This system is designed for non-marginable accounts such as IRA's and Cash accounts. It works well with traditional mutual funds that trade end of day at NAV too (when traded manually). The goal is to provide a low cost trading system that will eliminate the need for margin, and eliminates the need for expensive auto trade fees while still providing good returns and limited exposure to the market volatility by being in a trade less than 40% of open trading days.
Buys: We adjust equity employed to purchase long or short position in the S&P 500 (3X) without using margin. We are selective and intentional when we place a trade. Trades are placed to execute near the end of the day. Due to C2 limitations a MOC (market on close order) is unavailable so we will use the parked order system to execute at or near the close of the market (15.57 or 15:58 EST). We will try and give you at least 2 hours to place your parked order for those not on auto trade.
Sales: For most of the sales we will close the position the following day at the close of the market but occasionally will hold a trade as long as the odds hold up for as many as 4 consecutive days. We will give you plenty of notice as to when we expect to close a trade. By holding consecutive probability trades, this will help keep brokerage commissions low rather than churning in and out of a position.
Methodology: Our system uses an algorithm that calculates the odds that the S&P will close up or down on the following day. When the odds show a significant chance that the market will close up or down the following day, we place a trade in the direction of that signal the day before. Stops: We recognize the market doesn't always behave in predictable patterns, so in the event the market drifts in the opposite direction of our trade, we monitor the position and if necessary we place a stop at 4.5% of the trade. We do not place stops as soon as we open a trade due to gaps which often backfill. Remember the market can gap down or up and a stop is no way to eliminate market gaps and can even cause you to sell as soon as the market opens at the worst possible price. When a trade gaps against us, we monitor the situation and place stops to prevent additional capital erosion. Sometimes the market may gap in the opposite direction of our trade and then recover throughout the day.
Risks: Overnight Risk, Leveraged ETF risks which are unique, General market directional risks, order execution risks, in the event of catastrophic moves you should refer to the SPXL and or SPXS prospectus' to identify how they handle payouts.