Trading the Odds

A statistical approach to profit in the US equity markets, trading the markets like professional card counters are playing Blackjack or expert poker players are playing Poker.

Trading the Odds on Wednesday – April 15, 2009 -follow up-

Follow-up on Trading the Odds on Wednesday – April 15, 2009

This is a follow-up on my post Trading the Odds on Wednesday – April 15, 2009.

Due to the fact that market breadth (Advancing Issues, Declining Issues, Advancing Issues, Declining Issues, New 52-week Highs, New 52-week Low) does regularly not only own a good quality of forecast concerning the next session but over the course of the next couple of sessions as well, I additionally checked for the SPY’s performance over the course of the following 10 sessions after a session when the 2-day simple moving average of NYSE Advancing Issues/(Advancing Issues + Declining Issues) closed on a 4-day low while the 2-day simple moving average of NYSE Advancing Volume/(Advancing Volume + Declining Volume) didn’t post a 4-day high respectively setup was triggered for a potential positive divergence.

The table below shows the SPYs’ performance over the course of the then following 10 sessions concerning those 15 sessions since 10/01/2007 which fulfilled the setup mentioned above.

survey-20090414-4

(click on image to enlarge)

Although the chances (probability) that the market will probably close higher during the following 2 days are slightly negative, odds (profit factor as the sum of all profits divided by the sum of all losses going long on close of the session when the setup was triggered, NOT the true chances that the event -a higher close x days later- will occur) are significantly in favor of the long side due to the fact that the average and total profit on the long side regularly almost doubles the respective losses. And the real edge was provided from day 3 onward when the respective profit factor on the long side is more than fivefold compared to the respective profit factor on the short side (the same applies to the maximum gain/loss).

So any follow-up on Tuesday’s weakness might be shallow only, but will probably provide a favorable buying opportunity over the course of the then following couple of days.

But due to the insignificant sample size, it is questionable if and to what extent this setup might have any quality of forecast for the next couple of session, but nevertheless something to keep in mind.

Successful trading,

Frank

P.s.: WordPress recently implemented a Twitter widget, so I’ll regularly make some intraday updates as well using Twitter (as I already did during the last couple of session, but unfortunately there seems to be a connectivity issue between WordPress and Twitter; hope that will be solved soon). If you’re interested in, please have a look at the blog during the trading session as well or subscribe directly to Twitter.

Disclosure: Long BGU (Large Cap Bull 3x Shares) at time of writing.

Advertisements

Filed under: Daily Update, , , , , ,

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Twitter Updates

Error: Twitter did not respond. Please wait a few minutes and refresh this page.

DISCLAIMER

The information on this site is provided for statistical and informational purposes only. Nothing herein should be interpreted or regarded as personalized investment advice or to state or imply that past results are an indication of future performance. Under no circumstances does this information represent an advice or recommendation to buy, sell or hold any security.

The author of this website is not a licensed financial advisor and will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on the content of this website, including the information that others post here.

While every effort will be made to provide complete, the most accurate and current information, none of the information on this site is guaranteed to be correct, and anything written here should be subject to independent verification. I make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability or availability with respect to this blog or the information, analysis, statistics, or related graphics contained on the blog for any purpose.

I may or may not hold positions for myself, my family and/or clients in the securities mentioned here. Actions may have been taken before or after information is presented, and any opinions expressed in this site are subject to change without notice.

Please read the full ... DISCLAIMER

Calendar

April 2009
M T W T F S S
« Mar   May »
 12345
6789101112
13141516171819
20212223242526
27282930  
%d bloggers like this: