Trading the S&P Using EMAs

1) Performance Summary July 1980 – September 2019

Start Date July 1980 Net No leverage 3,620.49%
End Date September 2019 Net 2 to 1 leverage 7,240.98%
Net Gain $218,630.50 Net 3 to 1 leverage 10,861.47%
Max-Draw -$13,973.00 Net 4 to 1 leverage 14,481.96%
Winning % 62.50% Net 5 to 1 leverage 18,102.45%
AVG Winner $11,164.11 Current (E-Mini ES) Margin Requirement 
Losing % 37.50% S&P (E-Mini ES) 1.00 = $50.00
AVG Loser -$1,814.71 S&P Micro (MES) 1.00 $5.00
All in -$100.00 Risk Disclosure Statement

2) Indicators

This program uses two exponential moving averages (EMA’s) an EMA9 and EMA18, rules are the same for any data period your trading from 30 seconds to monthly.

In this example I’m using weekly data, slow and easy enabling you to track this procedure is less than 20 minutes a week.

3) Trading Procedure

Longs:

If price action is cleanly above the EMA9 (the red line on the charts below) and the EMA9 is above the EMA18 (blue line) trade long. Risk on long positions, if price action moves below the EMA9, and the EMA9 moves below the EMA18 exit longs and reverse to short.

Shorts:

If price action is cleanly below the EMA9 and the EMA9 is below the EMA18 trade short. Risk on short positions, if price action moves above the EMA9, and EMA9 moves above the EMA18 exit shorts and reverse to long.

The EMA4.5 (green line) crossing the EMA9 and EMA18 is a wake up call warning you to get prepared to modify your position should the EMA9 cross the EMA18.

There are no secret filters, no holy grail algorithms and you don’t a direct line to Federal Reserve chair Powell or Trump to trade this.

4) Qualifying this procedure over the last 39 years in less than 10 minutes

To make performance verification easy I’ve divided the last 39 years into 13, 3 year periods, circled all trades and linked all charts with trade date, price, entries & reversals enabling you to easily verify performance.

Cumulative net profit trading 1 S&P E-Mini (ES) is shown in the last vertical column on your right.

I am deducting a ridiculously high all in cost $100.00 per trade (all in = bid/ask spreads, brokerage, all exchange & regulatory fees)

Period 1 July 1980 – July 1983

Date & Chart L or S Price Value Profit/Loss Cumulative
28-Jul-1980 Long 120.78 $6,039.00 $0.00
06-Jul-1981 Short 129.37 $6,467.50 $329.50 $329.50
06-Sep-1982 Long 120.97 $6,048.50 $320.00 $649.50

Period 2 July 1983 – July 1987

Date – Chart L or S Price Value Profit/Loss Cumulative
30-Jan-1984 Short 160.91 $8,045.50 $1,897.00 $2,546.50
14-Jan-1985 Long 171.32 $8,566.00 -$620.50 $1,926.00
06-Oct-1986 Short 233.84 $11,692.00 $3,026.00 $4,952.00

Period 3 Chart July 1986 – July 1989 & Daily here for 1987 crash

Date – Chart L or S Price Value Profit/Loss Cumulative
03-Nov-1986 Long 245.77 $12,288.50 -$696.50 $4,255.50
15-Oct-1987 Short 298.08 $14,904.00 $2,515.50 $6,771.00
06-Jun-1988 Long 266.45 $13,322.50 $1,481.50 $8,252.50

Period 4 July 1989 -July 1992

Date – Chart L or S Price Value Profit/Loss Cumulative
15-Jan-1990 Short 339.93 $16,996.50 $3,574.00 $11,826.50
07-May-1990 Long 340.53 $17,026.50 -$130.00 $11,696.50
30-Jul-1990 Short 344.86 $17,243.00 $116.50 $11,813.00
14-Jan-1991 Long 332.23 $16,611.50 $531.50 $12,344.50
18-Nov-1991 Short 376.14 $18,807.00 $2,095.50 $14,440.00
23-Dec-1991 Long 387.05 $19,352.50 -$645.50 $13,794.50

