And what date and amounts would that be Andrew?
If I recall correctly the training the testing and the buy/sell price used is the close of the day after the signal is triggered. I hope this helps
Mani
I asked the exact same think. The answer is it depends on the date that you started trading the system. It seems that the public portfolio had some winning trades when I started. If you want to test this start using the system (either with real money or paper trading) and after a few months compare your open positions to the public portfolio. It is likely that your positions will be different. I started to use the system on 12 Dec 2020 and I followed the system exactly. It did not work for me. I would have hoped that the system would have been more robust.
Ivor
Hi All,
Jumping in to clear a few things up.
The figures Mani is referring to are from our SPA3 TRADER portfolio. SPA3 Trader tends to perform very well in rising markets. As is evident in the performance of this public portfolio since the Covid Crash.
However, this discussion is focused around the SPA3 INVESTOR strategy. Completely different to SPA3 Trader.
The SPA3 Investor public portfolio is in negative territory over the same period shown in Mani’s screenshot. However, this is why we continue to preach big-picture perspective. Over the past 6 years this portfolio continues to massively out-perform the market. (And there have been previous short-term periods of under performance in that time frame.)
Andrew, you are correct in that the SPA3 TRADER portfolio is paper traded. We do not hide that fact. But the price we use for all trades in the paper traded portfolios is the close price the day after the signal (aka The ACTION PRICE). This is the same price that is used to back-test all our strategies.
We cannot use prices or enter trades on the day a signal is generated as we rely on End Of Day Data. Meaning we do not know if a buy or sell signal has been generated until after the market is closed.
So, using your example of NAB, we would have used the price of $27.35 (Close price on 25 January 2022) to close this position if it were in a paper traded portfolio.
We understand there is a lot of frustration from our members with the performance of the SPA3 Investor strategy over the last 12 months. Completely understandable. But this is the exact reason why we speak so much about big picture perspective and the pyschology involved in following a purely mechanical approach. The mental fortitude to continue to execute when things aren’t going your way is without doubt the hardest aspect to overcome if you want to be succesful with a mechanical approach over the long term.
I would strongly encourage you all to read Way of the Turtle, by Curtis Faith.
Furthermore, Gary will also be hosting a webinar on Thursday to address some of the concerns that have been raised around performance of late. And again, I would encourage all to attend. There will also be a Q&A session at the end to address any further questions you may have.
You can register for the webinar here, if you haven’t already done so: https://zoom.us/webinar/register/WN_72Rgo0qBQxOCKkLRdlqYhA
Hope that helps.
Ivor,it’s a pity if you give up on the system after 12 months
While it is frustrating, as a client of over 10 years I can assure you the the SWS products are very robust, the research is rigorous and the results speak for themselves. I would encourage you to persist despite the present circumstances which I acknowledge are trying and somewhat discouraging.
Hi all
I know there has been quite a bit of discussion about the merits of the system. I purchased the SWS Investor product in May 2020 for two reasons
- To limit my drawdown. I got caught in the COVID market collapse and saw my SMSF fall 38%. I vowed that I never wanted to have that happen again.
- To outperform the market-ie beat the market and the back tested edge supports this. If I can’t beat the market may as well just buy the index STW.
Today the market is down another 2.6% at the time of this post. After last nights update there were 7 BAP signals still valid. Looking at price action today probably 4 will be sells and kicked out. With only 3 BAP’s likely to be valid tonight- NST, FLT, WHC- I currently own all of these in my portfolio. So my current portfolio will require no action until the stops are hit and the system generates new signals. (NCM could become a BAP but that’s only 1 more valid trade ) I have scrolled through all the charts and I am likely to be in cash for some time as the reversal signals are around 8-10% away from the current price. If the market continues its downtrend I will be in cash and objective 1 above is achieved.
I can accurately calculate my drawdown under this system which I was never able to do in the past.
Kind regards
Stephen
Hello everyone.
