March 25, 2017: New comments S&P500
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The full documented STS8 manual walks through an application example using the STS8 trading rules, following one stock "GT" with a starting capital of $1000. Small left overs in the calculation are for trading cost and slippage.
For compliance indication with the rules I will use a table to identify which rules are complied with or not, linked to each possible trading signal on the chart.
Not having to use multiple tables, I adapted the text of the rules so it is applicable both for long and short trades and opening and closing trades.
GT: Starting 07/08/2010 Buy Long
We start July 8, 2010. We have a buy long signal.
The bullish harami candlestick reversal pattern is confirmed within 3 candles. After the large and complex move down we can expect a wave 2 to become a wave 1. Buying price is $10.74 or 1000/10.74 = 93 pieces. Stop loss is set at $9.50.
August 9; we get immediately a very large black candle with a new top wave 3 and at the same time a low, changing the expected wave 2 to a new wave 1. Price drops in a just a few days to the S3 pivot level. This is a typical situation where taking profit is the message. We close the short trade at $11.95 the day after. The profit is: $17.17-$11.95= $5.22*176= $918.7. Our starting capital of $1000 grew to $3942 or 300% profit in one year. Even if you do not reach this amount there is a lot of room to make a very good profit applying the STS8 system!
We looked at the STS8 template with all the special indicators and the trading rules. Let me remind you that one of the indicators is an expert system (SVEPRExp) that can be used for full auto-trading via the NinjaTrader® platform and direct connection with your broker. Running a back test under the conditions and the stocks in the following figure results during the test period from May 2006 to April 2012, a period of 6 years to a profit of 238% with an average of 58 trades per stock. The starting capital was $21000 ($1000 per stock). There was no profit or loss sharing between the stocks. Trades were executed on the closing price the day of the signal.
For all the basic techniques, please consult my book “Capturing Profit with Technical Analysis”, published by MarketPlace Books and available HERE