I received the following query in a PM :
I was just wondering to what extent you would go "against" CIs. Also, why not go into cash at some points when things could go either way.
1) I have back tested my CI system from the beginning of
2000 until now - the system does not work well prior to 2000
(ie in big bull runs).
I am not now "going against" the CI's, I did not get a sell signal on the CI's recently; therefore my system is on a buy. The system does not always return the optimal profit - in fact it seldom returns the optimal profit - but it does return a profit 90% of the time, and many of those times it is very big profit
2) I don't raise cash except at a reversal - when I get a reversal I do not put all my cash in on one trade because very frequently, but certainly not always, a "trade" is a series of signals - sometimes all signals are profitable, sometimes not. unfortunately I can't determine when the first signal is going to be a loss, and when the first signal is going to be the only signal.
Therefore, I scale in. Sometimes the first couple of trades are losses, but as I see it, the overall trade (ie all signals in one direction) will be profitable in all most all cases by the time there is a reversal signal.
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right now I have two buy signals, one on 5/10 and the other on 5/13. what that means to me is that I have bought the index with two of the eight scales I allow myself for the trade. I have actually sold and repurchased those two long positions several times since the initial trade. However, I keep myself to those two long positions until I either get another buy (ie of the market drops from here) or until I get a sell/reversal at which point I will sell both positions and go short with one position.
That is my system, and I hope it explains why I am long now and why I never go to 100% cash |
