who would allow me to move this fast forward but I intend to make this happen either ways and will not stop learning and testing other systems in case this does not pan out.

401K Monthly Analysis – The Greek Vote “YES” or “OXI”

Although it is my month end 401K monthly analysis time, the word is Greece this weekend. The Greeks are going to the poll on a historic national referendum to decide whether they will say “yes” to accepting the EU austerity program for money, or whether they will say “no” (OXI in Greek) and support their leader to negotiate a better deal, assuming that is possible. I hear that there is a generation gap in the vote. The young want to say no to austerity and the Euro while the old are fearful that they will lose all that they have and are willing to give some to keep some by saying yes. I don’t envy the Greeks either ways. I hope the US will never reach that stage where we cannot manage our debt. I am afraid we too have to face some levels of austerity down the road as more and more countries are flush in debt. Borrowing cannot go on forever without having to pay the piper.

This blog site is apolitical. My focus is on blogging about trading, investing and making money. SPY is signaling down (S&P 500 ETF). Chart shown below. See the stellar returns SPY has shown over many years. Hidden in that is the gut wrenching drops that the recession created but the strength of the US economy has recovered all those losses plus more.

  https://www.spdrs.com/product/fund.seam?ticker=SPY

Given the exogenous events (as one of my Mcubed friends puts it) and that SPY is pointed down, I am out of the markets in my 401K and resting in money market funds. Markets dislike uncertainty and we have that in spades now.

In my current employer’s 401K choices, Fidelity Growth Strategies, Fidelity Div Intl and Fidelity Blue Chip Growth are the strongest funds. If one were to stay invested throughout then these would be the ones I would be in.

In my previous employer’s 401K funds, the best choices are T Rowe Price Intl Discovery, Vanguard Explorer Admiral and Fidelity Contra fund. These are the strongest. Fidelity Div Intl is also a good candidate. International funds are looking strong despite the Greek vote. Perhaps it is due to the weakening of the Euro?

My current investments are small and hedged in options trades. I own put options on the QQQ and vertical call spreads on the DIA (my wife is bullish on the DJ30 and while she is contrarian in her choices and likes to pick up dips, she is right more often than wrong). We will have to see if she is right or Cramer who says don’t buy this dip…. Me – I just want to follow the technical.