Trade Profiling

Here's a chart showing the last 10 CMI trades removing any take-profit or stop-loss mechanism. You can see the wild ride that holding leveraged ETF's can provide. The jagged, light gray line shows the manic nature of the QID during the fall of 2008. In retrospect, if the market offers me a 100% gain, I think I'll take it regardless of what any mechanical system says.

It's always easier making those kind of decisions in hindsight.




The next chart shows the average of all 10 trades represented by the blue line that is in the middle of all the others. The duration of each of the 10 trades was made "equal" by only using the data at a specific point of time during each trade. In this case, I used the percent gain or loss at the completion of each trade, and at 80%, 60%, 40%, and 20% of the duration of each trade. Obviously, you can only do this after the trade is complete since the length of each trade is not known until it is over. The other lines are various, averaged combinations of the individual trades (see legend).



Doing the impossible and knowing when you are within 20% of completing each trade would save a lot of money. Just look at the downtrend during the last fifth of these averaged trades. This is no surprise since the CMI is designed to hold it's position for as long as possible rather than whipsawing back and forth. As difficult as it is to take the loss at the end of each trade, allowing the market to shake the system out of the trade prematurely costs more over time.