Category Archives: *Big Bamboo System
This category houses all posts on the Big Bamboo Trading System, a short-term system for trading ETFs. The system is currently being paper-traded and tracked live on iBC. The system was first called The New ETF Trading System.
Last Friday, Big Bamboo closed out the USD trade for a handsome 14% gain. (I know, I’m late updating).
Surprisingly, there have been no signals since then, although the indexes have made some nice pullbacks. I’m not sure what that says about the quality of the pullbacks. Probably nothing.
I’m still testing to determine whether the Big Bamboo will ultimately survive as a viable system. More on that soon.
Highlighted in a pleasing green hue is the latest Big Bamboo position: USD. Should this ETF have another strong close tomorrow, it will be sold on Friday’s open.
There were no new Big Bamboo signals for Thursday’s open.
On tomorrow’s open the Big Bamboo will go long USD, the Ultra Semiconductor’s ETF.
I will update the spreadsheet and post it tomorrow.
There has been quite a bit of stress-testing of the Big Bamboo entry signal, over the last several weeks. The entry has also been modified and tested as an exit, replacing the RSI(2) exit that is used for the Big Bamboo.
I am not very thrilled with the results. More specifically, the results show that while the entry and exit together create a system which has handily outperformed the S&P500, the system fluctuates enough that during extended periods of time it may become unstable. The drawdowns are acceptable; they just last for a long time. I’m not willing to put a lot of capital into a system that may be psychologically draining (it suffers extended strings of small to medium losses) when there are other, and possibly better systems to develop.
Bottom line: the Big Bamboo, even though it uses a different exit, may not remain a viable system. I am going to run more tests with the RSI(2) exit, but my suspicion is that the results will show that the entry edge is not stable, at least not as applied to SPY, DIA, and QQQQ. If it is not stable over the history of the underlying ETFs, I have little faith that it will continue to work on the diETFs, although it would be really nice to have the system catch bull run right here like it caught the bear raid in October and November of last year.
More pain for the Big Bamboo. DXD closed out on today’s open, after the RSI2 for the diETF closed Friday above 70. The trade may have closed with a small loss, or a small gain (hard to know for sure) if the indices would not have gapped on the news of our government signing a 30+ year adustable rate sub-prime mortgage on our future.
All politics aside, SDS closed out on Wednesday last week after the stop was hit.
I am disappointed in the performance of the system. The win/loss ratio is atrocious, compared to what we expected through backtesting. Although this is difficult psychologically, the system is still showing a profit, since inception. Since it is all about making money, I’m trying not to overweight the win/loss ratio and instead focus on the fact that the exit criteria and position-sizing seem to be holding up well.
In the interest of fairness and transparency, the Bamboo selected ROM for entry today, but because I did not run the update over the weekend, I did not catch the trade, or alert everybody prior to entry. The trade would have netted a gain of 6.8% today, and would have been closed on tomorrow’s open.
The Bamboo is now set to get long the bullish levered ETFs (as it did with ROM), as soon as there is a pullback.
QID gapped below the stop this morning, costing the system .30% more than planned. It hate it when trades hover near their stops for extended periods of time. The psychological ramifications notwithstanding, they will often gap beyond the stop on the open, as QID did.
SDS and DXD closed in the good.
The Bamboo really has to make something happen here. Two more losers, making another five in a row, would really hurt.
Behind the scenes tonight there is work happening on a better Big Bamboo. Eventually, all the issues listed here will be addressed. When the system emerges, it will hopefully be lean, mean, and green. And, the signals may become available as a premium service, IF it turns out to be as good as I think it might.
The QID position came within a nickel of stopping out on Friday. It is marked-to-market as of the close and within .5% of stopping out.
The system has selected five diETFs to enter, but the rules will allow only 2 trades on any one day. The other ETFs were TWM, MZZ, and EFU. I would not trade EFU due to the awful slippage I have experienced in the name. MZZ is getting more liquid, but is not nearly as liquid as the other diETFs. As the system trades the open, liquidity is a huge concern.
With QID, SDS, and DXD, the Bamboo will be almost all in, and will have all major indices shorted. Another 4% up on the SPY will take it over $79.00 and leave it under $80.00. The SPX 790-800 levels, (SPY $79-$80) looks like strong resistance, but these diETFs may stop out before resistance puts a halt on the recent advancement.
Since November 15, 2007, the Bamboo has closed 90 trades with 78% of those being winners.
Highlighted in battleship gray is the SKF trade that promptly stopped out today. Beneath it in tan is the QID trade that looked good last night, but looks awful now. It came within half a point of stopping out.
The Big Bamboo has an 81% win rate, since 12/31/2007, on 78 completed trades. It does not seem to be firing on all cylinders though over the last 23 trades. It seems that only good position-sizing is keeping the Bamboo afloat right now.
Maybe the markets will gap down a bit and QID will survive to fight on Monday.