This is a very difficult time for everyone, as discussed the mental side of being able to keep taking new trades when the market is falling is extremely difficult and I have to admit there are plenty of times where I’ve paused taking new trades as much to get ‘breathing space’. Plenty of people second guessing what could be improved and I know Gary and the team are constantly looking for these. For my own part I wonder if when a market is in clear downtrend as at present, say a fall of over 7% whether there’s a call to stop taking BAP trades until the market seems to have bottomed and starts to return to an uptrend? I’m religiously taking the stop signals but I must confess to not taking some of the BAP trades that are still available. Being in cash feels more important than potentially being in a trade at present. I’m considering making this my own rule, I wonder if the SWS team have done any research on this? During the hight of the Covid crisis there was the new volatility rule brought in for example that stopped us taking some new buy signals.
Further to my last post I’m wondering if the system would be able to achieve greater protection if this rule was considered:
When QQQ posts a sell signal, possibly with further confirmation from IVV then stop taking BAP trades until they post a new signal.
Buy signals would still be taken and of course sell signals.
As always pain of loss is more keenly felt than the joy from gains.
Would anyone have the skills to test this idea?
Could people post their current drawdowns if they are mechanically following the system please. I would be very interested.
Cheers.
Hi All
It’s so great to hear everyone’s point of view.
I have been a subscriber for many years and have a lot of faith in the system and would expect based on all the research that this will be a small blip on the longterm chart and our equity curves…but I also know anything can happen.
Having previously used the trader system I have struggled taking entry signals, particularly BAPs in my investor portfolio when my trader portfolio is HMR for ASX or US, especially as my position sizes are so much greater.
Although the system might be considered set and forget in my experience it is constantly evolving and over the years there have been many well researched and backtested changes to improve the outcomes. and I am sure this will continue.
I find the education centre and eUGMs very helpful and the weekly ones during the Covid crisis invaluable.
Looking forward to Gary’s eUGM tomorrow.
FYI: My drawdown from recent XAO high (7927) is ~3.45% for the EW component of my portfolio, c/w XAO (down to 7248) decrease of ~8.6%. I don’t usually take BAP buys unless (1) market is ‘positive’ (SIROC over 70) and (2) only a few days since buy signal.
It is interesting to read all the opinions and variations of the system such as when to take BAP trades. When I bought the system I was told to follow it exactly, which I did. If the system needs more finessing or it is known that it performs badly in sideways or down markets then I think extra rules should be added to the system to take these in account. The problem here is that unlike with amibroker or realtest we can not actually properly backtest the system ourselves by adding or removing conditions/extra rules. By being unable to see our own backtests the only objective data that I have is my own results which have spent most of the time in the system with my equity less than wat i started with.
Also it has been mentioned that the system works best in a bull market. I started on 12 December 2020. Between the 12 December 2020 until 13 August 2021 (8 months ) the asx has been in a nice bull market with the market in a nice uptrend and closing price above the 70 day EMA. Why did my portfolio spectacularly underperform during what should have been ideal conditions. From day one I went into drawdown. During that period my equity was below my initial equity until 13 July 2021 (7 months during a bull market) when i hit my starting equity again. At the same time the XAO was hitting new highs.
Given my different start date my portfolio has also massively underperformed the public portfolio. At present I am in a -18.35% drawdown and my win rated is 22.68%. My annualised return is -10.07%
Over the same period the public portfolio has has a drawdown if -9.48% a win rate of 28.57% and an annualised return of +9.84%. The explanation was that the difference could have been accounted by variations in timing (ie when I started). I would have hoped that the system would have been more robust then that.
As I mentioned the only real data that I have is my data in front of me now. What I see is not good.
Ivor,
If the system needs more finessing or it is known that it performs badly in sideways or down markets then I think extra rules should be added to the system to take these in account.
