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FINDING THE BEST ROI BETWEEN SIMILAR ASSETS 📚 With Alpha's PoP💬Introduction : Today we are comparing the Dow Jones, NASDAQ, and the S&P by their annual performance to show how our open source indicator "Alpha Performance of Period" (PoP) can be used and why the results are useful. We will also look at other markets later in the writeup to see how they compare and to get a sense of which markets provide the best risk-to-reward and ROI. The idea here is to compare highly correlated markets over time to see which of these markets preforms the best overall represented by a period chosen by the user. This will help tell us which of these indexes is the best/worst to trade/invest with on average. For this article we will assume "best" equates to "best for long positions", but the indicator could be used for other purposes such as best shorting opportunities (largest drawdown amounts). Comparing these indexes shows that the NASDAQ has historically outperformed, while the DOW underperformed, and the S&P has been somewhere in the middle since the tech bubble on a year-over-year basis. You can also see this on the chart as represented by the indicator's metrics contained within its label, but we will summarize it below: NOTE: The figures below are rounded up to the nearest .01%, see charts for exact %'s. Equity Indices Total Annual performance results: (main chart) (Jan. 2000 - present) SPX = +111.79% NDX = +156.10% DJI = +117.65% Now let's look at the quarterly and monthly performance: Equity Indices Total Quarterly performance results: (Jan. 2000 - present) SPX = +104.57% NDX = +160.75% DJI = +111.65% Equity Indices Total Monthly performance results: (Jan. 2000 - present) SPX = +91.22% NDX = +125.274% DJI = +101.68% Equities Summary: While the NASDAQ has had periods of underperformance (for example the dot com bubble burst), on each of the charts you can see that not only has the NASDAQ outperformed (and the Dow underperformed) over time, the NASDAQ has also generally outperformed during each different period measurement. We won't do the math for each period here as that's the main purpose of this indicator, but you can apply the indicator on your own chart and take a look at it yourself. The main takeaways for us are this: 1. You are better off trading and/or holding the NASDAQ when compared to the 3 main indexes. 2. You are better off trading the S&P than the DJI. 3. The performance of the NASDAQ during COVID isn't an anomaly, and it doesn't necessarily indicate a tech bubble, outperformance in a specific period and overtime is the norm with this index. Now that you see how this works on the indexes, let's showcase how it can work for other markets. ----- RARE EARTH METALS~ Rare Earth Metals Total Annual performance results: (Jan. 2000 - present) GOLD = 193.87% SILVER = 186.72% PALLADIUM = 361.27% Rare Earth Metals Total Quarterly performance results: (Jan. 2000 - present) GOLD = 201.80% SILVER = 197.60% PALLADIUM = 304.04% Rare Earth Metals Total Monthly performance results: (Jan. 2000 - present) GOLD = 206.59% SILVER = 209.60% PALLADIUM = 283.25% Rare Earth Metals Summary: As you can see, despite the general public's love of Gold, Palladium vastly outperforms it. Meanwhile, we can confirm Silver underperforms. Many people wouldn't suspect Palladium was superior, but we now know from the resulting data (Hooray!). ----- FOREX~ Main Forex USD pairs Total Annual performance results: (Jan. 2000 - present) EURUSD = 19.48% GBPUSD = -9.03% AUDUSD = 23.90% Main Forex USD pairs Total Quarterly performance results: (Jan. 2000 - present) EURUSD = 20.75% GBPUSD = -16.53% AUDUSD = 20.98% Main Forex USD pairs Total Monthly performance results: (Jan. 2000 - present) EURUSD = 19.57% GBPUSD = -16.70% AUDUSD = 21.93% Forex Summary: As you can see against a USD base-pair, GBP is the worst performing from the 2000's by all periods. One might assume the more popular EUR pair preformed better than for example AUD, but the reality is AUD takes the cake and preformed better than both EUR and USD by each period over time. ----- CRYPTOCURRENCY~ Main Crypto USD(T) pairs Total Annual performance results: (Jan. 2017 - present) BLX = 1351.18% ETHUSDT = 8967.62% LTCUSD = 5012.80% Main Crypto USD(T) pairs Total Quarterly performance results: (Jan. 2017 - present) BLX = 504.60% ETHUSDT = 1124.81% LTCUSD = 824.44% Main Crypto USD(T) pairs Total Monthly performance results: (Jan. 2017 - present) BLX = 357.63% ETHUSDT = 739.39% LTCUSD = 530.67% Crypto Summary: Crypto has the largest period losses, but it also has the largest period gains (by far). Of all the crypto pairs, ETH offers the best ROI. Interestingly, ETH offers the best ROI of all markets mentioned in this article as well (although it also has the biggest losses and highest risk associated with its uptrends). Some might find it odd that Litecoin outperforms Bitcoin (although like with ETH, the drawdown is notably more intense). ----- Conclusion: Use "Alpha Performance of Period" (PoP) to compare markets for what is best suited to your portfolio depending on your individual risk appetite. It is meant to be used on highly correlated markets, but as you can see you can also compare different sets of markets together to get a sense of which offers the best risk-to-reward, ROI, etc. This tool thus has many uses related to figuring out which markets you want to trade based on historical data and offers a simple way to quickly compare past performance. Hope you guys enjoy it! :D Resources: apple.news Hit that 👍 button to show support for the content! Help the community grow by giving us a follow 🐣
TVC:SPXEducation
by AlphaBotSystem
15
