For example, in the Forex market, a currency pair is just the value of one currency vs. another, such a relationship doesn't have a long or short bias as the pair is just as likely to fall as it is to rise. Stock prices however tend to increase over time, so stock market indexes tend to have a 'long bias' as they typically spend more time rising than they do falling. And when stocks do fall in value, the falls tend to be sharp and sudden, whilst the rises tend to happen slowly over a long period of time.
Large currency pairs such as the EURUSD and the GBPUSD also tend to trend a lot better than stock indexes, so systems that aim to buy high and sell even higher, or sell low and buy back even lower tend to work very well on these currency pairs, but tend to not work so well on stock indexes. Systems that look to buy at a relatively low price and sell at a relatively high price usually work well on stock market indexes but they often miss the important big moves on currencies pairs where the price is less likely to retrace.
Movement of the S&P500 over the last 5 years. Notice how the index spent most of it's time moving up with sharp and sudden drops.
Worldwide, stock indexes are heavily influenced the events in the markets in the USA and the S&P 500 is often regarded as the 'grand-daddy' of indexes. The S&P 500 provides a good indication of the state of the US economy and the collective value of America's public companies. This system is an 'end of day system' designed for trading the S&P 500 only. It takes advantage of fact that the index usually moves in waves of mini peaks and troughs and aims to only take trades in the direction of the longer-term underlying trend.
The S&P 500 Trading System Rules,
The system is an end of day system using only the closing price data. We need today's closing price, the closing price 1 day ago, the closing price 2 days ago, the closing price 3 days ago, and the closing price 60 days (three months) ago. The rules are -
If today's closing price is higher than the closing price 60 days ago the trend is said to be up and we will only take long positions.
If today's closing price is lower than the closing price 60 days ago the trend is said to be down and we will only take short positions.
A long position will be taken when the price closes lower than it has closed in the previous 3 days and the trend is said to be up (the closing price being higher than it was 60 days ago).
A short position will be taken when the price closes higher than it has closed in the previous 3 days and the trend is said to be down (the closing price being lower than it was 60 days ago).
A long position is closed when the price closes higher than it has closed in the previous 3 days or if the trend has turned down (the closing price now being lower than it was 60 days ago).
A short position is closed when the price closes lower than it has closed in the previous 3 days or if the trend has turned up (the closing price now being higher than it was 60 days ago).
Or, in psedo code -
If (Close < Close1DayAgo AND Close < Close2DaysAgo AND Close < Close3DaysAgo AND Close > Close60DaysAgo) THEN Go_Long
If (Close > Close1DayAgo AND Close > Close2DaysAgo AND Close > Close3DaysAgo AND Close < Close60DaysAgo) THEN Go_Short
If (Close > Close1DayAgo AND Close > Close2DaysAgo AND Close > Close3DaysAgo) OR (Close < Close60DaysAgo) THEN Close_All_Longs
If (Close < Close1DayAgo AND Close < Close2DaysAgo AND Close < Close3DaysAgo) OR (Close > Close60DaysAgo) THEN Close_All_Shorts
The S&P 500 Trading System Results,
To see the full results of this system from January 1996 to June 2010 right click and save target as here.
The results, in summary, are -
From January 1996 to December 1996 –
Number winning trades: 39
Number of losing trades: 19
Number of points won: 229.71
Number of points lost: 176.32
Largest number of points won in a row: 94.08
Largest number of points lost in a row: 66.25
Percentage of trades that are winners: 67.24%
Winnings to losses ratio (points): 1.30 to 1
From January 1997 to December 1997 –
Number winning trades: 41
Number of losing trades: 12
Number of points won: 503.02
Number of points lost: 163.63
Largest number of points won in a row: 249.85
Largest number of points lost in a row: 70.54
Percentage of trades that are winners: 77.36%
Winnings to losses ratio (points): 3.07 to 1
From January 1998 to December 1998 –
Number winning trades: 37
Number of losing trades: 18
Number of points won: 690.98
Number of points lost: 541.69
Largest number of points won in a row: 157.71
Largest number of points lost in a row: 505.46
Percentage of trades that are winners: 67.27%
Winnings to losses ratio (points): 0.78 to 1
The S&P 500 Trading System
Stock indexes tend to move somewhat differently to Forex currency pairs and therefore systems designed for trading the Forex market aren't always suitable for trading stock market indexes.
