Trading the Tides, Part 2

Last week I posted a few charts showing equity growth if one were to trade the tide turn dates over the last 3 plus years. If you scroll down to earlier posts, you'll see the two charts, one based on what I have termed a 50% entry/exit and the other labeled nirvana trading where the absolute best entrys and exits are assumed (not possible). The reason for these two charts is to frame what is felt to be the absolute best and possibly worst trading results (although it is entirely possible for a trader to do worse than an average 50% entry/exit).

With the extremes set, we should now take a look at the range in between these two. A little more explanation is in order to understand the following charts a little better. When I refer to a 75% entry, here is what I mean. Lets say that an impending tide turn is imminent (for instance this coming monday) such that the trade called for is to close out a long position and reverse to a short position. Also, lets assume that the snp ES range for monday is a low of 1,060 and a high of 1,073. A 75% exit long and entry short then would be 75% of the difference between the high and low, and since we are looking for a long exit/short entry, we want: (1,073-1,060)x.75 plus 1,060. If I have done the math correctly, this translates to a price of 1,069.75. So this price of 1,069.75 then represents a 75% entry/exit for this day.

Similarly, if monday were instead a tide low date (short going into that day) and the price range were the same, a 75% exit/entry to exit short and enter long would then be: 1,073-((1,073-1,060)x.75) or 1,063.25. Pretty simple concept.

Now, lets look at some equity charts with varying degrees of success with average exits and entrys. Below are 3 charts illustrating the results.

At the top of each chart in the title block the entry/exit assumption is shown. Below is a chart with all the charts combined.

The heavy white line has been drawn to show a 100% return on investment, on in this case, starting with a $25,000 account and have it grow by $25,000 annually. Apparently, to realize this type of account growth, the average entry and exit would need to be in the 65% to 70% range based on backtesting data for nearly a four year span. At some point, I would like to go further in the past with backtesting. Again, this return is based on trading one ES contract and has no consideration for drawdowns, which if you are a trader, you would know how those can affect a trader's ability to stay in a losing trade. More on this later.