Beware the Law of Unintended Consequences - no rule change has ONLY a positive effect. There will ALWAYS be a negative effect in some other market conditions. Which is why research must be done over a large sample of data over multiple types of market conditions to determine the overall Edge.
More finessing and extra rules aren’t required.
…the only objective data that I have is my own results
As I mentioned the only real data that I have is my data in front of me now
Neither of these statements are true. You have the real-money public portfolios as real objective data and evidence to analyse. You also have all the research in the documentation. And in a few weeks time (it’s in Alpha testing right now) you’ll have the Simulator tool where you’ll be able to research your own historical equity curves, e.g. with and w/o BAPs.
Also it has been mentioned that the system works best in a bull market.
Not necessarily correct. In fact, SPA3 Investor works best in long bear markets where it keeps you mostly in cash. In raging bear bull markets it is good to match the market. In fact, this was Warren Buffett’s stated aim when he started out in the 1950’s - Google it.
No system or approach (mechanical, discretionary or B&H) will outperform the index in every bull and bear market. And definitely not in every timeframe. If you’re looking for this then you’ll never find it and will continue to be the worst type of investor there is - The Inconsistent & Subjective Investor
Please attend today’s C&G session or watch the recording where you (and others) will hopefully learn a lot more about stock market investing. With or without a mechanical trend-following system.
Regards
Gary
-15.87 drawn down showing after 4 Months trading
Had to sell the last stock today so completely in cash. AFI, BHP, CPU, CSR, RIO, WHC, WOR are the only stocks that a person could be holding after sells tomorrow
Yeah that’s the system doing it’s job. One of my portfolios is down to 3 of 8 (CPU RIO and WHC) and the other is down to 5 of 12 (BHP RIO CPU ILU CSR) If it gets to 100% cash I might reduce the 12 to 10 just to reduce workload a bit.
Been an awful month - reminds me of December 2018 - well most of 2018 actually.
Hello everyone,
I hope everyone took the signals today and over the last few days. I am back to fully invested now, and some excellent outperformance of the market today. One thing to look out for is a buy will not show up in the app the day after setting an action price as it’s not " below action price" but is still a valid buy if you can pick it up below the previous day’s close - for example I picked up WBC today at 21.50 as I put in an order below its close from yesterday (the action price).
And from a simplicity standpoint, I put my trades in for the open (set and forget) and hold ten positions in my portfolios as it’s easier to calculate position size ( easier to avoid trading errors).
May the run up begin…
The App uses end of day data and has no way of knowing “if” a stock might be below its Action Price any time into the future.
The only way to see this is to view the market intraday.
Any stock/ETF that is in an Open position (recent or not) could dip below it’s Action price intraday, and if you were watching the market during the day and picked that movement up, you could take a position.
If that candidate does close the session below its Action price then the App will provide a BAP entry signal later that night for potential actioning the following day.
Hi Ian,
In your WBC example, I am just trying to understand the advantage of buying WBC intra-day by setting a limit entry at the action price on the day after the action price is set. When buying at 21.50, how did you know that WBC was not going to close even lower than 21.50? How do you know it is better not to wait for the BAP entry?
Also, there is no rule for this approach in SPA3 Investor, so when you say, “is still a valid buy”, in what context do you mean?
G’day John. Valid questions. My intent is to be as fully invested as possible while still being mechanical and following the rules. As David said, any open position is a buy if it trades below its action price intraday. This can be a bit tricky to keep track of so what I will do is put in a buy order just below the action price of a recent buy signal as I can easily find that price in the app. I will just put in a good for the day order as if my order doesn’t get hit I will want to re assess the next day’s buys based on available spots and ranking. Because I buy at open, the action price is a good way to set your price limit - I just put in buy orders at action price, good for a day. Rinse and repeat. So yesterday I picked up ORG, QAN and WBC at open or just after, and by the end of the day I was well up as the market powered up. Same today with FLT. (Different portfolio).
Cheers.