Category Archives: Risk

RL Track Records 2012-2016

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Today we are going to do something different: often we receive enquiries from prospects that would like to know about the type of returns that can be obtained using the Retracement Levels models. We know from incubator accounts traded with real money and also from backtesting of our models that certain type of results are possible and are certainly above simple BUY & HOLD returns, however for a number of reasons it is not possible to provide this information to our clients because:

a) trading is so personal and each trader inevitably blends his own bias into our systematic strategy/model, so in the end not all traders will follow our system to the letter

b) most traders will fail even if you give them all the tools and support to be successful, because trading is very difficult, it requires capital, stomach, self-control, far-reaching intelligent/strategic thinking and unfortunately it’s hard to find all these qualities in one single individual (that is also why we want to use computers to trade or to support our investment decisions).


Market Volatility Now In “Fragile Zone”

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Further to my post of December 3, 2015, the price of the SPX:VIX ratio has broken below a critical level of 100.00 and has fallen into, what I call, the Fragile Zone.

I named it this because, as you can see from the ratio chart below (where each candle represents 1/4 of a year), price has now encroached into the last major bearish candle of Q3 of 2011, and has also fallen below the 60% Fibonacci retracement level taken from the 2009 lows of this ratio to its highs of 2014.

A hold below 80.00 could see the SPX plunge, particularly if this ratio drops and holds below 60.00. The declining Momentum indicator is hinting that further weakness is ahead for the SPX…as I mentioned here, with respect to the E-mini Futures Indices.

Our Hero Oil Again

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Well, the big week is here at last, and preparations are well underway. The podium at the Eccles building is being prepared. The microphones are being double-checked. And the poor chap who has to shave Janet’s back before each press conference is subjecting his best blade to a strop to ensure an excellent job. We’re all in this together.

When I curled up in bed Sunday night for my brief hibernation, the ES was up double digits, clearly getting a bounce from its deliciously battered state on Friday evening. “Moments ago” (as our friends ZH like to measure time) when I woke up, I was slightly bracing myself for high how the ES might have fought its way back. I say “slightly” because, as I’ve said many times recently, I intend to lighten up quite a bit before The Evil One speaks on Wednesday, and I’m already down to only 60 short positions.