A second signal in quick succession!

A dramatic view of a beautiful London Plane tree near my house. It's just been pollarded (trimmed), which creates this dramatic, triffid-like profile.

My portfolio has had some drama this week. If you are following my blog you will know that last week I had a BUY signal for my shares fund. Accordingly I bought the following Monday and invested that slice of the pie back into the markets.

You will remember, however, that the buy signal was not a strong one. The price had closed only just above the green line, and I wondered whether the price would fall back again. It did fall back this week, and has closed below the green line, creating a new SELL signal in equities. So I have a losing trade here. How much I lose will depend upon the price I get when I sell on Monday (25th). We shall see!

It would have been tempting to not take the buy signal a week ago, and not to follow the sell signal this week. The problem is that if I do that I am undermining my system by imposing my predictive thoughts on my binary trend-following system. The beauty of a mechanical yes/no system is that there is no leeway for manoevre. This makes it simple and helps to remove my temptation to make predictive buy or sell decisions with my portfolio. There is a great example of this in the video where a week ago, one of the sectors was looking like it was going to trigger a signal and I was quite tempted to make the investment prematurely, in order to get a better price. However, this last week the price moved the other way! This would have left me high and dry on the wrong side of the line had I followed my instinct a week ago. Thankfully I didn't!

The point is that I have no idea what will happen with any of the sectors in the future. I always have to remind myself that this is a trend following system, not a predictive system!


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