Highlighted Trades - 03/19/2024
Today was our first day with the reworked version of our current algorithm (that is, the one with the smaller list of allowed tickers). Today, we saw 13 trades from it - 9 long and 4 short - across 7 unique tickers. This is significantly fewer than we previously saw, but going forward it’s about what we’re expecting to see most days. The name of this change is quality over quantity.
Our most profitable ticker today was BG. We made 2 trades, both of them long positions. We made a total of 0.52% on these trades. Overall, the entry conditions are solid, but could have been better. The TK-cross is present, but it’s weak afterwards. After the cross occurs, our TK-lines are stuck together until about 15 minutes later, when the cross becomes more pronounced. There’s a strong argument to ignore the initial signal, and only enter once the cross becomes stronger. Using this strategy still would have yielded profit, albeit less so.
The MACD signal is also relatively weak during our initial exit. There’s some argument that this wasn’t a problem since MACD never went negative during the trade, but it’s worth noting as a loose red flag.
Additionally, I think our initial exit is questionable. The price crossing below the conversion line is a relatively weak movement, and while MACD is decreasing, it’s still positive at the time. If you’d held through that exit, and only made 1 trade lasting that whole time, you would have instead made 0.73%, for a bit extra.
Overall, these trades are largely what we’re expecting from this system. They’re successful, but not absolutely ideal, in such a way that a skilled trader using our system would likely beat the P&L made by a trader following it blindly.
Our biggest losing ticker of the day is HPE - where we made 3 trades, losing 0.39% in total. I think our initial entry here is questionable for a couple of reasons. First off, the MACD isn’t great. The differential is negative, but rather stagnant at the time of our initial entry. I would have wanted to see more downwards momentum prior to taking a position.
Secondly, the Kijun-Sen line is really flat throughout the latter half of the day - both before and after our entry. The Ichimoku Cloud indicator is most successful during trending markets. That isn’t to say strong trends are a requirement for these trades, but we don’t want to see stocks that are totally stagnant, or are showing signs of becoming stagnant. A flat Kijun-Sen line is a warning sign for stagnation. I think the initial entry is worth taking, since the cross is very strong, but I don’t think I would have re-entered the position after the first exit. Seeing the Kijun-Sen line remain flat after an entry signal is a warning sign that the signal was a false positive, and that the ticker is in fact too stagnant to effectively trade this way.
The last trade I want to highlight today is a long we took on KHC near the end of the day. We made 0.18% on this - nothing major, but a nice profit. We roughly broke even here, because this trade followed 2 losing long trades on KHC. The only real problem here is that the Kijun-Sen line is again, fairly flat. It’s not a coincidence that we got a winning trade only when the Kijun-Sen line began to slope upwards.
Unfortunately, we haven’t found an algorithmically consistent way to identify significantly flat Kijun-Sen lines. In the meantime, we’re experimenting with solutions here, but traders are encouraged to look out for them as a potential red flag.
That’s all I have for you tonight. Thank you for reading - and happy trading!
