Even though I've never used the Directional Movement System to make a trading decision, I still like to see it align with what the Volatility System is telling me. For the CME Group, the -Directional Index (-DI), which measures downward price movement, crossed above the +Directional Index (+DI) back in second week of March. On top of that, the ADX bottomed out at 12 in the last week of April and has since climbed to 19 as the -DI/+DI spread has widened.
That gives me (maybe) one extra ounce of confidence in my short position.
That gives me (maybe) one extra ounce of confidence in my short position.
1. LONG the week of 4.21.03 at $48.14. Using a stop set at $39.95, my initial risk (R) on the trade was $8.19. Stopped out and reversed to short at $108.86 the week of 7.12.04. The percentage gain on the trade was 126.1%, and the reward-to-risk ratio was $60.72/$8.19 = 7.42.
2. SHORT the week of 7.12.04 at $108.86. With a $138.19 stop the R was $29.33. Stopped out and reversed to long at $134.13 the week of 9.7.04. The percentage loss on the trade was -23.2%, and the reward-to-risk ratio was -$25.27/$29.33 = -0.86.
3. LONG the week of 9.7.04 at $134.13. The stop was $109.39, so R = $24.74. Stopped out and reversed to short the week of 3.28.05 at $171.35. The percentage gain on the trade was 27.7%, and the reward-to-risk ratio was $37.22/$24.74 = 1.50.
4. SHORT the week of 3.28.05 at $171.35. With a stop at $212.70 the risk was $41.35. Stopped out and reversed to long at $229.89 the week of 5.31.05. The percentage loss on the trade was -34.2%, and the reward-to-risk ratio was -$58.54/$41.35 = -1.42.
5. LONG the week of 5.31.05 at $229.89. The stop was $181.35, so R = $48.54. Stopped out and reversed to short the week of 1.14.08 at $529.89. The percentage gain on the trade was 130.5%, and the reward-to-risk ratio was $300.00/$48.54 = 6.18.
6. SHORT the week of 1.14.08 at $529.89. Setting a stop at $674.51, the R on the trade was $144.62. Stopped out and reversed to long at $268.68 the week of 5.11.09. The percentage gain on the trade was 49.3%, and the reward-to-risk ratio was $261.21/$144.62 = 1.81.
7. LONG the week of 5.11.09 at $268.68. Using $170.09 for my stop, the R = $98.59. Stopped out and reversed to short at $281.05 the week of 1.25.10. The percentage gain on the trade was 4.6%, and the reward-to-risk ratio was $12.37/$98.59 = 0.13.
8. SHORT the week of 1.25.10 at $281.05. With my stop at $343.45 the R was $62.40. Stopped out and reversed to long the week of 4.19.10 at $329.35. The percentage loss on the trade was -17.2%, and the reward-to-risk ratio was -$48.30/$62.40 = -0.77.
9. LONG the week of 4.19.10 at $329.35. The stop was $275.87, so that means R was $53.48. Stopped out and reversed to short the week of 7.12.10 at $262.86. The percentage loss on the trade was -20.2%, and the reward-to-risk ratio was -$66.49/$53.48 = -1.24.
10. SHORT the week of 7.12.10 at $262.86. With the stop set at $321.90 my risk was $59.04. Stopped out and reversed to long at $281.35 the week of 10.18.10. The percentage loss on the trade was -7.0%, and the reward-to-risk ratio was -$18.49/$59.04 = -0.31.
11. LONG the week of 10.18.10 at $281.35. My stop was $233.66, so R = $47.69. Stopped out and reversed to short at $283.15 the week of 5.23.11. The percentage gain on the trade was 0.6%, and the reward-to-risk ratio was $1.80/$47.69 = 0.04.
12. SHORT the week of 5.23.11 at $283.15. Using a stop set at $322.60, the risk on the trade was $39.45. Closed yesterday at $268.27 with a $312.61 stop. The percentage gain on this trade is 5.3%, and the reward-to-risk ratio is $14.88/$39.45 = 0.38.
Bottom Line:
Winning Trades: 7 | 58.3% | $98.31/share avg.
Losing Trades: 5 | 41.7% | -$43.42/share avg.
Average Trade: Gain of 20.2% | $39.26/share | Reward-to-Risk Ratio (R): 1.07
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