Welcome to The Enlightened Trader Newsletter… Running along the edge of a cliff, threatening to jump off… that’s what the markets look like at the moment.
Most of the major stock markets are hovering around their 200-day EMA and as you can see in the image below they are all moving pretty much in lockstep… and it is not looking terribly healthy TBH.
Of course, I don’t take any action on what the market ‘looks like’. I just follow my portfolio of systems – it is much less stressful that way, and I don’t have to worry about whether I am reading the market right or are my emotions getting in the way.
So what are my systems doing? Well, despite the hopeful rally so far in 2023, my system’s long-side exposure has been falling dramatically over the past few weeks during this correction. My short systems (US and Hong Kong) have yet to be activated, but they sure will be if the market drops much further.
If there is one thing the market will teach us (eventually… I hope 😂🤣), it is patience. Sometimes the market takes a long time to “make up its mind” about which direction it is going to move, these can be trying times, and we just need to stay in the game, not lose too much money and trust that our portfolio of trading systems will do its thing and build our account in the long run.
While I am waiting for a clear market direction, I turn myself to research to see what new or improved edges I can find. Last week I published a new article on how well Trend Trading works in different global stock markets. Today I continued this work and expanded it by another 4 stock markets that you may not have looked at before:
- Xetra (Germany)
- OMX (Nordic and Baltic)
- Tel Aviv (Israel)
These markets will be added to the article in the next few days, but in the meantime, I will share a sneak peek with you here 😉
I used a very basic trend trading system for this article:
- Enter on 200-day breakout if the stock price is above the 200-day MA and the 20-day average turnover is above $1m USD or equivalent
- Exit with a 25% trailing stop loss
- Position size of 5% of equity per trade
I have not optimized the system for any of the markets nor attempted to maximize the system performance. The purpose is simply to find the stock markets that have good potential for trend trading and focus there for further research.
The great thing about this is these are quite different from other markets I trade, and all of them are available on Interactive Brokers!
While stock markets globally do tend to be highly correlated, there are certainly diversification benefits from trading other markets. I also want to put to death the myth that if you want to trade stocks, you should trade the US Stock Market.
Yes, the US market is very liquid and has a wide range of stocks, but there are plenty of other interesting markets to trade as well… If you are not in the US, then have a look at other markets and find the one(s) that perform best with the strategy you want to trade… then fine-tune your strategy for that market.
I have summarised the backtested results of this study so far in the table below and sorted the tests from highest to lowest Compound Annual Return / Maximum Drawdown. I sorted using CAR/MDD because I am interested in which markets have given the smoothest equity curves from trend trading like this. As you can see, smoothness and return, do tend to go hand in hand:
The new markets that I tested this week all performed extremely well, and all have the potential to develop fantastic trend trading systems with higher returns and lower drawdowns than you see above.
The lesson for me in this has been don’t just settle for the markets you know. There are amazing opportunities around the world because all markets behave slightly differently, and stocks in some trend way better than in others.
If you want to get access to a ready-made portfolio of trading systems for a variety of different strategies / markets / timeframes… and if you want to learn how to test them for yourself and implement them into a portfolio so that you can be a diversified global stock trader (in just 20-30 minutes a day), then fill in an application to join The Trader Success System today, and I will be in touch to let you know if you are a good fit for the program.
Trading Tip of the Week
Patience… in the long run this trait will keep you alive as a trader, and lack of it will be your death as a trader!
The markets are not easy and in recent times this is especially true. Traders who try to force their will on the markets, take trades when they shouldn’t, or exit trades prematurely will all suffer long-term in the markets.
My suggestion is when you feel impatient for something to happen, take that as a sign that you do not have the right strategies for the current market conditions and use it as a trigger to focus your research. Not to take knee-jerk action in your portfolio!
Student of the Week
This week I want to highlight one of my newer members of The Trader Success System, Eleanor from the UK. Eleanor has never traded before and is now preparing to pull the trigger and go live with her very first trading system after working through the course, building confidence in the system, backtesting and finally paper trading for several weeks!
Eleanor is a perfect demonstration of how you don’t need to suffer through all the frustrations and uncertainty of discretionary trading, technical analysis and indicator confusion before finally coming to systematic trading… it is entirely possible (and far faster and more consistent) to just start with systematic trading right from the outset, learn the skills you need from The Trader Success System and go live with confidence.
Well done Eleanor – I am thrilled with your progress and am loving how your questions are getting more and more advanced. It really shows how fast you are growing as a trader!
News from EST
We have had fantastic feedback on our new portal for the Crypto Success System and are thrilled to have students moved across. This allows us to provide much greater support and a much cleaner and more efficient learning experience.
There are a lot of questions floating around about the crypto markets and The Crypto Success System at the moment, so we are running a free live Crypto Q&A session next week to answer all of your questions about trading crypto and The Crypto Success System.
WHAT: FREE Live Information Session on trading Crypto & The Crypto Success System
WHEN: Wednesday 15th March 8pm Sydney time (GMT+11)
WHERE: Zoom – Register NOW on this link(need a link for this)
If you have been sitting on the sidelines of the Crypto market wanting to get in but not knowing how to trade it, where to get the data or what systems to use, The Crypto Success System is exactly what you need – Click here to join The Crypto Success System now!
Meet the EST Team
We have updated the Enlightened Stock Trading website with a new ‘Meet the Team’ page. You may not realise how much goes into supporting our members and subscribers, but it is certainly not a solo effort. Check out the ‘Meet The Team’ page to discover how we bring everything to you and support our members with the help of our high performance coach, trading coaches, community manager and backoffice team!
On the Home Front
I did a sleep study this week to see whether I have sleep apnoea… with all the wires and things attached to me, I had pretty much the worst night’s sleep of my life… if you want some amusement, check out the photo below:
Stay safe, risk small, follow your system, and remain patient… That is what will lead you to long term success.
Remember – You’re Only One System Away!
Founder, & Master Coach | Enlightened Stock Trading