I used to be a huge proponent of analyzing market technicals and fundamentals. Until I realized how futile it was, because it required me to inject a fair amount of discretion into my trading. So much so, that it became nearly impossible for me to categorize and track any of my trades with any degree of scientific scrutiny.
Long story short, I had no way to tell which part of my strategy was working and which wasn’t. And so when things blew up, I had no objective way to fix it.
My background is technology and finance; I’ve run a hedge fund, and back during the tech boom I was a Chief Architect for Sun Microsystems, where my team was responsible for building out much of Wall Street’s infrastructure and trading systems. So, I decided to reach back on that experience and try my hand at developing my own trading systems.
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And I’ve never looked back. Systems are reliable, and make better interpreters of market sentiment, and better traders than any human could ever be. Also, systems are remarkably good at keeping track of what I do, so that I can automatically produce records of every trade, and the exact reason and circumstances for taking that trade.
Systems Based Trading
So, systems are the starting point of the AppleInvestor Trade Strategy. We use two primary systems for swing trading, a 240 minute and daily bar traders. This provides us with a multi-timeframe look at the market. In addition to these two systems, we have the AppleInvestor Sentiment indicator, which takes in a variety of information, including Apple and market volatility, money flow, momentum, Linear Regression analysis, and other factors, to provide us with a bearish to neutral to bullish scale.
The systems are strong enough to trade straight stock. In fact they are exceptionally strong. But the reality is that Apple is a very high priced stock that makes it difficult for people with small to medium sized accounts to make trades with a good margin to risk ratio. So, we use options for leverage, both monthly and weekly options.
We use monthly options for trending trades, and we use weekly options for mostly times of consolidation, which encompasses 70 percent of all our trades. This matches the fact that 70 percent of the time, stocks are ranging, in consolidation mode, the other 30 percent stock is trending.
There are two types of trades we do; those initiated by system signals, and those based on scientific analysis of price distributions of AAPL stock. We have done extensive studies and found patterns across certain periods and days that allow us to do regular trades, every week; like our “Over The Weekend” or “Into Expiration” trades.
Each morning we hold a pre-market briefing, where we discuss any external events that might affect Apple price (news, earnings, economic reports, etc), then we review our current trades, and we review the systems generated sentiment. From there we pick the types of trades we will enact for each scenario, whether it’s a signal, or managing an existing trade.
After the morning Briefing meeting, we watch our traders and systems, waiting for forward signals to appear. Forward are signals announce the intent of a systems trader to take go long or short at the open of the next bar. This means all systems generated trades have a lead time that can be as great as the timeframe in which the trader trades.
So, for example; the 240 minute system provides forward trade signals up to 4 hours before the trade is executed by the system. The Daily system will announce the trade the day prior, and the 10, and 60 minute day trader systems will produce a forward signal 10 and 60 minutes respectively, prior to the execution of the trade.
When a signal appears, we stage the trade and execute the trade after the trader has alerted us that the trade is on.
Management of Trades
All trades are managed by the trade room members. We use GoToMeeting for the first half of the trading day, for a complete collaborative experience. This time is also used for group training, sharing of ideas, and Q&A. After lunch time, we switch to our full-featured Chat Room to collaborate.
The trades are monitored, and any actions necessary, such as adjustments or repairs, are discussed live online, and then posted in the Chat Room and sent via text message to all members. At the end of the week we strategize and coordinate expiration and rolling of positions.
We trade what the market gives us, primarily collecting premium vs going long. Our motto is to preserve capital, and then profit. We trade by a set of principals and facts. And try to weed out as much discretionary choices as possible.
And finally, we are very focused on trading to a plan, and working within well defined campaigns, while maintaining a good deal of flexibility, so we can accommodate market conditions and new ideas. We are strategy and systems traders, that trade Apple, as well as a few non-correlated strategies, like statistical arbitrage of futures.
There are currently a few seats open in the trade room. We are looking for five people that love Apple, want to trade Apple using options, and learn about trading a methodology, that is both sophisticated and relaxed. If you want more information, simply comment on this post or send me an email, or sign up and lock in your seat. There’s no risk, as there is a 30 day money back guarantee.
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