Rules and Money Management

ALERTS

Email alerts are sent NO LATER THAN 8.30 AM EST.

Traders have 1 hour to take the trade. When The Summit system doesn’t trigger a trade, no emails are sent.  So, if you don’t receive any  email before 8.30 AM EST, stay in cash.

TRADING INSTRUMENTS

Returns and losses tracked refer to UVXY trades. You can trade TVIX as well.

Differences between UVXY and TVIX

If you want to cut your risk and halve drawdowns, you can trade VXX (I backtested The Summit system with VXX data). If you cannot short VXX, you can trade long XIV.

 Differences between VXX and XIV

ENTRIES

Entries are at the market as the U.S. stock market opens at 9.30 AM EST.

EXITS

If no stop loss order is hit, exits are at the market 1 minute before the U.S. stock market closes at 4.00 PM EST.

STOP LOSS 

Tight stop losses reduce profits. The best results are achieved with wide stop losses. There is only one instance of a 15% stop loss being hit during the VXX backtest period.

I advise a fixed 20% stop loss order from the opening price for traders using VXX. A 20% stop loss order has never been hit and ensures the backtest results posted in the blog. For those trading UVXY, I advise a 30% stop loss.

TAKE PROFIT

NONE.  A previous version of the system included a take profit, but I don’t want to risk over-optimization and data mining biases.  Having no take profit reduces CAGR but improves overall system strength.

MONEY MANAGEMENT

I backtested all the main 5% buckets to get drawdowns and returns for the fixed fraction investing alternatives. The table below shows the CAGR, the maximum drawdown and the ratio of CAGR to drawdown starting from a minimum of 10% of equity invested to a maximum of 100% of invested capital.

The highest CAGR/drawdown ratio is obtained by investing 100% of capital. If traders want to further reduce drawdown, they can rely on a lower fixed investment.

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