Trade frequency may increase going forward

Apr 11, 2024


VTS Community, 


Trade frequency may increase going forward

It's been a long period of calm in the market and because we are trend followers and we haven't had any reason to be very active.  When the market gives you a chance to profit without doing much, we take it.

However, since we are nearing those threshold positions between aggressive and safety in all three of our Tactical Strategies, don't be surprised if trade frequency picks up a bit.

- Tactical Volatility between SVXY and GLD

- Defensive Rotation between QLD and XLU

- Strategic Tail Risk between SPY and IYR


Whipsaw is common around thresholds

I define whipsaw as the situation where a rules based strategy is very close to a threshold and you get bounced around between two ETF holdings. 

It's not uncommon at all to switch from one to the other several times in short succession, sometimes even for several days in a row just moving out of one and into the other, only to move back the other way the very next day.

Fair warning ahead of time, this can be very frustrating but it is an unavoidable reality in trend following strategies.  Ideally the market will establish a new trend quickly and we can hold the new ETF.  However, it's pretty common to have the market bounce above and below until it finally chooses a direction.

A significant portion of our overall trade frequency is just during these "whipsaw" periods between thresholds where you may feel like we're just spinning our wheels.  It comes with the territory as in investor. 


Markets don't go up or down forever, they spend an awful lot of time just chopping around sideways with no clear trend.

Be careful what you wish for

For several months my email has had a decent amount of comments having to do with the current low trade frequency.  Believe me, I get it.  You're paying for a subscription and there aren't a whole lot of actual trades happening.  A couple things about this:

1)  I don't consider my job to be sending trade signals.  I consider my job to be maximizing your long-term rate of return while reducing the risk to an acceptable level.  If I wanted to just churn a bunch of trades to keep people busy I would do that, but what would be the point?  Sometimes the highest return can be made by just not fighting the current trend.

2)  Trade frequency ebbs and flows.  There will be times when for several months we are not active and you may feel like, what the hell am I paying you for?  There will also be times when it'll feel like we're taking multiple trades every day and you think, does he even know what he's doing?

Rules based strategic investing requires us to trade the market we actually have, not the one we wish we had


Investing success can only be seen 30,000 feet up

Producing the best long-term rate of return requires balancing that fine line between day trading and buy & hold.  Neither of those are good

-  Buy & hold is obviously terrible because there are definitely times when you would have wanted to exit to safety and side step a major crash.

-  Day trading isn't effective either though because nothing can be predicted with any accuracy in the short-term.  It takes time for patterns to develop

Our VTS portfolio balances that happy middle ground where the magic happens, IF you let it play out long-term.


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