Sunday, February 9, 2020

Answers to Frequently Asked Questions (2020 Update)

What is Balance Trading Blog?

Balance Trading Blog is my trading notebook. It's a place for me to record my thoughts, ideas, and long-term (weeks to months) trades.  I'm sharing it with anyone who cares to read it.  Please kindly note that my notes, thoughts, and ideas are not trading recommendations or investment advice. They are simply notes, thoughts, and observations of an x-aerospace engineer who changed his career in 1997 and became a full-time trader who trades for a living.

What is SGS?

SGS is a proprietary mathematical long-term (weeks to months) trend following market timer.  SGS is not a price-based timer.  It is  a smoothed and normalized aggregate of the number of new highs minus the number of new lows of a pool of around 4000 liquid stocks and ETF's (traded on NYSE and NASDAQ) for five discrete time periods (daily, weekly, monthly, quarterly, and yearly). 

Everyday shortly after close, a new value for SGS is calculated.  In order to reduce whipsaws, only the value of SGS calculated on a Friday is used to determine the status of SGS.  If the Friday value of SGS is greater than +50, then the status of SGS is LONG. If less -50, then the status of SGS is SHORT.  For any SGS value between +50 and -50, the status of SGS is NEUTRAL.

What is sgs-st (short-term)?

sgs-st is a proprietary mathematical short-term (hours to days) trend following market timer.  Similar to SGS, sgs-st status can be long, short, or neutral.  Additionally, sgs-st could change its status from long to neutral if an overbought condition is triggered or change its status from short to neutral if an oversold condition is triggered.

The status of sgs-st is determined by (1) the size of the total area between between 13 and 39 hourly EMA's of SPX measured in price-time; and (2) by the growth rate of that area measured in price-time per hour.  The value of sgs-st is calculated every trading hour during the regular session (9:30 AM to 4:00 PM). The status of sgs-st is determined by its hourly calculated value.

How SGS and sgs-st are used for trading?

Since October 22, 2019, I've been tradeing SPXL and SPXU using the status of SGS and sgs-st as summarized in the table below:

Sunday April 26, 2020

Changes to sgs-st:

I'm changing sgs-st to follow ES (S&P Mini Futures) instead of SPX cash.  ES has substantially less gaps than SPX cash and the problem pegging is resolved that way.

Saturday September 5, 2020

Changes to SGS:

Going forward I'm using the same algorithm used to calculate the value of sgs-st for SGS. The value of SGS calculated using Fridays internal data dictates the status of SGS as shown int the table below:
  • SGS is   NEUTRAL  (overbought) when its value greater than +1000 
  • SGS is  LONG  when its value > +50 but less than +1000
  • SGS is   NEUTRAL  when its value is less than +50 but greater than -50
  • SGS is  SHORT  when its value is less than -50 but  greater than -1000
  • SGS is   NEUTRAL  (oversold) when its value less than -1000