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The Ultimate Systems Trader

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  1. Bonuses
    5Topics
  2. Power Of The Mind
    8Topics
  3. Natural Laws Of Trading
    7Topics
  4. Introduction
    5Topics
  5. Systematic Trend Following System
    10Topics
  6. Power Stock Trading System
    11Topics
  7. Mean Reversion Trading System
    11Topics
  8. Monthly Momentum Trading System
    8Topics
  9. Slow and Steady System
    7Topics
  10. Monthly Momentum Stock Trading
    10Topics
  11. Conclusion
    7Topics
Module 1, Topic 4
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In a mean-reversion system, what if the SPX is below 200MA, Do I exit all my positions? 

No, you don’t need to exit all your positions. Your rules for exiting this system will still be RSI above 50 or after 10 days.

The thing with Mean reversion is that it doesn’t have a filter like MOMO and PST because this system by itself is a strong filter. After all, we buying the 52-week break out within 60 days. So, it's a strong filter by itself. You are already buying a strong stock.

For this market, there's no MA filter for any of the indices like the Russell 1000 needing to be above the 100 MA, etc. You do not need to exit your positions; you just simply stick to the exit rules that were mentioned in the mean reversion trading.

In the mean-reversion system the position I enter is above 200MA, what if on the 5th trading day, the price below 200MA following lower high, lower low, can I exit earlier?

I would recommend you not to exit earlier because if you do that, you are not following the rules. And after that, your results will probably be different.

As much as possible, try to stick to the rules because if you don’t, you probably will still be profitable, but I'm not sure whether how much more profitable or whether you are going to become slightly fewer returns as compared to the rule that has been a backtested by Rayner.

In the mean-reversion system, can I sometimes use Russel 1000, other times use Russel 3000 or SPX? Or need I consistently use the same index?"

Whether you use Russel 1000 or 3000 or SP500, it doesn’t matter that much because all these three still manages the overall stock market health of the U.S. so, if you pull out all these three charts, they are pretty much going to look like mirror images of one another.

If you want to use the Russel 1000, 3000, or SP500, use whatever you want and enter the day and the results are still going to be pretty similar.

In a mean-reversion system, can adding "clean move" criteria Increase the winning rate? If yes, how to write the code of "clean move" in TOS?

It’s a bit challenging as of now, Unfortunately, we do not have the code to quantify what a clean move would be into ThinkorSwim.

For STF, u said that we usually scan the market 1hour after the US market close e.g. SG time 6 am-7 am. Does it mean that we enter and exit the trade during the 6 am-7 am (Sg time) period every day?

Yes, correct! You do it at the same time every day, but honestly, I (Coach John) also do a trading system and It doesn’t make a whole lot of difference.

No matter how many hours after or before the US session that you go through the markets even if you are late for like 1-2 days, it’s still fine. Even if you miss the close above the 200MA, you can still enter at the 200MA as long as the stop-loss is not hit.

You don’t need to be so detailed that you have to enter at exact 1 hour after the US market close.

As long as the stop loss of the trade is not hit, you can still enter the trade.

In STF frequently asked question session, you advise to reenter the trade if the price hit 6ATR stop loss and close back higher (for a long setup). Can elaborate more details and show an example? what if MA flatten at that time?

Just for Illustration, I’ll use the chart below

The market came back down here as a wick, and your stop-loss is just below the Chandelier K Indicator.

The market came down and tested but closed above. The thing is the market didn’t close below your stop loss. You enter the market again and put your stop loss just below here.

That’s pretty much it! If the market touches your stop loss and closes back above.

In STF, for a long setup, should I exit my trade-in positive/negative earning if the 50MA cross below 100MA even if the price has not hit the 6ATR trailing stop loss yet? Can I have a chart example?

If the 50 MA crosses below the 100 MA, it will also be pretty likely that the 6 ATR will be hit.

Most of the time the 50 MA and the 100MA cross below, it is very likely the price is going to close below the 6ATR stop.

If the 6ATR has not been hit yet but the 50 MA has crossed below the 100MA, you will exit the system but if the 50 MA is still above the 100 MA and the 6 ATR has been hit then you simply exit the trade.

For STF, you said that 3ATR-10ATR stop-loss is still profitable. Then what is the reason to choose 6ATR? Which ATR is more profitable? Which ATR has the highest drawdown?

6 ATR is just simply like the sweet spot between having a decent refund, not so a deep drawdown.

I’m not sure if Rayner shared it, but a 3ATR has a slightly worst return, but the drawdown is a bit lesser. The thing is 6ATR is a sweet spot where the returns and the drawdowns are pretty acceptable.

You can also check out the excel sheet where you can see what the drawdowns and the returns are for the 6 ATR stop.

But if you want to know more regarding this, just drop me a message at coach@tradingwithrayner.com

We risk 1%of our portfolio value. Portfolio Value = Current Capital + Unrealized profit. My question is so our risk capital ($) per trade will vary every day or every trade since the unrealized profit is changing up and down every day?

You will only take into account, not including your unrealized profits. Your 1% is based on the capital that's left in your account. Suppose your account value is at $10,000. If $5,000 is used up for your trades, you will be basing the rest of the 1% on your $5,000.

PST, with capital 100k, I will allocate 10k each for 10 stocks. Let say after one period, 3 out of 10 stock hit the stop loss in which lose 3k in total while the portfolio value is higher or lower than my initial capital. When I choose to buy in another 3 new stocks, should I still risk to 10k (10% of initial capital) or 10% of the portfolio value at that particular time or ((30k-3k))/3=9k for each new stock?

If you decide to risk 10% of your previous value, then each risk in your stock is higher than 10%. When you get stopped out on 3 stocks, you will be dividing the remaining capital into those three stocks.

In MOMO, for example, I'm holding 5 stocks as per based on selection criteria. The MA of Russell 3000 is still above 10MA and the 5 stocks are still in 20 top ranking, however, one day one stock from the 5 drop suddenly 20-30% due to fundamental issue (or negative impact news of the company), do I still need to keep that one stock as the Russel 3000 above 10MA?        

Yes, you will still keep the stock unless the stock drops off the top 20 rankings for MOMO, only if the stock exits on the top 20, then you will exit that stock and look to buy the next highest one.

In STF, entry for a Long position is 50 DMA > 100 DMA, and the closing price is the highest over 200 days. If I could confirm selling pressure (stronger sellers are stronger than buyer pressure, is it better don't enter the Long position by at least I could avoid false Long breakout at 200 days high? 

It’s kind of discretionary. It's going to be more of a personal preference because the thing is we can't quantify or backtest what you have said.

You could, if you think that this could work out better in the long run, and have a conviction for these kinds of trades.

I guess you could avoid it, but do note that you will probably miss some of the long trades that the system has actually filtered and your results may differ a little bit, but as long as you don't change the system too much, I think your results should still be fine.

In MOMO, let say I sell down stock to 100% that has increased 300K, getting cash 120k, then only need to buy in one stock with 80k. In this case, we will keep the 40k in cash and accumulate to next month?

Yes, that is correct. You will just keep the money and after that just enter for the next stock or at least distribute it to the rest of the stocks if your commissions are not too much.


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