Trading SLW:SLV Ratio

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#1 Sat, May 12, 2012 - 10:22am
Strawboss
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Trading SLW:SLV Ratio

The strategy is to trade the SLW:SLV ratio with the stated intention of increasing the number of shares of SLW that I am able to acquire over time. The below chart shows the SLW:SLV ratio in a line chart (red line). When the red line is rising, its better to be in SLW. When the red line is falling - its better to be in SLV.

The intention is to be 100% invested at all times.

Two potential trading approaches…

Incremental Approach

When the red line reaches a peak – the strategy is to be 100% in SLW. Once a top is reached, the plan is to decrease the amount of SLW and increase the amount of ZSL.

When the red line reaches a bottom – the strategy is to be 50% in SLW and 50% in ZSL. Once a bottom occurs, the plan is to decrease the ZSL and increase the SLW.

All in Approach

When the red line reaches a peak, reduce SLW from 100% to 50% and buy 50% ZSL.

When the red line reaches a bottom, sell 50% ZSL and increase SLW to 100%.

Trading timeframes

Core positions based off daily charts.

Always 100% invested in core positions

How Peaks and Bottoms are determined

Stockcharts labels tops and bottoms using proprietary software. While these are not exact, they do seem to work rather well. Once a trade is made, based off of the then perceived top/bottom – that trade remains unless the previous top/bottom is taken out in which case the trade is reversed. This will result in some undetermined amount of “chop” – the extent of which is yet to be determined.

Edited by: Strawboss on Nov 8, 2014 - 5:08am
Sat, May 12, 2012 - 10:24am
Strawboss
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Washington DC, VA
Joined: Nov 13, 2011
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Forgot to mention

The way I will be assessing performance will be 2 ways - the number of shares of SLW as well as the account value. The account will start with $25K. I expect to begin trading within 2 weeks.

Hopeful for any suggestions/advice on how to optimize this strategy.

Jesus Christ is the only true hope that any of us really has. Aaaargh .. the monkeys!!! Trading metals is like playing frogger...there's always a big truck coming.