Current Position: Long SPX 1438.75
Next Action: Stop and go short at 1453.62
Score (0-10): 5=Neutral=Trend Score + Turn Score=10-5
Trade Record: 1 for 6 totaling -12 SPX pts since August 14th with the current trade likely to turn results positive
In order to simplify understanding of my System, I decided to stop using the terminology T2=TradeTrigger and S2=SystemScore. I also decided to update my site materials (see tabs). In this post, I will summarize the System and review the System results thus far after 1 month of trading.
System Summary
The S2 Trading System (commonly referred to as The System) has evolved over the last couple of years into a trend-based SPX scoring system based on key trend indicators, key turn indicators and hourly candles. Rather than rehash the evolutionary steps which are public record, I will summarize the System's key elements.
1. Next trade direction (long or short) is based on the System Score.
The Score is comprised of a Trend Score (0 to 10) plus a Turn Score (-6 to +6). 5 is neutral. >5 is bullish. <5 is bearish. The score calculations are proprietary and I reserve the right to tweak them over time, but I assure you that they are an objective representation of price, breadth, sentiment and cyclical indicators. Although the Trend Score + Turn Score sometimes exceeds the range of 0-10, I use a min score of 0 and max score of 10 for practical purposes. If the Score changes from bearish to bullish or vice versa, that does not cause the current trade to be immediately stopped out, but it does cause the current trade's stop to be tightened as described below and it will typically lead to a reversal trade in the other direction once stopped out assuming the Score has not reversed again by the time of the stop.
2. Trade entry and exit levels are based on SPX 4-hour candle support and resistance.
To
determine support in the case of a long trade (and vice versa for a
short trade), you simply (a) find the highest hourly closing candle, (b)
look back 3 additional hourly candles and (c) find the low hourly price
of that candle. If the Score is still bullish (6-10+) in a long trade, a
stop should be placed between hourly support and 1% below that
typically just below a key pivot, moving average or 0.5% buffer. If the
Score has become neutral or bearish (0-5) during a long trade, a stop
should be placed 1 penny or possibly 1-2 points below hourly support. If a stop level will be broken by more than 0.25% by an opening gap, the stop may be temporarily moved as much as 0.5% beyond the opening price since most initial gaps are at least partially retraced, but the trade will be exited even if the new stop is not reached assuming the Score has reversed against the trade. If the System has no current position and the next trade entry level will be broken by more than 0.25% by an opening gap, the trade will not be entered until price retraces within 0.25% of the original intended entry level or until price retraces 33%+ of the previous hourly pivot.
System Review
The System has gotten off to a mixed beginning. After the SPX 1329 bottom, the System attempted to get long twice at 1345 and 1374, but SPX gapped nearly 2% at the open on those days making the trade way too risky. And, the successful 25pt short trade prior to that (1369-->1345 with some profit-taking at 1340) was unofficial since I did not post the entry immediately. Unfortunately, the System got its first official trade signals in the rare historical 5-week 2% range at 1395-1420, and so it got chopped up a bit with 4 trading losses totaling 30pts. In hindsight, I might have saved 8 of those pts if I'd set the System stop at 1395ish rather than precisly on the 1397 pivot which is often used to run stops like ours. And, the primary loss of 15pts on the System's first official trade should not have ever occurred and will not happen again, because I stretched my hourly s/r rules to trigger a short trade based on an internal 4-hour break (see post from 8/14). And, in past versions of the System, a sideways market did not lead to quite the same lopsided result. Despite all that, I am fairly pleased that the trend-based System kept losses small during an historic trendless phase and kept us bullish or neutral since SPX 1345.
If we include the current trade and current SPX price, the System has 2 wins and 5 losses for a 1%+ total gain. That does not meet the 60-67% winning percentage I'd like to see, but all of my System renditions have gone through choppy phases and ultimately won more than lost. And, the new System started under extenuating circumstances. Although more wins than losses makes it easier to stay mentally strong and stick with the System, making money is the bottom line and the System is now 1% positive (not counting any leverage) after 1 month despite the stumbling blocks. In a mostly choppy, high-risk environment, the System has kept its head above water while trading both long and short, and I believe it will do even better over time. Perhaps, I will review the results again after 3 months.
Ultimately, I built this System for selfish reasons. I have literally lost my shirt, my mind and at times my self-worth trying to conquer the market beast, but I have slowly learned from hard lessons to reach this point. I publish my System to be held accountable to some degree and to possibly help somebody else going through a similar journey. My goal is to make SPX trading a reasonably consistent source of income for my family as part of multiple streams of income. If I feel like I have something successful enough to share and help others financially, I might even open a blog/site to the public with a small subscriber base. Currently, my System is not proven enough nor is my time dedicated enough to do such a thing. This may be a pipe dream I have to give up at some point, but I feel like I am making steady progress and I can see light at the end of the tunnel. Hopefully, it's not an oncoming train. Good luck
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