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Weekly Signals Update – October 25, 2021 [Premium Signals]

The weekly systematic trading reports include open positions, new signals and year-to-date performance of seven trading strategies. Access to article requires Market Signals or All in One subscription. 

Market Recap and Comments

Stocks (SPY) finished the week up 1.6%. Commodities (DBC) fell 0.3% after a volatile week. Gold (GLD) ended the week up 1.5%. Bonds (TLT) fell 0.6% but finished off lows of -1.9%. DBC is up the most (+47%) year-to-date while TLT is down the most (-7.5%.)

Last week I wrote:

Discretionary trading can lead to erratic and random decisions with highly negative impact on P/L. Numerous posts in financial social media daily are proof of random decisions by an overwhelming majority of traders.

Developing and following strategies isn’t easy with the latter being the hardest part. In addition, strategies underperform the market most of the time. Why using them at all then? The answer lies in the lower variance obtained from using a number of strategies that trade different markets with different methodologies. For example, for these weekly signals we combine trend-following, mean-reversion, cross-sectional momentum and long/short. The ensemble variance may also allow leveraging the strategies to outperform the market but this isn’t what we do here as the signals are for informational purposes only.

The rally to new highs in the stock market in the last two weeks surprised the bears but also the bulls. Economists, pundits and others may be concerned with the drivers but a real trader never spends time trying to figure out causes. One of the worst mistakes a trader can make is to think that to become profitable one must identify the drivers or causes of price action. This is linear thinking and incompatible with market reality and dynamics. Experienced traders and robust strategies follow price trends and/or reversals in all timeframes as soon as they identify them and aren’t concerned with causes and explanations. In financial social media, about 80% look for causes and it is indication they aren’t traders but involved in an exercise in futility. Traders with robust strategies many never outperform the market but returns compound over time to an acceptable performance.

Strategy Performance Recap

The weekly systematic trading reports include open positions, new signals and year-to-date performance of seven trading strategies. Access to article requires Market Signals or All in One subscription . . .

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