Wednesday, May 6, 2009

Day traded FAS and FAZ today

I day traded FAS and FAZ for a little bit of extra money since I had all day to myself today. Day trading is really hard. I will be using the same setup tomorrow. I had two windows with real time (5 minute - one day) graphs from Ameritrade, one for FAS and the other for FAZ. The secondary indicators are volume, momentum and slow stochastics (3,3). When the stochastics gives an oversold or overbought I check with the momentum and volume to be sure of the reversal and jump in with two orders in equal dollar value - one to buy FAS and one to sell FAZ or the other way. I started with a buy on FAZ at 10:15 AM ET, and then followed with sell FAZ at 10:40 AM and buy FAS at 10:41 AM, and then I continued this game. My gains on FAZ were +0.25, +0.05, -0.10, +0.05, +0.30 in share price and on FAS were -0.1, 0, +0.15, +0.85, +0.4 in share price. I ended the day with selling at the end about 10 minutes before close. The total number of trades was 5*2*2 = 20. My e-mail inbox was filled with confirmations. That will pose problem when writing tax return will come next year. The method generates too many trades, but the percentage of winning trades is decent and will prove to be useful. When you add up the gains then I got 9% from FAZ adn 12% from FAS. That is a really terrific return, but I had to watch the market every single minute. That's no way to live. Clearly +0.05, 0, and -0.1 returns are from false signals, but you do not really know at the time. Any idea to trim my signals will be very helpful. I will also try this on other pairs BGU/BGZ where you can play both sides. I was thinking you need a lot of fluctuation for this method to give good returns like today. I wouldn't mind trying this on SPY/SH pair since I found liquidity to be problem. My big orders were broken into too many smaller parts each time they got filled. Also with 20 trades Ameritrade made $200 from me, so have to play with large enough pool. Today was too much motion in FAS/FAZ and that is why the return is so high. I am not expecting this to repeat every day. I would be content with more down to earth return if it is consistent. I would be looking for other violent pairs to play this strategy on. So if you know of some, I will greatly appreciate it.

2 comments:

  1. That's pretty impressive. FAS/FAZ is probably the most volatile pair as far as I know.

    For brokers, you may wanna try interactive brokers (IB)?

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