ETF Prophet

It’s a go. With a couple of quick calculations and a few clicks I’m back in. In the first week of July I deployed the first of three installments of my allocation to the Permanent Portfolio. I went as simple as possible using ETFs and took an equal weight position of 25% in each SPY, GLD, TLT, SHY. This portion of the allocation finished +1.11% in July and is currently +.26% in August. So far all is as expected with Gold hanging around and Stocks and Bonds following their modern pattern of divergence. The decision to make an allocation to the Permanent Portfolio was easy. Deciding how much to allocate to it proved to be much more of a challenge and has lead me to start the development of a comprehensive approach to managing my capital. I have come up with five main categories or types of portfolios with the following allocations:   Permanent Portfolio 40% Variable Portfolio 20% Direct Portfolio 20% Living Portfolio 10% Doomsday Portfolio 10% Permanent Portfolio Basic Permanent Portfolio in simple form: Equal weight allocation of 25% to each SPY, GLD, TLT, SHY. The goal of this portfolio is to gain exposure and take part in [...]

The recent performance of the Permanent Portfolio seems to have stoked some interest in the strategy crafted by Harry Browne. I’ve been noticing more references to the strategy making their way into my daily reading of favorite blogs. Looks like there is even a new book coming out about it, the authors of which have an informative blog I just discovered. I haven’t given the strategy much thought for quite some time so I read Harry’s book Fail-Safe Investing as a refresher. Only a small portion of the book deals with the composition of the Permanent Portfolio, but it is worth the read if you are not familiar with Harry’s 17 Simple Rules of Financial Safety. The Permanent Portfolio has three requirements: Safety, Stability, and Simplicity. The allocation is: 25% Stocks, 25% Bonds, 25% Gold, and 25% Cash. Positions are rebalanced on an annual basis when any one of the position’s allocation breaks the range of 15% to 35% of the portfolio. That’s it. The idea is to be able to profit in any of the four major market environments identified by Harry: Prosperity, Inflation, Tight Money or Recession, and Deflation. So how has this strategy performed? Quite Well: 1990-2012 [...]

Not only has this site been mostly dormant for over a year, but so too has been my trading activity. I have been extremely busy over the past few years with a wide variety of endeavors which have occupied most of my waking hours. In the process I have been lucky to work with some amazing people who are way smarter than me. It has been a challenge, and in order to keep up I’ve had to focus on the details, like trying to figure out how to structure and code some pretty complex algorithms, while not concerning myself too much with the big picture. This experience, while still ongoing, has left me with a long list of yet to be articulated questions piling up in my mind. In order to start the process of working through these questions and searching for answers I decided to spend some time updating this site to share some of my thoughts and ideas as a prepare to relaunch my trading activity. Why even trade in the first place?        What lures me to the market is that it is one of the last frontiers on which merit rules and using economic means only (as opposed to [...]

Following up on the first post here from over two years ago, below is the current performance report for the Percent Exposure Donchian Channel system. I have made some improvements in my backtester to handle recording trades to better simulate how trad…

System Rules: Enter on 100 day Donchian Channel breakouts Exit on 20 day Donchian Channel breakouts 2 ATR (10 day exponential average) stop. Market selection based on RS Momentum Ranking Strategy 1 Enter top 6 markets ranked by ((1 year price change + 1 month price change)/2) / (10 day ATR) Strategy 2 Enter bottom [...]

System Rules: Enter on 100 day Donchian Channel breakouts Exit on 20 day Donchian Channel breakouts 2 ATR (10 day exponential average) stop. Position Size = ((Account Equity * 1%)/2 ATR) Transaction Slippage = 2 ticks Markets Traded: ES, NQ, TF, GC, SI, HG, CL, HO, NG, RB, ZC, CC, CT, KC, ZW, LE, HE, [...]

This idea was put forth by David Varadi over at CSS Analytics. (see his orignial post here, and the follow-up) The basis of the method David describes in his post is to use a larger Donchian Channel to determine the main trend, then scale into positions using smaller channel breakouts. Position size is adjusted according [...]

This system is an expansion of David Varadi’s Percent Exposure Donchian Channel Method strategy with the RS momentum (note: I used volatility adjusted RS) market selection he suggested in his follow-up. System Rules: The 200 day channel dictates the main trend. Smaller channels are traded using a 2 ATR (10 day exponential average) stop. Strategy [...]