19 Apr A Simple System for the S&P 500
A Simple System for the S&P 500
Apr. 19, 2023
This week we’re talking about the possible advantages of breaking out and adding Futures to our lives.
And one of the advantages is that it’s easy to create simple systems from simple ideas, and have those ideas make money (just like we thought they might).
Here’s one. And I didn’t make this up. It’s just common sense.
Let’s consider the stock market (in the form of the ES Futures contract).
What if we were absentmindedly watching the market and we saw that the S&P had gone up a ton since earlier in the day? If it had been lower four hours ago and now it’s soaring, what would you think?
You’d think something bullish has happened, right? And if something bullish is happening, we should buy.
The opposite is also true. If price is much lower than it was four hours ago, something bearish is afoot. And we should sell.
But we also don’t want to hold overnight. Overnight can be scary.
So we’ll get out after we hold a half-hour.
Easy. We see bullishness and try to take a little bullish win at the end of the day. And vice versa.
Here are the details of this ES System (30M):
Start Time: 15:00 ET (3 pm ET)
Long Entry: Buy if the current price minus the open of the bar 8 bars back is greater than the range of the bar 8 bars back.
Short Entry: Sell Short if the current price minus the close of the bar 8 bars is greater than the range of the bar 8 bars back.
Stop Long: $500 per contract
Stop Short: $1700 per contract
Time Exit: Exit after one 30-minute bar.
Here’s a screenshot of the simple code: https://www.screencast.com/t/6ck60sK6FfaC
And here are some recent trades:
And here’s the Equity Curve since 2008:
A few takeaways.
One, this simple idea is clearly profitable.
Two, it’s really, really profitable lately as volatility has gone cuckoo.
Three, it has some periods of underperformance, especially during twistiness or low volatility.
Can we do anything about that?
We can add another simple system.
And we’ll do that in the next Newsletter.
It should not be assumed that the methods, techniques, or indicators presented in these products will be profitable or that they will not result in losses. Past results are not necessarily indicative of future results. Examples presented on these sites are for educational purposes only. These set-ups are not solicitations of any order to buy or sell. The authors, the publisher, and all affiliates assume no responsibility for your trading results. There is a high degree of risk in trading.
HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER- OR OVER-COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN.