Fairly flat week....Still waiting for some gains.
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Trading Blogs
About Me
- Forecaster
- I originally developed this stock market timing system to trade leveraged mutual funds within a retirement account. It appeared that traditional "buy and hold" strategies would not generate the returns I desired in the time frame I needed. I wanted a mechanical trading system that took the emotion out of making decisions about the future moves of the markets. This system gives a "end of day" call for the next days market direction. On some days it requires some input from the trader as the signal may be dependent on the closing price of a particular index. It can be traded using etf's or mutual funds. This blog is for entertainment purposes and to track the development of this system. It is not intended to be used as advice. Use at your own risk!
I just saw that the Direxion mutuals are going to be re-balanced every month rather than daily, starting on 9/30/09. I just called them but I was not really sure what they were saying. Just wondeing what thoughts you may have on this, and its effect on a trading system that requires just about daily switches in funds.
ReplyDeleteHi, thanks for the heads up. I looked at their website and it appears that they are lowering their 2.5x funds to 2.0x and rebalancing once per month.
ReplyDeleteIt appears that this will have some affect on returns for a frequent trader..i.e. daily as they state that the leverage will be variable intermonth....ranging from 1.75x to 2.5x if the underlying index were to move 15% per month.
According to their info the bear funds will be affected to a greater degree during the month. 1.3x to 3.3x for the same 15% move.
I don't think it will affect us unless the underlying index makes large moves from the beginning of a month to the end, which is highly possible in these markets.
if it gets too complicated I may move my money elsewhere.
Here is a link that should help.
ReplyDeletehttp://www.direxionfunds.com/pdfs/Understanding_Monthly.pdf
thx for the link - will look at it.
ReplyDeleteI am wondering if it is even possible that their fund (say DXELX) could close negative even if the index/etf (say EEM) it is tracking closes positive. Because now they do not have any daily constraints, from what I can figure. SO under this scenario you could lose even when the system say the correct direction for the next day.
Hope this will not be the case but I am a little suspicious about it.
Leveraged etf's and mutual funds were not designed to be held for more than a few days at most because even tho the underlying index might move in the anticipated direction...the etf would not reflect this. I believe this is their attempt to make it better for swing traders that hold for longer periods than I do. My best assessment at this time is that it will mainly affect the amount of leverage that the fund represents if you buy inter-month.
ReplyDelete