Ed Mamula.com

My month to date results for February 2007:

 # closed winning trades : 4

# closed losing trades : 1

 Net monthly profit % :  +41.6%

Current drawdown : 0.6%

This was a relatively uneventful week for the Cable Glider.  It entered long on Wednesday, got stopped out at a loss early Thursday morning, went short on Thursday afternoon, and closed out with a gain on Friday afternoon that nearly reversed the loss that it suffered earlier in the week.

Since Monday is a holiday, I’ll be spending some time this weekend trying to determine whether any special precautions should be taken in shortened trading weeks; the two shortened trading weeks in January could have produced large gains, but at the time, the Cable Glider did not enter due to it’s economic / calendar filters.

I’d like to make note of a change to the Cable Glider as of February 9th, 2006.  It had been using MACD as an entry filter only, but I’ve found evidence that MACD can be used as an exit tool as well on Friday afternoons only.  Before discovering this, I had a simple rule in place to exit all trades on Friday afternoon, because I do not want to be exposed to the illiquidity risk of holding a position over the weekend.  It is a risk mitigation factor that I presumed would lower the system’s overall profitability, but in fact, it seems to have improved my back test results.  So it’s a win – win.  I get to take it easy every weekend, and in doing so, the system’s returns are improved.   The more recent change to use a MACD cross as an exit filter on Fridays netted me an extra $2000 compared to the predecessor system which would have exited at a predefined time rather than as a result of a technical signal.

Well, it turns out that I left about $15,000 on the table last month.  There was a revision to my system that I had been meaning to implement for the sake of clarity and intuitive sense, but I failed to do it during January 2007 because this revision didn’t seem that it could have a material effect on the trading results.  Well now that January has come and gone, and the biggest event was the volatility surrounding the Bank of England rate hike on January 11th, I revisted how the system filters signals around economic events.  I had the system coded as “do not trade on Wednesdays”, but what I really meant was “do not trade on the day that the EIA releases crude oil inventories.”  It turns out that the EIA loves the 3 day weekend, so that anytime there is a Federal holiday, the inventory number doesn’t come out until Thursday.  This is relevant because there were two holidays in January that threw the schedule off (New Year and MLK day).  The “do not trade on Wednesday” caused me to miss two hugely profitable trades…if those trades had been included in my system results, I could have made in excess of a 70% return for the month.  Ouch!

So I’ve closed the lazy coding gap, and I re-did the backtest for 2006, and no fooling, the results went up by 40%.  Live and learn.  I’ll have a new version of the system active on Sunday night then, and a new backtest result posted in the sidebar.

 On another note, the Employment Report on Friday caused a short lived flash of volatility in both directions, but neither move resulted in an entry signal, so for February, I am still 0 for 0 with a 0% return.   So much for predictions.

The spike up followed by the spike down on the chart above may not look like much, but I’m sure it was enough to clean a lot of short term traders’ clocks.