Trading Major Markets on Margin Part 2 Trading Major Markets on Margin: Part 2 ...You need a game plan. You need a system. You need stops. You need to understand true risk management and try to keep it as simple as possible at the same time . You need discipline. You need courage to buy when others are selling and to sell when others buying - if the correct signals are present to do so. You need patience. You need belief proven by evidence. You need to test this by paper trading - or at least only trading the Dow for say $3 per point at outset. If so and you were to decide on risking this amount per point and the stop you used on the Dow was 50 points away then the loss is $150 in this instance if wrong. Look for trades that have risk/rewards of 3 to 10 times upside to 1 of downside whenever possible. The upside on the Dow trade from Friday was from 24860 back to the highs and in near term it was back to 25000 - maybe 140 upside and 20 points of risk with a stop 20 lower. Or at 50 points of risk it just about qualifies as a 3 to 1 shot. The low was 24852 on the futures. Sometimes it works and sometimes not. It really hurts to get stopped out and then the trade goes the way you originally thought it would. Really hurts. More than being plain wrong usually. But it will happen nevertheless. On the other hand you could have got long around 24641 on Thursday and have closed out at 25000 yesterday for 360 points profit = $1080 profit before 2 points in costs. The risk was between 20 to 50 points on the stop, so between $60 and $150 at $3 per point - so you know what you you stand to lose before the trade is initiated. When you test it 20 times with small small numbers and see it works - or it doesn't - you can decide on whether you have a system of trading bigger numbers or not. When you do, you can start to compound wins and losses and keep dividing total risk on ANY single trade to 5% of the total bank, 1/20th of the total bank. If you did this with the Dow as above, (when tested to satisfaction first!) and you staked $1k with 50 points of stop it means $1000 divided by 50 points = $20 per point x 360 = $7200 profit. For $1000 of risk. The 20k is now worth $27,200. Now you compound it and trade 5% of this on the next trade. It takes less than a year to turn 10k into 1m if you can be bothered and disciplined enough. You only need to be right half the time if the risk reward is right to begin with. Go do the math... There is no right way to trade. Just the one that suits your own profile and time considerations best. This is just one way. It does work though, most of the time : ) Be lucky, whichever way you choose.
DJ:DJIEducation
by sumastardon
Trading Major Markets using Stops and Margin: Risk/Reward RatiosTrading Major Markets 1 of 2 You've probably already learned a lot through trading Bitcoin. Those skill-sets are super scalable. Often am in too much of a hurry to cover other markets to have time to lay out stops and risk reward ratios - hoping that you're experienced enough to work them out for yourself when I miss doing them- which will be quite often in fast markets. There just isn't time except at weekends to cover things from a newbie's perspective. This analysis is meant to be for more experienced traders really. But for newer traders this is one way of trading technical signals. It isn't fool-proof. No system is. But it works well across multiple markets if used with discipline, and without emotion. But please don't believe mere words. If it interests you please test it first. 20 times. Calibrate your rifle sights/stops as per the pinned message at top of crypto pages and test tolerance levels of stops given. It will never be perfect though. We don't have to be either. Just close enough... Wave Trading and Wave Counting Don't really see where Elliott 'waves' figure in the great scheme of things or at the micro level either. Would like to. But have little evidence usually. But If Elliott floats your boat and you can trade off it that's great. Please share if so ; ) In the meantime smaller time scale signals are there to be traded. And if we trade them with stops and a system that works more often than not we can make good returns on half and more of the positive trades and yet limit losses on the ones that don't work out as planned. And by trading smaller moves we become part of and merge into the longer term. It's more fun to ride the smaller waves - they too become part of the bigger wave anyway. And if we can see a good Elliott wave amongst the noise all the better. If so, share it dude! Until then, if you can SEE that the stop is very close or ideally that price is right on it (limit down as with FB last week for example) then it's a SPECULATIVE buy with a stop close underneath the level given. It's 'speculative' because we don't know that this will be the bottom. In this respect 'breakouts', though still speculative, are less so than buying lows. We all want to do the latter: the buy low sell high mantra didn't make it to market mantra-hood by coincidence. But lows can be more difficult to spot than breakouts, which no one misses really. For example with the Dow recently it was around 20 to 50 points of stop if you were buying the dips, (see global markets link at top of main page) Some will just leave orders in the market with a decent stop - say if looking to buy the Dow within 10 or 15 points of a given level (cannot expect to be bang on every day, you know that already) - they leave the order to strike or not and then use a stop at least 20 lower on Dow and maybe 50 at most. And some stick in a limit order too at the same time as the stop. Sometimes it works well. Sometimes it never gets struck. And sometimes it's a big fail and we get stopped out for 20-50 points on the Dow. It takles a lot of the emotion out of the equation. Not all of it. But a lot of it. And if you can work out the RISK in points you can then work out potential rewards too. Then it becomes possible to divide your total bank into 20 - so 20k total bank for ease of explanation = 20 trades or bets of $1000 each at a maximum - for this is effectively what we are doing... Betting that our call is better than the market's call at that moment in time compared to some future moment in time. We don't have to be right much more than 50% of the time though we all want to be. If we can be stoical/philosophical about losses and wins and tread the line without thinking either we're too clever or too stupid we stand a better chance of handling the inevitable losses when they come. To think you're Billy-whizz of the markets and then discover you're not is way more disheartening than never thinking that crap in the first place... Part 2next
DJ:DJIEducation
by sumastardon
1