Tuesday, June 10, 2008

Time To Buy the Financials

Maybe. Maybe not. Would certainly be a gutsy trade here.

I have an excellent indicator that is telling me its time to buy them for a trade though. I've been testing a new system that looks to buy and sell Ultra ETF's (2x) based on RSI signals. The basics are that it goes long when RSI(2) hits 10 and sells when RSI(2) hits 80. I've tested the system as a whole with around 50 ETF's that have enough volume and the win rate is incredible.

The UYG (Ultra Financials Proshares) signalled a buy on 6/3/08 at 27.76 and are currently trading at 26.00 even, offering an even greater opportunity to profit than usual. Note below the historical success of trading the UYG based on the system's criteria. Tests were run purchasing an even 10,000 of UYG on every signal. You can see that the system is up around 100% since the first trade was executed in May 07. Pretty impressive considering the system is buying UYG while its fallen from 70+ to 26 today.


TLtrader said...

Johnson, very good post - Thanks.

Are you big on automatic strategies trading? I use Tradestation too and am developing and coding my own automatic strategies. Since I have a full-time job, daytrading by hand doesn't work. And I'd like to THANK YOU for sharing the RSI way of looking at charts - not that I didn't know about RSI prior to reading your blog or listening to your TRADERSINTERVIEW --which is a very good one BTW-- but it was an AHA, clicked, kick-myself-in-the-rear moment that I needed for my strategy formation.
Good trading,

Johnson's Trading Blog said...

I'm not too big on automated strategies. Really just looking to augment my returns with some easy money. re: RSI - glad I could trigger that moment for you. Just remember that price is the ultimate key and you don't make / lose money on RSI movements, you make / lose on price movements. RSI works best for me as a trigger in conjunction with price.

TLtrader said...

Agree. I use trendlines, thus the screen name TLtrader. I read and hear many traders talk about volume being another key. but analyzing volume with computer codes are too complex. thanks again for sharing your ideas,

Woodshedder said...

Johnson, as you know, I've been working with the same strategy.

Question for you: How are you setting up the rules to get that equity curve for UYG?

I've applied the rules you mention in this post and my equity curve for UYG looks nothing like yours. I want it to look like yours :)!

Johnson's Trading Blog said...

Woodshedder - I'm actually using the RSI easylanguage you sent me. The rest of my settings:

RSI periods: 2
BuyZone: 10
Sell Zone: 80

Format Strategy:
Calculation: Enable intrabar order generation is CHECKED with option 2 (Limit entries from all signals in this strategy...)

Strategy Properties:
Commission: 0
Slippage: 0
Initial Capital: 10000
Interest Rate: 2%
Allow multiple entry orders: Off
Total size: Fixed dollars per trade of 10,000, rounded to nearest 1 share
Min # shares: 100
Look inside a bar backtesting: Off

Woodshedder said...

Hmmm. Very odd. With the exception of intrabar order generation, I think mine is setup the same or very similar.

Help me out here. Will enabling intrabar order generation record the trade as_soon_as the RSI trigger is hit, rather than at the open of the next bar?

Very interesting, as it makes a LARGE difference in the equity curve.