Stick With Your System and Trade Your Time Frame (Pigs Get Slaughtered)

Saying every system works is as good as saying no one system works all the time.  The truth is a system or indicator works within the intended time frame, or “eventually”.  We’ve heard the rhetoric, “you call it often enough, you’re bound to be right one of these days”.  It’s a mockery to the stock analysts or advisers who forecast the markets.

But you have to follow a system, and only one!  You can claim you should follow a couple of services, bloggers, or multiple indicators, but only if they provide confluence to the system you follow.  The reason is the system will be right sometimes but it will be wrong sometimes as well.  If you follow the system faithfully and exercise money management disciplines, you will win overtime.   On the other hand, if you are constantly searching for the Holy Grail, or lose faith and flip flop among different systems, you’re a pig and will be slaughtered.   Despite all the knowledge I’ve gained over the years, I couldn’t apply the wisdom and I am once again a pig.

I have admitted in following The SI Indicator without success while the SI has proven time and again to be right in the end.   I’ve used it incorrectly in the past by trading the market per the micro trend of the SI instead of the overall trend.  It’s a long term trading signal spanning over 10 weeks.   The “fuzzy” nature of the SI has caused me to lose faith frequently as I studied technical analyses and read other people’s blogs.

When the SI indicated that the peak is in for the market at the end of April, I had doubts as the market had been in relentless bull market since last summer.  As it turned out, May had indeed proven the saying, “sell in May and go away,” right.  Amazed, I was convinced that SI was once again right.  So in June I was looking to short on any meaningful rally, but the market kept tanking aside from a rare one day bounce or two which quickly got reversed the next day.  Finally the market consolidated and I started to timidly build my short position, and last week I finally built up a meaningful position and was ready for the market to take the next leg down.

Alas, this week the market started to rally relentlessly.  In fact, this week has turned out to be the biggest weekly advance by the market in years!   This is despite the fact that today was the last day of the QE2 POMO.   My TZA position alone is down over 8% losing over $2,000 on paper.

You see, SI is still right as of today.  The SPY at 134 is still below the peak of 137 made in May. The trend is down if you draw a line from the peak through today’s close, but I’m once again seriously hurting.

The Chartist, an investment service that my brother subscribed to, has been on buy signal since last November and the signal was never taken off.  It did very well for many months until it almost lost all of it’s gain at the low in June.  However, it re-iterated it’s buy signal in it’s June 16 newsletter in the face of all of the bearish sentiments in the market.   Well, since then, the market has rallied 6%.    So those Chartist subscribers who maintain the faith are sitting pretty with at least 6% profit; but those who “jumped” ship would be on the sideline kicking themselves in agony.

Every service uses its own system that works in its own time frame.  If you enter a trade because of it, you’d better stick with it until it exits the trade.   “Bulls make money, bears make money, but pigs get slaughtered.”

Right now, the SI is bear and it’s making money, the Chartists service is a bull and it’s making money, I’m the pig and I’m being slaughtered.

The only consolation is my core AONE long position followed the market and was up 2% today.

Portfolio Value: $133,100.   All time low.

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