I'm just looking for someone that can actually use it to create a winning trade, even just one.
since this system is not perfect, 1 trade is not enough. One should post 10 trades and should win at least 7 AND make a profit. Or make only an appropriate profit out of the 10.
if there is a bad week or month and you loose the trade, then this doesn't prove anything. Or if you have 9 small looser and 1 that is the Jackpot, it also doesn't prove anything. It could also have been just luck.
WIth
this analysis there are 50 trades and 36 of them made profit's. This is a good set of data. 36 win's are of course also not enough. One has to actually make profit and this was the case. Charts like this are also available on the weekly level.
I'm not in the need to try to convince anyone about how good Socrates is. I'm just here to discuss things with like-minded people who have also invested a lot of time into Socrates. And sometimes I feel compelled to respond to apparently false statements.
At least, a lot of arguments and numbers have been posted proofing that Socrates does not work.
Some of it I checked recently and it turned out to be incorrect.
I would like to dive into the historical testing of the DJ you gave the Link. I cope your article from the other forum:
Socrates Dow buy / sell signals - profit calculation
Armstrong has published the buy and sell signals for the Dow on the below long term chart. He has mentioned the "net profit/loss" number, but that in itself is not telling much about the real profit that could have been made. I've Iooked at every single position and calculated this chart with some real position and equity numbers. The following was the outcome.
Positions are additive and for simplicity I've taken the initial Dow at 7000 points = 7000$ for 1 position, but this can of course be scaled up or down. Depending on how much drawdown you are willing to accept (or capital / leverage is used), the below table shows the profit that could have been made.
Since the initial position size of 7000$ will change over time, the average position size during those 18 year was 10.500$ per position . The maximum number of open positions at one point was 9 positions which equals around 120.000$ in total. This was between 2004 and 2008 and all 9 open buy positions were closed in 2008 when the first sell signal came up. Then the first sell position was opened when the bear market ongoing. In 2002 the amount of sell positions was 9 positions (from 9 sell signals) which results to about 76.000$ in total, In Oct. 2002 all 9 sell positions were closed and a buy position was opened at the same time.
There was one period during 2008 and 2009 where 8 positions were accumulated (= 55.000$) and and in 2013 til 2015 it were 5 positions ( = 70.000$)
The average equity used over the 18 years was 35.000$ in this example.
The maximum drawdown happened during 1999 and 2011 were 3 consecutive open positions were closed with loses during a choppy period.
These numbers are calculated on the long term. There were 3 bull markets and 2 bear markets during that 18 year period. To take advantage of these numbers, one should to stick to those signals for at least 2 years (better 3 or ideally 18 years), I would say. As Armstrong also said, these signals work well during bull or bear markets. If the markets move sideways for a long time (several years), then signals don't work so well without timing.
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The below values are related to the average equity invested over the whole time period of 18 years. In this case it is 35.000$
9 simultaneously open positions max. = 120.000$ max. investment at some point.
Max. drawdown is related to the average equity.
Max. drawdown 9% profit 160% (56.000$ without leverage)
Max. drawdown 18% profit 320%
Max. drawdown 27% profit 480%
Max. drawdown 36% profit 640% (224.000$ - with a leverage of 4x per position)
Max. drawdown 45% profit 800%
Max. drawdown 55% profit 960% (336.000$ - with a leverage of 6x per position)
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Since having 120.000$ invested at some point might not be an option for everyone, I've calculated this for fewer positions as well
and skipping everything above that position number. This is given that the initial positions size is 7000$ per position and position size is growing over time.
3 simultaneously open positions max = (40.000$ max.) - 10.500$ in average per position , average equity used during the 18 years = 23.000$
The 40.000 for 3 positions were only invested from 2012 to 2015. In 2001 there were 30k used for about 14 month, 31k in 2005 until 2008 and 34k for about 6 month in 2008. Rest of the time the equity was below 20 to 25k depending on the no. of positons (1 or 2).
Max. drawdown 15% profit 160% (37.000$ without leverage))
Max. drawdown 30% profit 320% (74.000$ - with a leverage of 2x per position)
Max. drawdown 45% profit 480% (111.000$ - with a leverage of 3x per position)
Max. drawdown 60% profit 640% (148.000$ - with a leverage of 4x per position)
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During 1997 til 2015 the Dow itself had a max. drawdown of 50% (in 2008) and a total profit of around 250%. However, who could have known that it really goes up to 17.000 - 18.000 in 2012 with all of the banking crisis and subprime crisis going on. Who would have bought and sold the Dow during the panic of 2001 or 2008 correctly?
So in my opinion those signals were very successful compared to the Dow itself and it is super-simple to follow. You just have to consider the buy and sell signals by looking once a month at Socrates.
What also needs to be considered is position size, leverage, duration of investment, trading tools (ETF's or alike), the max. number of positions and the max. drawdown that can be accepted. Profits could be re-invested and additional equity could be added over time so that one doesn't have to start with 120k or 35k equity from the beginning.
With only 3 open positions max. it may happen that one is not trading at all for 2 years because there were more than 3 positions open at the same time. Also a leverage of 2x - 3x would be good to compensate inflation.
This one took me several full days to collect the data and create the formulas. Quite some work...
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*** Update 1 ***
some stats on 9 positions strategy : 49 trades in total - 36 win / 13 lost
some stats on 3 positions strategy : 49 trades in total - 30 traded (20 win / 10 lost) - 19 trades omited (more then 3 trade at the same time)
Ok here are my first questions:
- What are the signals exactly? Are they based on the reversals he publishes on Socrates now ? Since I remeber MA saying the signals are only available to corporate clients.
- Assuming the "system" is long: When is the long position closed and a short position entered? At the first reversal, or second, or third or forth?
- At what price is the new position entered? Since the market must close the month below the monthly reversal (in case of a potential new bear market) is the trade executed at the close of the month (in the last hour or so) or on the opening prices of the new month. Makes sometimes a big difference.
Also I would not call adding to a position (leveraging). I would call it pyramiding.
Also why does the run end 2016 at Dow 17000. It would be interesting to see the results of the move to 27'000 (easy) then down to 24'000 then up to 27'000 ten down to 22'000 then up again to 27'000 now (all not so easy !).
thanks for your response.
