Just a little clarification. After yesterday's post I received a few emails concerned that I was abandoning my dirty dozen systems approach to the markets. Rest easy gentle readers and dedicated system traders. . . such is not the case and I apologize if I left that impression.
What is the case is that I'll be reviewing the ongoing performance of each dirty dozen system relative to the others to develop a kind of revolving pecking order of reliability. I expect this ranking to be dynamic and will adjust the weighting of each system on a monthly basis to create a kind of exponentially biased system approach. I would realign the systems more frequently, but many of the systems only trade weekly, biweekly or monthly, so this seems unproductive.
When I originally started the Kit of Parts and systems basket studies back in May of 2008 the stated goal was to reduce risk exposure ( drawdown, max consecutive losers) by diversifying. In this case diversification was not to be accomplished in the traditional means by trading a wide variety of stocks and ETFs, but by trading a variety of non-correlated systems against a single ETF, or a very small basket of ETFs.
In the constant flux of trading range and trending markets the applicability of various system approaches will inevitably vary, which is why I developed multiple non-correlated systems. The trick is not to fooled into reading too much from the system performance reports. Either it's working or it isn't. End of story.
After almost 25 years of trading one thing I've learned is that market dynamics are constantly changing. Traders who adapt their methodology and strategy and embrace those changes typically fare much better than those who resist new ways of looking at things and instead stubbornly cling to what's worked in the past. I'm just trying to practice a little proactive tactical adaptation in an effort to increase my changes for survival.
As I mentioned yesterday, I personally find it "easier" to read what's coming down the pipe on intraday charts than on the daily bars. That's just my brain's hard wiring at work (and the risk management gnome inside my head talking). So what I need to do going forward is to capitalize on how and why that intraday time frame paradigm works so well (for me) and why the daily bar time frame is a bit (frustratingly) lagging.
Those of you who've followed me for a while know that, in fact, 80-90% of my trading is daytrading, augmented with some swing trading focused on fixed risk butterfly positions and short term (less than a week) momentum plays.
Why would a risk aversion nut like myself even bother with longer time frame trades in these volatile markets? Because, my friends, that's where the big money is. Unfortunately, that's where the big risk is also so the trick is to either hedge your bet (option spreads, covered calls, covered puts, etc.) or find a REALLY RELIABLE systems approach. My on going goal has been development the later while I practice the former. The search continues.