Highlighted Trades: 02/15/2024
I’m going to start with our worst trade of the day, because this one is particularly embarrassing on our part. We lost 4.55% on this one - making it not only our worst trade of the day, but also one of the worst in the entire development of this system. What upsets me isn’t just that it was a big loss, but that it was really easily avoidable. It shows the same pattern a lot our worst trades have - heavy volatility during the opening stretch that throws off tech analysis for the whole day - but there’s one other factor here that we didn’t account for. Can you guess what it is?
Earnings. ALB reported earnings after close on Wednesday, which was the reason we saw so much volatility after open. Currently, this algorithm doesn’t have any filter for earnings. At time of writing, we haven’t conducted enough backtests to definitively say whether we want to add one, but if I had to guess, I’d say we very much do. Earnings can lead to exactly the type of volatility that throw off this system, and frankly, this something we should have thought of. I know I said that we wanted to let this iteration of the algorithm run until the end of the month without changing it, but this is kind of improvement that makes me want to push an update mid-month.
Given the circumstances of earnings and abnormal earnings volatility, I feel safe in saying that most people wouldn’t have taken this trade in the first place, I would still prefer our system not call these out at all.
On a complete 180, our best trade of the day was a long on CNP, which made us 0.83%. In the interest of full disclosure, this trade was closed in error, but since it was close to EOD, coupled with a poor technical outlook and nearly at our exit price, the impact was near-zero. I’ll elaborate further on what caused this error during the weekly review, as well as how we’re preventing similar errors in the future, but said error was fairly low-impact here, and didn’t really detract from an otherwise excellent trade opportunity. Movement could have been smoother, and while technicals never turned bad, they did become less good near the end of the day, just before another spike in price. All in all, a solid position.
Our best short of the day made us 0.6%, and came in right as the day was coming to a close. This trade was an anomaly for the system, since it only held it for about 10 minutes before it hit our target exit. Looking at the chart, I don’t see any clear reasons we wouldn’t have taken this trade, BBY just started moving much faster immediately after the notification came through.
Ultimately, we made 54 trades today - 44 long and 10 short. That’s all I have for you tonight. Thanks for reading - and happy trading!