Period 5 July 1992 -July 1995

Date – Chart L or S Price Value Profit/Loss Cumulative
28-Sep-1992 Short 414.27 $20,713.50 $1,261.00 $15,055.50
26-Oct-1992 Long 418.68 $20,934.00 -$320.50 $14,735.00
28-Mar-1994 Short 460.58 $23,029.00 $1,995.00 $16,730.00
01-Aug-1994 Long 458.28 $22,914.00 $15.00 $16,745.00
21-Nov-1994 Short 461.69 $23,084.50 $70.50 $16,815.50
16-Jan-1995 Long 464.78 $23,239.00 -$254.50 $16,561.00

Period 6 July 1995 – July 1998

The EMA9 never crossed below the EMA18, the long was maintained during this 3 year year period (not you’d have to roll this position quarterly from one delivery month the the next)

Period 7 July 1998 – July 2000

Date – Chart L or S Price Value Profit/Loss Cumulative
03-Aug-1998 Short 1089.45 $54,472.50 $31,133.50 $47,694.50
26-Oct-1998 Long 1070.67 $53,533.50 $839.00 $48,533.50
27-Sep-1999 Short 1282.81 $64,140.50 $10,607.00 $59,140.50
25-Oct-1999 Long 1362.93 $68,146.50 -$4,106.00 $55,034.50

Period 8 July 2000 – July 2003

Date – Chart L or S Price Value Profit/Loss Cumulative
25-Sep-2000 Short 1450.30 $72,515.00 $4,268.50 $59,303.00
24-Dec-2001 Long 1161.02 $58,051.00 $14,364.00 $73,667.00
28-Jan-2002 Short 1122.20 $56,110.00 -$2,041.00 $71,626.00
04-Mar-2002 Long 1164.31 $58,215.50 -$2,205.50 $69,420.50
15-Apr-2002 Short 1125.17 $56,258.50 -$2,057.00 $67,363.50
28-Apr-2003 Long 930.08 $46,504.00 $9,654.50 $77,018.00

Period 9 July 2003 – July 2006

Date – Chart L or S Price Value Profit/Loss Cumulative
12-Jul-2004 Short 1101.39 $55,069.50 $8,465.50 $85,483.50
06-Sep-2004 Long 1123.92 $56,196.00 -$1,226.50 $84,257.00
18-Apr-2005 Short 1152.12 $57,606.00 $1,310.00 $85,567.00
23-May-2005 Long 1189.28 $59,464.00 -$1,958.00 $83,609.00
10-Oct-2005 Short 1186.57 $59,328.50 -$235.50 $83,373.50
31-Oct-2005 Long 1220.14 $61,007.00 -$1,778.50 $81,595.00
05-Jun-2006 Short 1252.30 $62,615.00 $1,508.00 $83,103.00

Period 10 June 2006 – July 2009

Date – Chart L or S Price Value Profit/Loss Cumulative
21-Aug-2006 Long 1295.09 $64,754.50 -$2,239.50 $80,863.50
30-Jul-2007 Short 1458.93 $72,946.50 $8,092.00 $91,195.00
17-Sep-2007 Long 1484.24 $74,212.00 -$1,365.50 $89,829.50
05-Nov-2007 Short 1453.53 $72,676.50 -$1,635.50 $88,194.00
04-May-2009 Long 879.21 $43,960.50 $28,616.00 $116,810.00

Period 11 July 2009 – July 2012

Date – Chart L or S Price Value Profit/Loss Cumulative
17-May-2010 Short 1136.52 $56,826.00 $12,765.50 $129,575.50
06-Sep-2010 Long 1109.25 $55,462.50 $1,263.50 $130,839.00
01-Aug-2011 Short 1286.94 $64,347.00 $8,784.50 $139,623.50
17-Oct-2011 Long 1224.47 $61,223.50 $3,023.50 $142,647.00
14-May-2012 Short 1351.93 $67,596.50 $6,273.00 $148,920.00
02-Jul-2012 Long 1362.33 $68,116.50 -$620.00 $148,300.00

Period 12 July 2012 – July 2015 The EMA9 never crossed below the EMA18, maintained the long for this 3 year year period.

