How to Use our Signals
Investment Choices
The Two Corner Timing signals are based on the Nasdaq 100 index, but it's not possible to invest directly in the index. Fortunately, there are many investments available that attempt to track the Nasdaq 100. Most prominent among these is QQQQ, the "PowerShares QQQ" exchange-traded fund (ETF). There are also mutual funds and other ETFs designed to track the index, the inverse of the index, or a multiple of the index's daily performance, offered by such companies as ProFunds (OTPIX, SOPIX, UOPIX, USPIX, PSQ, QLD, QID) and Rydex (RYOCX, RYAIX, RYVYX, RYVNX). For advanced investors there are also future and option contracts on the index itself. Which particular investment to use is up to the investor, and Two Corner Timing LLC makes no recommendation as to which may be the most suitable. The above list isn't meant to be exhaustive, and an investment's mention should not be construed as a recommendation. Whatever investment you choose, take care to control costs - our system does trade often, and that means it's very important to keep per-trade costs under control. The best per-trade cost is zero, which some brokers offer for some of the mutual funds.
Shorting
The signals are either LONG or SHORT (and, in some variants, CASH). The SHORT signal may be traded by actually selling a security short (if account restrictions allow it), or by buying one of the funds that aims for an inverse performance of the Nasdaq 100. Some investors prefer to avoid "betting against the market", and it's possible to follow the Two Corner Timing signals long-only, by treating a SHORT signal as a CASH signal. Of course, performance has typically been lower when spending more then half the time in cash; see the "Long Only" option on our Performance page.
Leverage
It is also possible to use leveraged investments with the Two Corner Timing signals via a margin loan, funds that are designed to track a multiple of the Nasdaq 100's performance, or index futures or options. You can see the results of a typical 2x leverage (what many funds offer) with the "Long & Short w/ 2x Leverage" option on our Performance page. While any investment has its risks, it should be noted that the risk of leveraged investments typically rises faster than the return of those investments. Two Corner Timing LLC makes no recommendation about what leverage an investor should or should not employ (because we make no investment recommendations). All results shown on twocornertiming.com are for unleveraged long & short investments, excepting the Performance page options.
Combining Signals
You may trade based on any of the Two Corner Timing signals, or on a combination of multiple signals. By combining different timing signals, you may balance temporary weakness in one signal variation with temporary strength in another. This balance comes in the form of days where you hold a position that is less than fully LONG or SHORT, and may even be in CASH, when signals conflict. While it may seem "wasteful" not to be fully invested, these partial investments offer the advantage of reduced risk while maintaining a long-term return approximately equal to the average of the signals you're combining.
Another way to invest in multiple signals is to go "all in" with whatever market direction the majority of signals predict. Unlike the equal-weighted blend, this method will never be partially invested (though a CASH signal is still possible). This will often give higher gains, but without the advantage of risk reduction that the blends offer.
The official signals are generated at the market close and backtests use the closing value of the Nasdaq 100. This performance can only be approximated by trading either before or after the close. Some investments may be traded after the official market close. They generally stay near the closing price, though this may not always be the case.
It is also possible to wait until the next day and trade at or near the market open. Some mutual funds offer morning trades in addition to the typical closing trade. These opening or near-opening trades should use the signal from the previous day's close. The performance of next-morning trading hasn't been as good as closing trading, but is still well worth doing.
Trades can also be placed before the market close using a preliminary signal. This signal is not always the same as the day's final closing signal, and these differences will tend to reduce the performance of early trading. For this reason it is best to get the signal as near the close as practical while leaving adequate time for trading. If trading a mutual fund that is priced at the close, any time in the last 15-20 minutes is sufficient; if trading an ETF like QQQQ, it should be placed within the last five minutes.
For the benefit of those trading before the the market close, or for anyone else who's interested, the "Current Signal" page in the members' section includes a graph of the day's Nasdaq 100 index plotted against ranges that determine the closing signal. A sample of this graph is shown below. While the index may move between different ranges throughout the day, the final signal is only determined by its closing value. An investor planning on trading an early signal can use this graph to help decide if that signal is near a cutoff point and likely to change before the close.
|
2009-04-07
NDX 1275.42 Current Quick signal: SHORT |
2009-04-08, 3:45PM
NDX 1297.84 (+1.76%) Pending Quick signal: LONG |
| |
Every day after the market close, the cutoffs are chosen that determine the signal for the next day's close. There may be as many as three such cutoffs, or there may be none at all (which indicates that the next day's signal is known in advance). These cutoffs are also displayed along with the current signal in the upper left corner of the screen on every page when a user is logged in and are included in the e-mail sent for signal changes.