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I came across some interesting information about the Kelly Formula that I think will be useful to those of you who struggle with the concept of position sizing. I will continue to include position sizing articles each month as it one of the most important aspects of any investment strategy, particularly the trading strategies that we follow. In my opinion, this is the most critical concept you need to tackle as a trader or investor.
Why is it critical? It is critical because the question of "How much should I allocate" determines your risk and your profit potential.
Some of you might find the Kelly criterion/strategy as a helpful guide to deciding what position size fits your investment goals. |
Slope of Hope Blog Posts
Slope initially began as a blog, so this is where most of the website’s content resides. Here we have tens of thousands of posts dating back over a decade. These are listed in reverse chronological order. Click on any category icon below to see posts tagged with that particular subject, or click on a word in the category cloud on the right side of the screen for more specific choices.
All Signs Point to a Short -Term Reprieve (by Andy Crowder)
Seriously?
In nine trading sessions the S&P 500 (SPY) has advanced over 14%. The tech-heavy QQQ – over 16%.
The market’s performance heading into this past week was impressive; now it's historic. Just when everyone thought the market was about to break support last Tuesday (10/4) the market proceeded to bounce off those levels and hasn’t looked back. Indeed it has been one of the strongest two week rallies in market history. In fact, we have only seen this type of move 5 other times since 1928.
Short-Term Reprieve Looks Imminent (by Andy Crowder)
It was another day of sideways trading. The market was able to hold gains for yet another day which was impressive given the short-term overbought extremes, strong overhead resistance and yesterday’s huge upside gap.
I am still leaning towards a close of the upside from yesterday which would bring SPY down to $117.25, DIA down to $112.21 and QQQ down to $54.66. I would expect that this occurs over the next 2-3 days, but Mr. Market always has a way of playing games with what should be obvious price levels.
High-Probability Mean Reversion Indicator (by Andrew Crowder)
Short-Term, High-Probability, Mean Reversion Indicator – as of close 10/25
I hope that all of you find the following information useful in your trading endeavors. I will be back later with my daily market commentary.
After being deeply oversold on a short-term basis, Brazil (EWZ) bounced back today, and is now sitting comfortably in a neutral state. The ETF gained of $.70 or 0.92%. The at-the-money EWZ Dec10 76 puts had a net change today of $0.55 or 16.4%.
Even after today’s failed rally (considering the highs of the day), there are still a few ETFs that I am watching for a potential trade.
The QQQQ is an obvious one that I have added to my short-term watchlist. The tech-heavy index is on the border of being “very overbought” and has a decent RSI (2) rating above 93. I would prefer to see a higher number (greater than 95), but given how heavy the market currently feels I will be watching this one closely tomorrow.
The other is the Real Estate sector (IYR) as it has pushed into a “very overbought” state. The RSI (2) is not as high as I would like, but I will be watching this one closely nonetheless for a quick decline.
Benchmark ETFs
- S&P 500 (SPY) – 69.2 (neutral)
- Dow Jones (DIA) – 69.3 (neutral)
- Russell 2000 (IWM) – 65.2 (neutral)
- NASDAQ 100 (QQQQ) – 79.4 (overbought) / RSI(2) – 93.3
Sector ETFs
- Biotech (IBB) –63.2 (neutral)
- Consumer Discretionary (XLY) – 75.7 (overbought) / RSI (2) – 91.7
- Health Care (XLV) – 68.2 (neutral)
- Financial (XLF) – 45.7 (neutral)
- Energy (XLE) – 68.6 (neutral)
- Gold Miners (GDX) – 48.8 (neutral)
- Industrial (XLI) – 67.9 (neutral)
- Materials (XLB) – 66.8 (neutral)
- Real Estate (IYR) – 80.3 (very overbought) /RSI (2) – 87.8
- Retail (RTH) – 66.8 (neutral)
- Semiconductor (SMH) – 71.2 (overbought)
- United States Oil Fund (USO) – 52.5 (neutral)
- Utilities (XLU) – 39.8 (neutral)
International ETFs
- Brazil (EWZ) – 36.8 (neutral)
- China 25 (FXI) – 62.9 (neutral)
- EAFE (EFA) – 60.3 (neutral)
- South Korea (EWY) – 42.7 (neutral)
Commodity ETFs
- Gold (GLD) – 52.9 (neutral)
Ultra Extremes
- Small Cap Bear 3x (TZA) – 33.6(neutral)
- Small-Cap Bull 3x (TNA) – 64.1 (neutral)
- UltraLong QQQQ (QLD) – 78.1 (overbought)/RSI (2) – 92.1
- Ultra Long S&P 500 (SSO) – 69.7 (neutral)
- Ultra Short S&P 500 (SDS) – 29.8 (oversold)
- UltraShort 20+ Treasury (TBT) – 51.6 (neutral)
I work hard to bring you my latest views, opinions and research on a daily basis. If you are a loyal reader and find my thoughts useful please show your support by joining my newsletter service.
Watch and learn firsthand how I implement my options strategies.
Daily Short-Term, High-Probability, Mean Reversion Indicator
Short-Term, High-Probability, Mean Reversion Indicator
I hope that all of you find the following information useful in your trading endeavors.
Benchmark ETFs
S&P 500 (SPY) – 64.9 (neutral)
Dow Jones (DIA) – 64.2 (neutral)
Russell 2000 (IWM) – 58.8 (neutral)
NASDAQ 100 (QQQQ) – 75.6 (overbought)
Sector ETFs
Biotech (IBB) –52.2 (neutral)
Consumer Discretionary (XLY) – 70.3 (overbought)
Health Care (XLV) – 60.7 (neutral)
Financial (XLF) – 50.1 (neutral)
Energy (XLE) – 65.7 (neutral)
Gold Miners (GDX) – 37.6 (neutral)
Industrial (XLI) – 63.9 (neutral)
Materials (XLB) – 49.0 (neutral)
Real Estate (IYR) – 78.5 (overbought)
Retail (RTH) – 65.6 (neutral)
Semiconductor (SMH) – 64.2 (neutral)
United States Oil Fund (USO) – 51.2 (neutral)
Utilities (XLU) – 44.9 (neutral)
International ETFs
Brazil (EWZ) – 25.8 (oversold)
China 25 (FXI) – 52.1 (neutral)
EAFE (EFA) – 55.4 (neutral)
South Korea (EWY) – 42.7 (neutral)
Commodity ETFs
Gold (GLD) – 52.9 (neutral)
Ultra Extremes
Small Cap Bear 3x (TZA) – 39. 1(neutral)
Small-Cap Bull 3x (TNA) – 57.2 (neutral)
UltraLong QQQQ (QLD) – 74.7 (overbought)
Ultra Long S&P 500 (SSO) – 63.0 (neutral)
Ultra Short S&P 500 (SDS) – 32.9 (neutral)
UltraShort 20+ Treasury (TBT) – 57.6 (neutral)
I work hard to bring you my latest views, opinions and research on a daily basis. If you are a loyal reader and find my thoughts useful please show your support by joining my options newsletter service with real-time trade alerts. My performance speaks for itself.
Watch and learn firsthand how I implement my options strategies.
Kindest,
Andy
