Algorithm and Portfolio Stats: 06/03/2024 - 06/07/2024
Our first week with the new algorithm was a strong one! We turned a profit 3 days this week, for a net return of 0.88%. We aren’t expecting to be in the green every week with our new system, but I’m thrilled that it’s started out strong. Before going on, I’d like to elaborate a bit on how that profit number is calculated.
We make 2 assumptions here: first, that every position is taken with a roughly equal allocation. Our algorithm doesn’t give a recommended allocation with each notification, since we want to encourage users to do their due diligence, so rather than having some positions gain an an invisible stronger recommendation, we assume that no position is given more capital than any other.
Second, we assume that someone trading with this system is trying to use as much of their capital as they can, for as much of the trading day as they can. Based on this, and our first assumption, we evaluated what an expected allocation per trade would look like. Our system was active for 5 trading days - 1,950 trading minutes. Of this time, it held at least 1 position for 1,530 minutes - or about 5 hours and 43 minutes each day. The trades our system took lasted a combined total of 6,500 minutes even. This gives us an average of about 4.25 positions held at any given time, which equates to an average of a 23.5% allocation into each position. In the interest of being conservative with this estimate, I reduced this by an additional 33% - giving us our final estimated allocation per position: 15% of your portfolio. If you put 15% of your portfolio into every trade the algorithm called this week, you likely ended up near that 0.88% number.
But this algorithm is designed to be cherry-picked, so it’s customizable for a user’s preferences. If you had a low risk appetite, and wanted to keep a chunk of your portfolio in cash or in other positions, you probably fell short of that number. If you were very aggressive, taking everything and going into as much margin as you could, you almost definitely beat it. If you’re an experienced trader and gave extra allocations to trades that looked good to you, you probably left it in the dust.
We took a total of 190 trades this week - 117 long and 73 short - across 129 unique tickers. Let’s check them out.
This week’s big winner was IP. We had 1 entry on Friday, where we made a massive 2.86%! It’s the best trade of the week, and one of the best we’ve seen since switching to an intraday alert system. The entry is solid, with very consistent momentum, strong MACD, and a solid upward slope on the Tenkan-Sen line. More than anything else, this trade showcases our new, more forgiving, stop loss strategy. You’ll notice that, several times, the price action dips below the Tenkan-Sen line, but the system doesn’t exit. This algorithm’s system isn’t as simple as “Get out when price dips below Tenkan-Sen”. Instead, it only exits when 1 of 2 conditions are met:
The price dips below the Tenkan-Sen’s value 5 minutes prior
The candle closes below its new Tenkan-Sen value
Had we not made this change, the system would have been stopped out around 11:55, for a fraction of the return we were actually able to make here.
Our biggest loser of the week was A - losing 0.66% between 3 entries. I’ve discussed this one in a previous highlight report, but to recap: I don’t think anyone took the 2nd or 3rd entry; I definitely would not have. The first entry is solid enough, but by the time we re-enter, momentum and MACD are significantly weaker, plus the stock is still testing a level it just rejected. On paper, all 3 entries pass our requirements. But looking at the chart as a human trader, it’s more obvious that it’s a bad move. Trades like this are why we always encourage our users to do their own due diligence, and never take a trade you don’t fully believe in. This is also why, if you’re picking and choosing which trades to take, you’ll almost definitely out-perform our system in the long run.
The last trade I want to highlight is this long position on YUM from Monday. We made 0.69% here, but I bring it up because it’s another showcase of our new stop loss system. Again we see it just barely test the Tenkan-Sen line, and while our old system would have exited early for nearly zero profit, our new one rode it out until EOD, and we got to make a solid profit off of this signal. Trades like these are why I’m optimistic about our re-worked algorithm.
Now then, onto our portfolio.
We’re coming back from a tough portfolio week with a big win, out-performing SPY by 0.72%. Almost all of that can be attributed to our big money-maker: NVDA. If you’ve been watching the markets, I don’t have to tell you NVDA went on an absolute tear this week, and being nearly 10% of our last portfolio, we were in prime position to take advantage.
Looking forward, we’re keeping our strategy about the same. We’re big on tech, with a little more consumer cyclical discretionary allocation this week from AMZN.
As always, our portfolio for this week is listed below. For brevity, all tickers with allocations below 0.5% are excluded.
That’s all I have for you tonight. Thank you for reading, and happy trading!
