Thomas Meyer, Editor
July 25, 2022
Twitter: @AlgoTrendTrade1
Email: algotrendtraders@gmail.com
Welcome to this week’s AlgoTrendTraders report. Before we get into this week’s report, be sure to follow us on Twitter: @AlgoTrendTrade1
We’ll post updates throughout the week.
Final Issue of AlgoTrendTraders - Thank You!
This week’s newsletter will be the last one I write, at least for a while. I appreciate the kind emails you’ve sent over the past couple of weeks. Hopefully you’ve had an opportunity to understand the power of trend-trading and how it can both generate profits and protect your capital in both bullish and bearish trends. If you take the perspective of “how much money could I potentially lose” first, you’ll be able to make more intelligent trades and you’ll have better control over your investments. I’ll be posting many of these same charts on Twitter going forward. Be sure to follow me there.
The Markets Were Kind Last Week
The markets moved higher last week and all 5 tickers we follow moved up. We had 3 oversold bearish trades in place and all of them hit their trailing stops. This means that we’re leaving just one trade on the table. The bearish trade in GLD remains in place and a suggestion on how to manage the trade going forward is in the Composite Table underneath.
We Achieved Outstanding Results in the Past Year
We began publishing the newsletter more than a year ago. We had also been publishing in the UK and Australia before that. Here are the results of the SPY and QQQ trades.
There were 5 trades in SPY, 3 were winning trades and 2 were losing trades. The average gain per trade was +3.24%. Just doing a little simple math, that’s a gain of more than +16% in the past 1+ year. Of course, this includes both bullish conditions and bearish conditions. The gain of SPY during that same timeframe was +5.14%. We outperformed the market with much less risk.
There was a similar outcome for QQQ. Of 5 trades in the past year, 3 trades were winners and 2 trades were losers. The average gain per trade was +1.56%. That puts the total gain of a little more than +7% while QQQ actually fell -9% during the same timeframe. Again, we outperformed the market with much less risk.
We had a total of 16 trades of just the ETFs over the past year. The average gain per trade was +3.26%! Not bad in a falling market. Including the Bitcoin trades, there were 21 total trades and the average gain was +2.35%.
Best of luck to you in your future endeavors. And don’t forget to follow the trades on Twitter.
For those wanting to know more about Trend-Trading
The overview of the AlgoTrendTraders system is underneath the charts. Those familiar with our methodology can get right to the trades. If you’re new to trend-trading, be sure to read this introductory section. This will help you understand the concept of trend-trading and why it’s so powerful.
Each week, we show you the Composite Table that has the week-ending price, current volatility, and the updated exit strategy for each of the ETFs and Bitcoin. We repeat this a lot because it’s the most important element for successful investing…
Always have your exit strategies prepared before you enter into any trade.
The Composite Table for July 25, 2022
SPY (S&P 500 ETF) closed higher last week and hit our oversold trailing stop. The gain in the trade was +6.84%. Though the S&P remains in a Bearish condition, there will be no new trade until the week closing price is below the previous week’s close.
QQQ (Nasdaq 100 ETF) also closed higher last week and hit our oversold trailing stop. There was a loss in the trade of -9.57%. As with the SPY, QQQ remains in a Bearish condition and there will be no new trade until the week’s closing price is below the previous week’s close.
ARKK (Ark Innovation Fund) closed higher for the week. It is no longer in an oversold condition. There will be no new trade until the week’s closing price is below the previous week’s close.
GLD (physical gold ETF) closed higher last week, but it remains in a Bearish condition. The exit price for the bearish trade is now 167.67 which is 1.5 Expected Moves (EM) from Friday’s close. Going forward, consider using a trailing stop of $6.75 (1.5 EM) and tighten it up to 1 EM when the trail crosses the entry price on the trade.
BTC (Bitcoin) closed higher last week and hit our oversold trailing stop. The gain in the trade was +39.19%! Though Bitcoin remains in a Bearish condition, there will be no new trade until the weekly closing price is below the previous week’s close.
Be Sure to Read the Disclaimer at the End of This Report
Here are the latest charts…
Trend-Trading Overview
In this weekly free report, we give you the trading signals for five of the most popular investment tickers. The signals are based on trend-following principles. Very simply, stocks stay in trends until they don’t. Trends can last a short time or they can last for months and even years at a time.
This is not a “get-rich-quick” scheme
If you’re looking to make a ton of money in a short time, you’re going to be disappointed. Trend-trading is not fancy; it’s boring, and takes time to be successful. This is a system that relies on a historically-proven process to generate solid returns on winning trades and avoid large losses on losing trades. We’re definitely the tortoise, not the hare.
Trend-following systems don’t try to guess what the next move in the markets might be. Instead, we measure the markets each week and use our algorithms to determine the current trend and the exit strategy for the current trades.
The key to the winning trades greatly outperforming the losing trades is the risk management system. If a trade moves against us, we’ll get out of the trade with a small loss. But if a trade trends higher for months at a time, we have the ability to build up substantial profits.
AlgoTrendTraders uses both trend and momentum to generate the trading signals. The yellow channel you see in the center of the charts is called the “Transition Zone”. When a stock is above the yellow channel, it’s in a Bullish condition. When it’s below the yellow channel, it’s in a Bearish condition. When it’s in the middle of the channel, it’s in a Neutral condition and there is no trade.
Selling is More Important Than Buying
Every trade has a pre-determined exit strategy. This is based on the normal volatility of the underlying ticker. Each stock has its own unique volatility. And, volatility is dynamic. It’s constantly changing. Each week, we look at the previous 52 weeks of price movement to come up with its normal weekly volatility. This is called the “Expected Move”. The Expected Move equals one week of the normal volatility of the stock or ETF being measured. Every week, the exit strategy for each ticker is updated.
The system is based on the weekly closes of the underlying tickers. All trading information and volatility calculations are based on weekly volatility. By using weekly calculations, the system ignores the day-to-day noise in the markets and is able to give better signals.
It’s easy to see the periods of time that volatility increases and decreases. As the yellow channel Transition Zone widens on the charts, the volatility is increasing. The opposite is true; when the Transition Zone narrows on the charts, the volatility is decreasing.
The best time to enter a trade is when a new signal is given. This gives you the greatest opportunity to get into a trend that could last a long time. Though it’s possible to get into a trade after a trend has been in place for a while, the risk in that trade is elevated. Consider using 1/2 or 1/3 of your normal investment for these situations.
For this report, we give signals that can be followed by both novice and more experienced investors. Novice investors can use these signals to help them manage their 401(k) and retirement plans by adjusting the signals for SPY and QQQ to match the mutual funds in their plans. Though you won’t be able to short these indices when they become bearish, you can stay away and avoid devastating losses from bear markets.
Experienced and sophisticated investors can use leverage or options, but the risk is substantially greater. Never risk more money than you can afford to lose.
Disclaimer:
The information published in this newsletter should not be used to make personal investment decisions. We are not licensed by any federal or state entity to give investment advice. We do not know your personal financial situation. Investments should be made only after consulting with your professional investment advisor and only after reviewing the prospectuses or financial statements of the companies in which you’re considering investing.