Technical Advice

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Adjust your exposure

The model assumes that you adjust each day your position so as to keep the leverage computed by the model, versus your cash.

If the model works well and your cash position increases when the model is at 2, you will have to increase your exposure accordingly in order to keep a leverage of 2. For instance if you start with $100k and the leverage is 2, your exposure needs to be $200k. Now if the market increase by 10%, you will gain $20k and your cash is now $120k. Since the leverage is 2, you will now need an exposure of $240k.

If the model does not work well, you will have to decrease your exposure in order to keep a leverage of 2. For instance if you start with $100k and the leverage is 2, your exposure needs to be $200k. Now if the market decreases by 10%, you will lose $20k and your cash is now $80k. Since the leverage is 2, your exposure must be adjusted to $160k.

If you do not adjust your exposure with your gains and losses, you will probably not have the same performance as the model and you may increase your risk and/or decrease your gains.

Place your order at market close

The model assumes you place your orders at the market close. For the Dow Jones Industrial this means 4pm EST. Prices sometimes vary strongly around the market close. It may be better to enter your order at 3:58pm in order to get filled before the close rather than after. Beware rare early closing days.

Keep track of your gains versus the model gains

It is common that actual gains diverge from the model gain. You need to understand why. The best way is to use a workbook with two spreadsheets. On one spreadsheet you will record the actual orders you enter on your financial account. On the other spreadhseet record the orders that the model sends you in advance by e-mail, and use the official market close quotes as published on the internet on financial sites on the evening the order is entered. Then compare the profits on each spreadsheet.

Because of interest rates, dividends, exposure adjustment, difference between the filling price and the quoted market close, there will always be a small difference between theoretical and actual profits. Just make sure the difference remains small.

Normally your perfomance should follow the model performance. Ours does.

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performance Beat The Dow

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