Since I stopped posting the daily indicator and moved to an autotrading platform to publish trading signals, it has been relatively quiet on this blog with regards to market updates. That's about to change.
On a monthly basis I will now go through what happened that month. Of course, the actual and verified trading results are continuously posted real time on the autotrading platform(s), but some extra explanation on the trading decisions will be given in these monthly updates. This way current and potential investors will likely have a better understanding of how things work in the Greed and Fear model portfolio.
As mentioned in other posts, trading for the Greed and Fear portfolio is done with exactly one S&P E-mini future, with a trading capital (base amount) of $10.000 (depending on the type of autotrading platform). Since this is the first monthly trading update, let's look back at both January and February. The first month of the year had only two trades, which brought in a net trading profit of $1250,50. The second month made a net loss of $1368,- So the portfolio is slightly negative for the year so far.
February has proven us once again that having a stop loss is of extremely great importance! On February 5th, the Greed and Fear indicator anticipated a higher close, and consequently a long position was opened. This was however quickly stopped out at a pre-determined loss, way before the major indices went down for about 5%(!) I have seen several portfolios on the autotrading platforms completely wiping out several years of profit in only a few days.
During those high volatility days, I decided not to trade. Where should one get into a position and where to put a stop loss? The stop should may be as wide as 40 points or so, that's $2000,- equivalent on the E-mini. With a base amount of $10.000 you can not have single trade losses of several thousands of dollars. The Greed and Fear indicator did however manage to make several good calls during those days, but for the aforementioned reasons those were not traded. That's the difference between analysis and trading, something you may not realize when 'lazy-armchair-analysts' make it look like trading is so easy.
With the term 'volatility' in this case I mean the daily distance between low and high as a percentage of price-close. Obviously, the S&P 500 volatility of early February was above historical average of 1,4%, but my guess is traders became a bit spoiled after the low-volatility of last year which was only 0,5% With low volatility it's easier to enter into a position and set a reasonable stop loss.
To wrap things up, for February, the Greed and Fear indicator daily calls had a net result of (only) 21 points, but a negative trading result of $1361,-. For detailed trading records and exact daily indicator calls, check out the results page.