Wednesday, July 07, 2010


Thanks for the emails regarding my New Approach post with suggestions for further improvements. It's nice to know that some folks are trading variations of this setup every day even though it may be formatted on a different platform. As Clueless pointed out . . why trade the Qs at $43 when you can trade SSO at $33 with twice the beta? Of course you could trade the QID ultrashort Qs at $19 with the same beta although some brokers classify the the QID as HTB, making shorting the QID difficult . . and the ultralong QLD is $51, so I still think the SSO/SDS pair is the best value play.
Here's a variation of the 5 minute chart setup using SSO/VIX on the left and SSO/TLT on the right. It might surprise you learn that applying the VIXEN crosses setup to SSO with TLT in lieu of VIX actually produces about a 7% performance improvement while reducing net drawdowns similarly. The downside to using a TLT based VIXEN is that it tends to lag the VIX signals and as a result the total net gain is reduced a bit. That's the tradeoff . . increased reliability for reduced net gains.

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