Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: shades who wrote (52924)	6/28/2006 11:21:41 PM
From: Moominoid	Respond to of 116555

Was that thier claim? I thought they said US equities and SP500 futures? Are you investing globally MOO? Yes The paper they critique looked at 37 markets globally - they decided only to look at the US and only SP500 futures. Then they throw out the two "outliers" (after saying more important events happen in this period - maybe we'd just like to be out of the market or short when they happen?) and then they throw out post 2000 data because "it's a bear market". They dismiss the original paper's result with the statement that after short-term CGT it doesn't pay off. That is probably true. But if you are using a retirement account or in HK it could make sense. Their new result is still significant at 9% - that isn't "not meaningfully significant" in my book. Oh and they find that putting a January dummy in reduces the effect more - so that January effect is also real. As you can see I don't think much of their paper. Based on your data though why shouldn't we take a 9 month vacation and only go long the market from oct to dec? Short it in sep? What ETF do you recommend I buy in october to capture the "all country gross index" - is there one? IOO seems to be all I can find. I just used that because I use it as a benchmark to evaluate my performance against. You'll probably see similar results for other indices. My own returns do mirror that index somewhat though I don't do so bad in August and do especially well in October. That is true - I had a friend named bald man from mars here on SI that was certain the nasdaq was going to crash in 2000 - back in 99 he bet his house on shorting it - he was right - we all would watch the market go up and baldie rip out a few more hairs! hehe He got margin calls on the way up before the big blowup and lost everything - his house - his wife left him - etc etc - he ripped all his hair out KNOWING he was right but losing all his money. He was vindicated a few months later after he was financially wiped out - the nasdaq did crash - his knowledge didn't make him rich though - his poor timing broke him. I often wondered how many similar people got sucked in like baldie while the brokers laughed all the way to the bank. This is what money management is about. It really is the key to trading systems. Cutting losses fast on losing trades. There may be a Soros or two out there who can take a massive bet and win. But most traders are taking smaller bets repetitively with a system that has a little edge and stops out losing trades. A lot of it comes down to emotions as well. Few people it seems are cut out to do it. I've been trying to learn how to be one :) I post about the philster a lot - however last year from my SWAG he made the brokers a lot of money in trading fees - he is a big advocate of stop loss orders too - it always seemed to me the specialists would move the prices just enough to blow up all those stop loss orders and then snap the price back - notice they are holding hearings on specialists/market makers right now who GAMED the system you are trying to predict. Yeah it is a problem. I increasingly conclude that trying to trade individual stocks is too hard and risky. So the plan is to mainly trade the index from now on. I have backtested my new system with different stop percentages. In the last couple of years a 1.25% stop loss each day would add the most return. Some days they'll hit it and snap back and bad luck. I found that the 1% stop loss had that happen far more. Those were mostly losing days but the closing price wasn't as bad as a 1% loss. But for a bit bigger gap mostly only really bad days crashed through that. Philster would often say you would lose on 7 or 8 out of 10 trades - but just a little using stop loss - and the 1 or 2 you won on you would win a lot - perhaps your strategy will play out - I want to know your real CONVICTION to your beliefs though - one trader won a CNBC maserati turning one million into 5 million in a few short months - but he didn't have FEAR and EMOTION skewing his decision - he could take wild risks because of this - how much of your net worth are you going to throw at your model and give proof in the pudding? Its one thing to play with 1 mil in funny money and run backtesting - its another to put your nuts out there for real. I am starting now with this model (though I'll look at other stuff too! The question is if that would make the results worse). Net worth in trading equity is only 10% at the moment though. I plan to ramp that up to 20% perhaps in the short-term. But I trade with margin, so the trade size is double that. Another money management technique is to rebalance between long-term investment and trading - take money off the table. And 80% of the money is in retirement accounts or at the low dividend and CGT rates and only 20% at the high short term rate. In the backtesting in bull years taking money off the table probably helps. In bear years it might work to just pyramid up, but rather scary. Today I felt much more calm about the market knowing I have a system that seems to be able to make money if not today, then another day. Rather than a bunch of indicators that can't always be relied on. Maybe I'll find some error some time with the idea, we'll see.

To: shades who wrote (52924)	6/30/2006 1:11:51 PM
From: CaBum	Read Replies (2) \| Respond to of 116555

``That is true - I had a friend named bald man from mars here on SI that was certain the nasdaq was going to crash in 2000 - back in 99 he bet his house on shorting it - he was right - we all would watch the market go up and baldie rip out a few more hairs! hehe He got margin calls on the way up before the big blowup and lost everything - his house - his wife left him - etc etc - he ripped all his hair out KNOWING he was right but losing all his money. He was vindicated a few months later after he was financially wiped out - the nasdaq did crash - his knowledge didn't make him rich though - his poor timing broke him. I often wondered how many similar people got sucked in like baldie while the brokers laughed all the way to the bank.'' Wow, is this guy still around? Did he ended up being totally bald? As you have said, Timing Is Everything. The patron who started the housing thread probably sucked others into his bad timing.