Saturday our 1 unit play in MLB on Colorado +126 won in extra innings. Ahead 3-0 they gave up 4 going behind 4-3. But then won the game with a 2 out triple 5-4.
Today nothing looks very good to me. There are plenty of lopsided public numbers today but my models do not support a play or a slight edge. If anything changes I will update later.
In the NBA game tonight the public numbers have changed slightly. The public is now only 37% on the favorite and the line is back down to -4. We still have a slight edge on Miami +4.5 from Saturday.
Our Swing trade in SDS is off almost 4%. I received the following email:
“What a great blog Rick! I’m not nitpicking because your record speaks for itself but I was curious what your risk management strategy is when a swing trade goes against you.”
These trades are considered mean reversion trading. The studies and backtesting supports the idea that any stoploss lowers the expected return of the method. I know this seems contrary to common sense. But….I have researched this setup extensively and that is what it appears to be. So……It just a question of following the trade and exiting when the exit is triggered.
Now…..My rule of thumb on these trades is to trade $100,000 per trade. On the long side I just buy SPY. On the Short Side I choose SDS which is 2X inverse to the SPY. So a 50,000 trade in SDS is essentially 100,000 SPY trade. So based upon 100,000 we are off 2% on the short side the same as if we shorted SPY for 100,000.
Good LUck Today