"No matter what your spiritual condition is, no matter where you find yourself in the universe, your choice is always the same: to expand your awareness or contract it."
Thaddeus Golas
Many moons ago I used extreme readings of the NYSE Advance-Deline Index for trading entry signals. The plan was simple back then: fade all extreme upside A/D readings by shorting the ES on the following market open. Once my position was filled I placed two additional orders. The first was a hard stop loss of 10 ES points, and the second was my target of 20 points. Position size was determined based on total account loss – I would allow no more than a 1% total account loss per trade. Trading this was highly beneficial for many years, but I evolved beyond for a simple reason – it eventually stopped working!
Being a
nostalgic guy I dusted my old technique off and evaluated it's effectiveness
over the last six months. Tabulating
the results we find five wins and nine losses.
With each loss dropping 1% of total account value and each win
bolstering 2% the total result over six months is +0.9%. After commissions that's essentially a coin
toss (capital is tied up in a fruitless endeavor as well, which is very
negative).
What's
the point of this? Be adaptable! Don't be a stone in the river, Grasshopper!
1 –
Techniques are cyclical. In some
markets they work, and some they don't.
2 – It's
important to evaluate your techniques periodically and tweak / eliminate as
needed.
3 – Revisit old techniques occasionally to see if they're working again. When powerful trends diminish and a long, grinding sideways market returns, this technique will likely bear fruit once again.
