News about <![CDATA[signals]]> News about en-us <![CDATA[All Quiet in Land O' Commitments of Traders]]> <![CDATA[Natural Gas Gives Up Gains, Goes to Cash]]> <![CDATA[Quiet Week in COT Land]]> <![CDATA[Jumping on the Trend with Maximum Profit]]> <![CDATA[Jumping on the Trend with Maximum Profit]]> <![CDATA[Delay for Next COT Update]]> <![CDATA[Bearish Turn for Nasdaq-100, Crude Oil]]> <![CDATA[Banks Bullish, Bond to Cash]]> <![CDATA[Bearish Turn for Copper in Trader Data]]> <![CDATA[Smooth Sailing in COT Data]]> <![CDATA[Bearish Lean Deepens in Trader Data; Short Copper, S&P 500, NDX and Crude]]> <![CDATA[Seven New Signals This Week From COT Data]]> <![CDATA[A Whisper Is A Stronger Social Signal Than A Public Shout]]> Yesterday was a surprisingly interesting news day, given how close we are to celebrating the holidays. Facebook struck while the iron was hot and released a brand new standalone iOS app called “Poke”, leveraging a feature that has been around since the early days of the product, as well as a shot across the bow of SnapChat, who it reportedly attempted to acquire. At first glance, it’s a competitive move, and also a whimsical one. The idea of sending someone a message that self-destructs is kind of “cute”, in the way that passing notes in class was when you were younger. But make no mistake about it, Facebook’s Poke is meant as a means to strengthen its social graph, as well as to crib signals from your daily lives and activities to make itself a better company. I’m not saying that anything is wrong with that, but these are the obvious facts. Let’s discuss the idea of a social signal first, though. When you tweet something, and someone responds, that’s a signal that the person is interested in what you have to say. One could also infer that this person “likes” you, or has an affinity for you or what you just said. This could all be torn down as bullshit though, since we all know that sometimes we respond to people to simply get their attention. The Facebook Poke is an interesting historical feature, one that hasn’t really been documented. It was Mark Zuckerberg’s baby, as Facebook was and is, but not much is known about it, only assumed. During yesterday’s ferver about this new Poke app, a phrase was repeated by outlets over and over again, here’s one from CNN: The poke, which is still around but rarely used, is a minimalistic form of communication — the digital equivalent of a head nod or wink. I take issue with the notion that it’s “rarely used”, because we simply do not have data to back that statement or sentiment up, Facebook has never made it public. I would challenge that it’s not public data because it’s quite important. Whispering to someone is way more interesting than speaking to ten people in a crowd. Your closest friends When you’re at a bar and you look around at the people there, are you interested in what a group of fifteen people are talking about, or what the two folks in the]]> <![CDATA[Bevy of New Signals From Commitments Report]]> <![CDATA[S&P 500, Banks Bullish Next Week, Not So Copper]]> <![CDATA[Sneaky COT Data Looks Maybe, Possibly Bullish... But Who Knows!]]> <![CDATA[Bullish for Natural Gas, Bearish for Banks and Gold, Cash for Crude and Bond]]> <![CDATA[Bearish Nasdaq-100 Signal One of Four New Signals From COT Report]]> <![CDATA[Commitments Data Puts Gold, BKX in Cash]]> <![CDATA[Silver, Banks Bearish Based on CFTC Data]]> <![CDATA[Bearish Downturn in COT Data Accelerates]]> <![CDATA[Forex Signals Reviewed]]> <![CDATA[Forex Signals Reviewed]]> <![CDATA[Investor Hope and Investor Fear]]> <![CDATA[Investor Hope and Investor Fear]]> <![CDATA[Banks Going Bullish, Equities Turn Corner?]]> <![CDATA[Natural Gas Short Ends Crazy Ride in Black, Going to Cash]]> <![CDATA[It’s Never Too Late!]]> <![CDATA[Dollar Rallies vs. Euro as Unemployment Rate Falls To 9.4%]]> The dollar continued its rally against the euro on Friday, despite the weaker-than-expected increase in hiring . . . → Full Story: Dollar Rallies vs. Euro as Unemployment Rate Falls To 9.4%]]> <![CDATA[Equity Trade of The Day – Aeropostale]]> <![CDATA[3C Template]]> <![CDATA[Zynex Medical Holdings Inc. (ZYNX.OB) Announces Increased Orders for 2008]]> <![CDATA[All Eyes Will be on the Fed as Investors Look for Signals on Both Inflation and Interest Rates]]> <![CDATA[Strategy Test: Stochastics]]> In last week’s strategy article I did some basic analysis on the MACD; a trend indicator. In this week’s article I took a look at stochastics; a momentum indicator. However, unlike the traditional overbought/oversold triggers associated with using stochastics I have opted to use a cross of the mid-line (50) with a base fast stochastic setting of [39,1,1]. I couldn’t test for the optimum [39,1,3] using the %K smooth as a trade trigger, so the generated signals were not as good as the basic slow stochastic signal I normally use (see chart for differences in the quality of the signals), but it did give an indication of the efficacy of this strategy.


Test period: A complete bull-bear cycle defined by the S&P (March 20th 2000 to October 8th 2007).

Stocks: Active Trader list (AAPL BA C CAT CSCO DIS GM HPQ IBM INTC IP JPM KO MSFT SBUX T WMT)

Number of shares: 100

Commission: $9.95 (included in the loss calculation)

Trades: Round-trip only; partial trades were excluded.

The basic settings on commission returned the following:

Total Profit: -$30,939
Winners: 256
Losers: 1011
Win percentage: 20%
Profit Factor: 0.74

Unfortunately, using the fast stochastic as a base for generating the signals produced a large number of whipsaw trades. Compared to the MACD strategy there were almost three times as many trades, which translated into three times the cost when commissions were factored. The huge loss would quickly break a trade account, so by itself the stochastic mid-line crossover system is not a recommended strategy.

The use of a protective stop failed to ease the pain; using a 4% stop reduced the loss to a (still) depressing -$23,968 off 26% winners, compared to the 20% winners of the no-stop strategy. Other tested stops didn’t change the return over the non-stop strategy to any large degree.

Taking commissions out of the equation ($0) improved things a little, but there wasn’t the swing to profitability as might have been hoped:

No stop: TP = -$5,276 on 23% winners
3% stop: TP = -$4,174 on 31% winners
4% stop: TP = $1,543 on 31% winners
5% stop: TP = -$7,122 on 29% winners
6% stop: TP = -$9,904 on 27% winners
7% stop: TP = -$9,430 on 26% winners
8% stop: TP = -$10,366 on 24% winners

Only the 4% stop strategy returned any profit (on 100 share lots with an average cost-per-share of $39.48). Stops above 5% gave less of a return than using no stop at all.

How does the strategy test for three random dates?

A start date was randomized and 1 year of data from each point was used. The randomization dats covered 2000/01, 2004/05 and 2006/07; a relatively good mix of bullish and bearish periods. The system was an across the board disaster in 2000/01 with 1-year of trading producing staggering losses ranging from -$7,612 (4% stop) to -$22,975 (no stop). The 2006/07 period produced the best returns from +$1,738 (8% stop) to +$6,036 (4% stop). The average return is given in the chart below:


Not surprising, the 4% stop loss proved to be the most effective strategy to employ - although none were ideal. No stop strategy brought the win percentage to the 40%+ area needed for most profitable systems.

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