READ THIS FIRST --> | 15 year performance of all our timing models | New Sincerity Trader turbocharged for 2013 |

The Sincerity Trader is a PowerStocks Trading Labs creation that purely uses the JSE ALSH Index's daily price movement to derive BUY and SELL signals. The Sincerity Trader is one of a suite of 3 high-frequency JSE Index traders we offer.

It is a very good performer recommended to all our new clients that wish to try shorter term higher frequency trading on the TOP40, trading on average 6 times per year over the last 15 years as shown below. To understand the trading actuarial table shown below, it is advised you first read the article highlighted at the top of this page.



INSTRUMENTS OF THE TRADE
To trade this system you buy SATRIX40 ETF shares. Every broker will have these on offer as they are fully fledged JSE listed shares. You make the buy immediatlely after you receive the SYSTEM ALERT with the BUY signal in your email. If you want you can buy SATRIX40 CFD's or Single Stock Futures offered by your broker to achieve some leverage/gearing.

The system banks a winning trade 56% of the time, so you need to be prepared to take some losses, sometimes a string of 2-3 losses in a row. But the losses are small (averaging 2.42%) and the winners are much larger (averaging 6.8%) and this is what makes this a successful system with a positive trade expectancy. You can expect to earn 3.7 percentage points for every point you lose.

If you are very new to this we suggest attempting a lower frequency trader such as Turtle-S3 or Zweig LazyBoy first.

THEORY OF OPERATION
The system tracks the number of daily back-to-back (consecutive) advances of the J203:JSE ALSH Index in a rolling x-day window. This is represented as a yellow signal line in the sample trade chart from JBAR below:

As at 18 April 2012. Click on chart to open full history since March 2009

When the JSE is correcting there is typically an absence of these back-to-back days and the signal line eventually falls to zero. This is our cue that a BUYING opportunity is approaching. Eventually, after some time (depending how serious the correction is) we suddenly see the re-introduction of back-to-back advances meaning there is conviction buying. A re-introduction of back-to-back days after an absence of a certain minum period is our BUY SIGNAL.

The yellow index was named the "SINCERITY INDEX" as it measures buying conviction (sincerity of buyers) in the market. When it is high there are lots of back-to-back days propelling the JSE up and this is a sign of buying/demand pressure.

Values of 6 and above in a rising market are a warning of overbought conditions and higher risks of a peak in the market.

THREE BUYING RULES
BUY when yellow signal line rises from 0 to 1 after being on 0 for a while (CLASS-A)
BUY when yellow signal line rises from 1 to 2 after being on 1 for a while (CLASS-B)
PYRAMID (add to existing positions) when already in a CLASS-A & you see a Class-B

The Class-A signals are obviously better (lower risk) than the Class-B signals

ONE EXIT RULE
A short-term Donchian lower channel is used as trailing stop for the trade. When the JSE falls below (breaches) this stop a small red dot is shown in the trade chart and that is your SELL signal. After selling you wait in cash until the next BUY signal.

There is no shorting with this system.

OPTIONAL PROFIT TAKING
When you are in a trade, it is wise to offload 40-50% of your positions when the Sincerity Index (yellow signal line) reaches 6. Whilst this has not been backtested yet, a visual inspection shows that this is likely to generate even better risk-adjusted returns, since it protects some of your trade profits from the "curve over" effect when the market rolls over and the trade gives away 2-3% in profits before being stopped out.

ALERTS
We email you with "SYSTEM ALERT : SINCERITY TRADER" in the email subject header whenver this system is about to make a trade or close it.  Additionally we publish an updated version of the previously shown trading chart in the JSE TIMERS sheet in JBAR published every weekend.

3-YEAR LIVE PERFORMANCE
The system has been running for 3 years since March 2009 in an "out of sample" environment. The chart below depicts the performance of the Sincerity Trader since the commencement of this bull market in March 2009. It is the top performing trading system from a total return perspective. You can download the full PDF report over here.


READ THIS FIRST --> | 15 year performance of all our timing models | New Sincerity Trader turbocharged for 2013 |
 
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