Period 13 July 2015 – Current

Date – Chart L or S Price Value Profit/Loss Cumulative
17-Aug-2015 Short 1970.89 $98,544.50 $30,328.00 $178,628.00
12-Oct-2015 Long 2033.11 $101,655.50 -$3,211.00 $175,417.00
04-Jan-2016 Short 1922.03 $96,101.50 -$5,654.00 $169,763.00
07-Mar-2016 Long 2022.19 $101,109.50 -$5,108.00 $164,655.00
08-Oct-2018 Short 2767.13 $138,356.50 $37,147.00 $201,802.00
04-Feb-2019 Long 2707.88 $135,394.00 $2,862.50 $204,664.50
25-Sep-2019 Settle 2987.20 $149,360.00 $13,966.00 $218,630.50

Risk Disclosure Statement

When you get the hang of the weekly you’ll find trading multiple time periods will produce and better return on risk (based on OTE)

5) Trading multiple time periods simultaneously

In this example I’m trading the same EMA9 and EMA18 on 4 different time periods, 120 minute, daily, weekly and monthly simultaneously over an 18 month period.

I’ve deducted $38.90 per round-turn trade to cover all bid/ask spreads, clearing, and regulatory fees including automated order entry and 24 hour a day position monitoring.

The ATA brokerage team in Chicago places and monitor all trades, guarantee order accuracy and an an account risk (called a maintenance balance) defined in writing before the first trade goes on.

A maintenance balance is a stop loss based on the equity of the account, should the account balance go down to the defined maintenance balance all positions would be liquidated automatically on or before the next close or the ATA team is liable. A maintenance works like a stop close only order for example if your maintenance balance is 100K and your balance drops to 99.5K the firm has until the next settlement to get you flat which could leave  liquidation value below 99.5K.

6) Performance trading multiple time periods simultaneously

Linked here  is a spreadsheet containing the trade-by-trade performance, I’ve linked all charts with entry, offsets, dates & prices enabling easy performance verification, download, open and enable editing (with some operating systems you may have to save it as a new file)

On the spreadsheet you can change the number of contracts traded for each time period in cells B5, B7, B9 & B11.

To change the staring balance see cell C3.

Contract size cell B3, use $50.00 a point for trading the E-Mini S&P (ES) or $5.00 a point for S&P Micro (MES).

To modify the Bid/Ask spread and all fees deducted per trade change cell B13 to $39.80 for the E-Mini S&P (ES) or $12.95 for the S&P Micro (MES).

Margin requirement, cell B15, use $6,300 for S&P E-Mini (ES) or $630 for S&P Micro (MES)

Performance below is based on trading one E-Mini S&P (ES) contract for each time period, 120 Minute, Daily, Weekly and Monthly.

7) Performance dates from  January 2018 to September 2019

Net profit = $163,147.10
Maximum drawdown = -$23,158.90
Drawdown period 26 March 2018 – 6 July 2018
Total number of trades = 180
Average winning trade = $2,565.57
Average losing trade = $819.64
Percent winning trades = 41.67%
Percent losing trades = 58.33%
Maximum margin requirement = $25,200 (shown in cell D17)
Closed out trades = $140,798.40 (shown in cell D13)
Open trade equity (14 August) = $23,348.60 (cell D15)
Starting balance 2 January 2018 = $100,000.00 (cell D3)
Ending balance 28 June 2019 = $263,147.00 (cell D17)
Trade-by-trade performance = vertical column M

Linked here is the spreadsheet

8) To track this procedure forward

Follow procedure reviewed in section 3, use the same procedure for all 4 time periods.

The EMA’s are already dropped into to charts, charts are updated every 10 minutes enabling you to track trades for the period(s) of your choice as they occur.

120 minute price bars use this chart  
Daily
price bars this chart
Weekly
this chart
Monthly
this chart

When all 4 periods generate a short you’ve just confirmed the beginning of the next bear market, 119 years of price history tells us we won’t see a new significant high for a minimum of 2 years and up to 13.5 years.

9) Obviously you can enhance performance using additional indicators for trend confirmation like the ones linked here, trading additional time periods simultaneously and/or implementing strategies like collars that define risk on every trade and for the duration of every trading period. I did this S&P 500 Collar Spreadsheet a few years back it’ll help you with collars.

10) ATA summary & account opening procedure

Automated Trading Accounts (ATA)
The ATA Fee Structure
Defining Overall Risk For Your Account
Exchanges Traded
Brokerage Firms
How Balances Are Guaranteed Plus or Minus Trading
How To Open An Account

If you have any questions contact me.

Regards,
Peter Knight Advisor

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