If you had opened a long-term long on the Nasdaq at the last close of 2023 your current position price would now be up about 3,500 points, about 20% since then: not a bad return. But buy-and-hold puts all your eggs in one basket, and you earn literally nothing from the bearish moves. So traders look for short-term positions, including both long and short.
So here’s a simple objective short-term D1 strategy that might be interesting.
On any day when price closes above the 50EMA set a buy order at the day’s high.
Do the same tomorrow.
Set a stop-loss at the day’s low.
If an order is triggered, exit that position at its next profitable close.
Cancel untriggered buy orders if price closes below the 50EMA.
Whle price is closing below the 50EMA, follow the same strategy but in reverse - set a short order at the day’s low, with a stop-loss at the day’s high.
The issue that no end of tweaking responds to us that the points lost is always a full day’s range, while the points gained can rarely be as much, and usually less than half a day’s range. I am now back to looking at the old tried methods of swing trading so that profitable trades are not closed within hours for a fractional gain. Hey ho.
It’s a fairly cautious strategy. I look for price to rise from a swing low, make higher swing low and then close on D1 above the most recent swing high as the initial setup. I then set a buy order at the high of the next day with a lower high. I only trade the US indices long only.
I wonder what made you shift over? I have been testing your buy higher, sell even higher strategy for the past few years and it has yielded some good results.
Of course, there is the occasional series of losses but if your account can absorb it, you are back to winning ways.
Another filter I used is to use ATR to figure out how many $ per point I am going to be trading to take into account of increased volatility in the markets.
As you mention - the drawdowns are the issue for me. These can get too big to bear - that’s a personal finance management issue - but the strategy will still work.
Yeah, I am aware that everyone has their own risk and drawdown tolerance. When it came to this strategy at what drawdown level did you call it quits and is no longer tolerable?
True enough … not to mention that it also doubtless depends on what proportion of one’s available capital one has allocated to any particular system/method?
(For a professional investor, or anyone assessing “results” with a view to investment, a maximum drawdown of 4% or at the most 5%, over a long period and a very high trade-count, is a more or less industry-standard “acceptable figure”.)
Right now I am tracking the strategy as it works on the US indices. It would be nice to think some modifications might come out of this to lessen the stop-loss damage - but I’m not holding my breath/
