I have been working on a project the past several months related to the silver market, and trading in general. It’s ready for a test drive so to speak.
First some background...I, like many of you have been very frustrated by the metals market in particular (especially the miners). I have even sat and watched some of them go up in flames after recommending them and stating my reasons for bullishness on them. Those reasons are still valid - but, the price action demonstrably proves that my ability to find value AND time entries/exits well is definitely sub-standard and in need of serious evaluation.
So, with that honest assessment of my efforts - I determined to start over with a blank slate and see if I could figure out a better way to pick those entries/exits. I couldn’t tell you how many indicators and combinations of indicators I have tried to back test - none of which worked particularly well with any of the miners or the various PM ETFs.
But then I stumbled upon something that did work. And the vehicle it seems to work best with is AGQ (the 2x silver ETF). My criteria were that it needed to be a system that was entirely methodical (no interpretation needed) and actionable (you have the information you need in advance).
I have been tweaking and back testing this over and over and over for the past several weeks because the results I was getting were ridiculously large.
An initial investment in AGQ on the date of its inception 1/5/2009 (periodically traded based on daily close prices) has returned 3,675% with this system. Simply buying or selling at the close based on a pre-determined price that is known in advance.
So, for the past couple of weeks, I have been waiting for this system to give its next signal. That buy signal was triggered today as a closing price of $40.02 (or higher). I have begun trading real money with this system effective today. Of course I understand that what worked in the past is no guarantee that it will continue to work – so there is that risk.
Here is some interesting statistics on this system based on back testing AGQ since its inception on 1/5/2009.
Number of completed trades: 90
Number of winning trades: 38
Number of losing trades: 52
Average winning trade: 19.26% (biggest winner 137.40% closed out on 1/5/2011)
Average losing trade: 4.5% (biggest loser 11.34% closed out on 10/6/2009)
Largest drawdown from initial investment ($10K): $7409.27 on 5/4/2009
Initial investment ($10K) on 1/30/2009 is worth $367,549.98 as of this evening.
So - for the purposes of this thread the first publicly stated buy signal occurred today in AGQ at the close at $40.02.