TRADING The Gold Miners Trade Signal

I recently posted a backtested system for trading an anomaly between the dollar and the price of oil in the gold miners using the leveraged  ETFs NUGT (for long positions( and DUST for short positions. It's important to remember that DUST is an inverse ETF so when a short signal is given, you DO NOT short DUST, but buy it as it is already an inverse ETF. The same applies for NUGT, it's for long signals and is a long ETF so again you buy it. There's no shorting of either ETF ever.

I posted the original system and the returns and statistics looked like this

 Above is the original system returning 64% to date (about 6 months-starting at the origination of the ETF). This system has a decent equity line, 64% in 6 months. As you can see, there were 12 winning trades that averaged 6.77% and 10 losing trades that averged -3.08% for a total of 22 trades. There is a 3% stop loss condition added.

I tweaked the system some more and came up with a 76% return over the same period, but in this case I reduced the number of losing trades trades. Here we have 11 winners at 7.52% average and 6 losers at 3.78% average for a total of 17 trades. The second system is superior in that the average winning trade is bigger (the average losing trade is slightly bigger as well), but it also reduced the number of losing trades by 4 and only reduced winning trades by 1. Overall total trades were reduced by 5 so execution costs are lower and the equity line is higher. The second system is clearly better.

However, the first system produced a signal today, it would be to buy DUST on the open. From the opening price, if DUST were to close 3% lower any day after the start of the trade, DUST would be sold the next day at the open. Every trade will always be at the open with the signal coming the night before.

So I leave it up to you, this system is good and it is giving a signal to buy DUST on the open tomorrow morning. Te other system is better, but there is no signal. So I leave it up to you if you'd like to pursue the signal given today; if so, simply buy DUST tomorrow morning on the open. If you prefer to wait for the better performing system, I'm sure a signal will come soon, it's your choice. Just remember, the stop loss is 3% of tomorrow morning's opening price and would be executed the next morning after a 3% loss has occurred on the close.

The system works best if you treat it as its own portfolio, meaning if you invest $1,000 and make 5%, the next trade signal given should see an investment of $1050, it's in this manner the compounding in the system works.

The statistics are above, it's your choice. If you have trouble reading them, simply click on the image for a larger view.

Good Luck!