For example, in the Forex market, a currency pair is just the value of one currency vs. another, such a relationship doesn't have a long or short bias as the pair is just as likely to fall as it is to rise. Stock prices however tend to increase over time, so stock market indexes tend to have a 'long bias' as they typically spend more time rising than they do falling. And when stocks do fall in value, the falls tend to be sharp and sudden, whilst the rises tend to happen slowly over a long period of time.
Large currency pairs such as the EURUSD and the GBPUSD also tend to trend a lot better than stock indexes, so systems that aim to buy high and sell even higher, or sell low and buy back even lower tend to work very well on these currency pairs, but tend to not work so well on stock indexes. Systems that look to buy at a relatively low price and sell at a relatively high price usually work well on stock market indexes but they often miss the important big moves on currencies pairs where the price is less likely to retrace.
Movement of the S&P500 over the last 5 years. Notice how the index spent most of it's time moving up with sharp and sudden drops.
Worldwide, stock indexes are heavily influenced the events in the markets in the USA and the S&P 500 is often regarded as the 'grand-daddy' of indexes. The S&P 500 provides a good indication of the state of the US economy and the collective value of America's public companies. This system is an 'end of day system' designed for trading the S&P 500 only. It takes advantage of fact that the index usually moves in waves of mini peaks and troughs and aims to only take trades in the direction of the longer-term underlying trend.
The S&P 500 Trading System Rules,
The system is an end of day system using only the closing price data. We need today's closing price, the closing price 1 day ago, the closing price 2 days ago, the closing price 3 days ago, and the closing price 60 days (three months) ago. The rules are -
If today's closing price is higher than the closing price 60 days ago the trend is said to be up and we will only take long positions.
If today's closing price is lower than the closing price 60 days ago the trend is said to be down and we will only take short positions.
A long position will be taken when the price closes lower than it has closed in the previous 3 days and the trend is said to be up (the closing price being higher than it was 60 days ago).
A short position will be taken when the price closes higher than it has closed in the previous 3 days and the trend is said to be down (the closing price being lower than it was 60 days ago).
A long position is closed when the price closes higher than it has closed in the previous 3 days or if the trend has turned down (the closing price now being lower than it was 60 days ago).
A short position is closed when the price closes lower than it has closed in the previous 3 days or if the trend has turned up (the closing price now being higher than it was 60 days ago).
Or, in psedo code -
If (Close < Close1DayAgo AND Close < Close2DaysAgo AND Close < Close3DaysAgo AND Close > Close60DaysAgo) THEN Go_Long
If (Close > Close1DayAgo AND Close > Close2DaysAgo AND Close > Close3DaysAgo AND Close < Close60DaysAgo) THEN Go_Short
If (Close > Close1DayAgo AND Close > Close2DaysAgo AND Close > Close3DaysAgo) OR (Close < Close60DaysAgo) THEN Close_All_Longs
If (Close < Close1DayAgo AND Close < Close2DaysAgo AND Close < Close3DaysAgo) OR (Close > Close60DaysAgo) THEN Close_All_Shorts
The S&P 500 Trading System Results,
To see the full results of this system from January 1996 to June 2010 right click and save target as here.
The results, in summary, are -
From January 1996 to December 1996 –
Number winning trades: 39
Number of losing trades: 19
Number of points won: 229.71
Number of points lost: 176.32
Largest number of points won in a row: 94.08
Largest number of points lost in a row: 66.25
Percentage of trades that are winners: 67.24%
Winnings to losses ratio (points): 1.30 to 1
From January 1997 to December 1997 –
Number winning trades: 41
Number of losing trades: 12
Number of points won: 503.02
Number of points lost: 163.63
Largest number of points won in a row: 249.85
Largest number of points lost in a row: 70.54
Percentage of trades that are winners: 77.36%
Winnings to losses ratio (points): 3.07 to 1
From January 1998 to December 1998 –
Number winning trades: 37
Number of losing trades: 18
Number of points won: 690.98
Number of points lost: 541.69
Largest number of points won in a row: 157.71
Largest number of points lost in a row: 505.46
Percentage of trades that are winners: 67.27%
Winnings to losses ratio (points): 0.78 to 1
For example, in the Forex market, a currency pair is just the value of one currency vs. another, such a relationship doesn't have a long or short bias as the pair is just as likely to fall as it is to rise. Stock prices however tend to increase over time, so stock market indexes tend to have a 'long bias' as they typically spend more time rising than they do falling. And when stocks do fall in value, the falls tend to be sharp and sudden, whilst the rises tend to happen slowly over a long period of time.
