Friday, 23 March 2007

10-Year Treasury: Sell

Today's COTs numbers generated one new trading signal: sell the 10-year Treasury bond. I'm planning to sell my bond holdings on the open next Monday. (I don't plan on shorting bonds because I don't know of any inverse bond ETFs on the market yet.)

My system went long the 10-year Treasury on Jan. 19. I did the trade using the iUnits Canadian Broad Bond Market Index Fund on the Toronto Stock Exchange (symbol: XBB.TO) as a proxy for the 10-year Treasury, since the two securities appear to have a high correlation.

The trade had a 0.7-percent profit as of the close today.

I calculated the amount of my position based on the largest drawdown that this trade has seen since the data started in 1995 (17 percent) and my risk threshold of 2 percent of total assets. (In other words, I don't want to risk losing more than 2 percent of my total assets on any single trade.)

All other signals are unchanged this week. See the next message below for my current signals.

Sometime in mid-April, I hope to give a lot more specifics about how my COTs timing system works. As you will see, trading my system involves significant risk. Some of the trades have maximum drawdowns as high as 35 percent, so I adjust my position size accordingly. Stay tuned!

No comments: