Highlighted Trades - 04/01/2024

We saw 6 trades across 5 tickers today - 1 long and 5 short. Let’s check them out.

The best trade we made today was a short on ANSS - this was 1 position with no re-entries. We made a decent return of 0.2% here. There isn’t very much to say about this trade, unfortunately. The entry is pretty solid, with good momentum, a strong cross, and solid MACD. The one reason I might have hesitated is that there’s some choppiness with the candles - notably there are some large gaps between them. That can increase the odds of our technical analysis not holding up well, in addition to making it more likely we get stopped out prematurely, due to the stock gapping upwards. Still, we did end up profiting here and it’s hard to argue with results.

Choppiness, while an obstacle in determining good trades, is something that’s difficult to measure algorithmically. And even if we had a system of measurement we liked, it’d be difficult to designate an exact threshold, that is: at what point is the chart choppy enough that we don’t want to trade it? As such, this is a red flag we encourage users to look out for. The choppiness wasn’t severe here, and the trade worked out anyways, but something worth having in mind.

Our biggest losing trade today was this short on ABNB, costing us a pretty tame 0.11%. I think this one is a pretty clear fake-out. To start with, the stock’s movement had been almost completely sideways the whole afternoon. Secondly, while the MACD differential is technically negative (and increasingly so) at our moment of entry, it’s only negative by a small amount. On top of that, the TK-cross is fairly weak. The Tenkan-Sen like had previously been above the Kijun-Sen line for several candles - which is good to see - but after crossing, the Tenkan-Sen is just barely below the Kijun-Sen line. At very least, it’s a sign to exit early when, on the next candle, it’s still only barely below it.

Overall, this trade is a textbook example of what we encourage our users to look out for. There are certain red flags in trades that, while our algorithm doesn’t always catch, are useful to be aware of: long term sideways movement, MACD being only slightly on our side, certain kinds of weak crosses. While none of these red flags necessarily invalidate a trade on their own, they make them more questionable. Here, a trade showing several of these red flags, is kind of a prime example of one not to take.

Our losses here were pretty minimal, which is nice, but we’re looking to use this trade as somewhat of a learning opportunity when improving our system. I’d like to look into adding some “buffers” to our TK-line and MACD measurements to avoid signals like these, as well as some means of evaluating longer term momentum. Currently, our system is only effectively able to evaluate shorter term momentum building, which means longer term sideways movement can often get through our filters.

The last trade I want to examine tonight is this short on WRB. This was our only trade that had a re-entry today, and overall it ended up almost exactly in the black (we’re down 0.06% on it, to be exact). While I don’t think this is necessarily a bad trade, I think there’s a pretty solid argument against taking that re-entry. The MACD signal is pretty strong, and getting stronger, when take our first entry, but by the time we re-enter, it’s much weaker (and had briefly been positive). We don’t have this as a hard rule, because MACD can often turn briefly against us, before looking good again and giving us a profitable re-entry, but in that case, we usually want our re-entry conditions to be fairly strong - and this one was largely just okay. Another reason I say the re-entry is just okay is that the price action had been above the Tenkan-Sen like for several candles, making it look likely that we were going to get stopped out again.

There were opportunities to make this trade profitable (for one, ignoring our stop conditions and holding until the end of the day - since the TK-cross never reversed), but our algorithm on its own did not. The loss here was minor, but I do think it was pretty avoidable.

That’s all I have for you tonight - thank you for reading, and happy trading!