Large currency pairs such as the EURUSD and the GBPUSD also tend to trend a lot better than stock indexes, so systems that aim to buy high and sell even higher, or sell low and buy back even lower tend to work very well on these currency pairs, but tend to not work so well on stock indexes. Systems that look to buy at a relatively low price and sell at a relatively high price usually work well on stock market indexes but they often miss the important big moves on currencies pairs where the price is less likely to retrace.
Movement of the S&P500 over the last 5 years. Notice how the index spent most of it's time moving up with sharp and sudden drops.
Worldwide, stock indexes are heavily influenced the events in the markets in the USA and the S&P 500 is often regarded as the 'grand-daddy' of indexes. The S&P 500 provides a good indication of the state of the US economy and the collective value of America's public companies. This system is an 'end of day system' designed for trading the S&P 500 only. It takes advantage of fact that the index usually moves in waves of mini peaks and troughs and aims to only take trades in the direction of the longer-term underlying trend.
The S&P 500 Trading System Rules,
The system is an end of day system using only the closing price data. We need today's closing price, the closing price 1 day ago, the closing price 2 days ago, the closing price 3 days ago, and the closing price 60 days (three months) ago. The rules are -
If today's closing price is higher than the closing price 60 days ago the trend is said to be up and we will only take long positions.
If today's closing price is lower than the closing price 60 days ago the trend is said to be down and we will only take short positions.
A long position will be taken when the price closes lower than it has closed in the previous 3 days and the trend is said to be up (the closing price being higher than it was 60 days ago).
A short position will be taken when the price closes higher than it has closed in the previous 3 days and the trend is said to be down (the closing price being lower than it was 60 days ago).
A long position is closed when the price closes higher than it has closed in the previous 3 days or if the trend has turned down (the closing price now being lower than it was 60 days ago).
A short position is closed when the price closes lower than it has closed in the previous 3 days or if the trend has turned up (the closing price now being higher than it was 60 days ago).
Or, in psedo code -
If (Close < Close1DayAgo AND Close < Close2DaysAgo AND Close < Close3DaysAgo AND Close > Close60DaysAgo) THEN Go_Long
If (Close > Close1DayAgo AND Close > Close2DaysAgo AND Close > Close3DaysAgo AND Close < Close60DaysAgo) THEN Go_Short
If (Close > Close1DayAgo AND Close > Close2DaysAgo AND Close > Close3DaysAgo) OR (Close < Close60DaysAgo) THEN Close_All_Longs
If (Close < Close1DayAgo AND Close < Close2DaysAgo AND Close < Close3DaysAgo) OR (Close > Close60DaysAgo) THEN Close_All_Shorts
The S&P 500 Trading System Results,
To see the full results of this system from January 1996 to June 2010 right click and save target as here.
The results, in summary, are -
From January 1996 to December 1996 –
Number winning trades: 39
Number of losing trades: 19
Number of points won: 229.71
Number of points lost: 176.32
Largest number of points won in a row: 94.08
Largest number of points lost in a row: 66.25
Percentage of trades that are winners: 67.24%
Winnings to losses ratio (points): 1.30 to 1
From January 1997 to December 1997 –
Number winning trades: 41
Number of losing trades: 12
Number of points won: 503.02
Number of points lost: 163.63
Largest number of points won in a row: 249.85
Largest number of points lost in a row: 70.54
Percentage of trades that are winners: 77.36%
Winnings to losses ratio (points): 3.07 to 1
From January 1998 to December 1998 –
Number winning trades: 37
Number of losing trades: 18
Number of points won: 690.98
Number of points lost: 541.69
Largest number of points won in a row: 157.71
Largest number of points lost in a row: 505.46
Percentage of trades that are winners: 67.27%
Winnings to losses ratio (points): 0.78 to 1
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