Launching The Algorithmic Portfolio System: Let The Market Work For You
- Removing emotions eliminates stress.
- The market is always right. Market participants, not so much.
- The news and experts have ulterior motives.
- The Algo Portfolio System aims to take the meat out of moves.
- Drawdowns occur, but the long-term results speak for themselves.
- Looking for a portfolio of ideas like this one? Members of Algo Portfolio System get exclusive access to our model portfolio. Learn More »
Editors' note: This article is meant to introduce the new Marketplace service, the Algorithmic Portfolio System (APS).
During the past weeks and months, Todd “Bubba” Horwitz and Andy Hecht have posted exclusive articles on Seeking Alpha on the assets that are components of the Algorithmic Portfolio System (APS).
The APS can reduce stress as the system makes long or short decisions based on the proprietary model. It operates on the principle that crowds make the best decisions about the path of least resistance of market prices. Many investors panic out of assets or portfolios at lows when market volatility becomes too much for them to stomach. Others buy high, chasing the hottest assets in the spotlight. The APS is different as it's always long or short the portfolio’s components, which are highly liquid and optionable. Portfolio changes never occur intraday, but each day they can change from long-to-short or short-to-long. The APS is never on the sidelines.
Subscribers will get daily proprietary signals for the entire portfolio via a Google docs spreadsheet on Seeking Alpha. They're also welcome to a weekly Monday Night Call where Bubba and Andy review all of the portfolio’s components and a slew of other markets across all asset classes. The calls are interactive and are typically held on Mondays after the market closes. A link will be available each week for easy access to the session.
We're introducing this service to make your life easier by eliminating stress. We have found that trends are our best friends and yield the optimal results over time for those willing to follow the signals. The APS is proprietary, with the model constructed to capture only significant market changes based on data collection.
Removing emotions eliminates stress
Creating and growing wealth can be more than stressful. Deciding what assets to hold in portfolios when to buy, when to sell and what to do in between trigger emotional impulses that more often than not lead us in the wrong direction.
Stress is a killer. It's the root of unhappiness. Life is short. Reducing stress leads to a happier, healthier, and more fulfilling existence.
Most investors make the mistake of spending their time looking for bottoms or tops in markets. Asset prices tend to move far higher or lower than reason, logical, and rational analysis dictates. There's a difference between calling a market’s eventual direction and profiting from that call. Bottom fishing or top hunting has little to do with profits and everything to do with your worst enemy - your ego.
Nothing creates more stress than buying or selling and watching the price move against you. Fear and greed are powerful emotions. They trigger impulsive responses that lead to mistakes. Emotions are our enemy. Trends are our best friends as they reflect the market’s collective wisdom.
An agnostic, non-emotional approach puts us in the best position to profit from the path of least resistance of markets across all asset classes.
The market is always right - market participants, not so much
One of the most dangerous mistakes traders and investors make is assuming that a market is wrong, and they're right. A long or short position that moves against us insults our ego. It spits in our faces.
All the fundamental analyses in the world can lead to a wrong conclusion as it's impossible to account for all variables.
Asset prices move higher when buyers and more aggressive than sellers and vice versa. It’s that simple. The most successful traders and investors will tell you that they're wrong most of the time. What separates winners from losers are three factors:
- Planning: Risk vs. reward is a critical factor in a plan for a long or short position in any asset. The plan comes before buying or selling, not after.
- Discipline: It's crucial to follow the plan. It's never acceptable to allow a short-term risk position to become a long-term investment because it moves against us.
- Following rules: The rules of the road include following the signals religiously and not deviating from the plan.
The most important thing to remember is that the market is never wrong. It's possible to make money in markets if you call the direction correctly 30% of the time. It's also possible to lose money if you call the direction 70% of the time. A plan, discipline, and adherence to the rules will determine success for failure.
Think of it this way - a 0.300 career batting average will put a professional baseball player in the Hall of Fame. Getting a hit in one of three at-bats means making an out two out of three times. Being a Hall of Famer in the markets starts with acknowledging that the market price is always the right price.
The news and experts have ulterior motives
Market pundits, experts, news items, events, and all other outside noise triggers emotional impulses. We ignore them. The markets often move in the opposite direction to what logic dictates. All of the noise is subjective. The only objective factor is the current market price. Market prices always are the correct prices because they're the levels where buyers and sellers meet in a transparent environment - the market. Our mantra is to ignore the noise and follow the trends.
News and experts have an objective that has little to do with calling the market direction. They exist to sell advertising or a product. You're the product! Do not be the product - allow the market to work for you.
Following a systematic, algorithmic approach to trading or investing allows the market to work for you. It puts up an impenetrable shield that does not allow emotional impulses to impact the decision-making process. All of the information we need to make intelligent, high-odds choices are on a simple price chart. So many variables can affect market prices, and the least likely often blindside market participants. Even the most thorough analysis runs the risk of ignoring factors that can create adverse price behavior. The bottom line is that working overtime for the market can be a waste of time and effort, while following the path of least resistance is an efficient and effective method of capturing a substantial percentage of price moves.
The Algo Portfolio System aims to take the meat out of moves
Bubba’s dad was a meat peddler in the Midwest, so please excuse the analogy. We look at the markets like a big slab of meat. We do not look to dine on the fatty end pieces. We only look to eat the filet mignon or center cuts that are the tastiest. The end pieces are for those looking to buy bottoms or sell tops, which may appeal to the ego, but can cause catastrophic losses. The filet sits in the market’s trend, and extracting that prime cut is always the goal.
We never look to buy bottoms or sell tops. We're likely to be short at bottoms and long at tops. However, when a trend develops, we dine like kings, taking the filet from the move. Markets often rise or fall to prices that defy logic, reason, and rational analysis. The Algo Portfolio system seeks to take the most significant percentage of trends to the bank. We're constantly long or short the portfolio components, so we're always positioned to catch the trends.
Subscribers to the Algo Portfolio System will receive:
- A daily update of any portfolio changes: Positions never change intraday, but they can change overnight. Subscribers receive any changes each day before the opening of the stock market.
- A weekly portfolio update with results: Over each weekend, subscribers receive the entire portfolio with weekly, monthly, and life-to-date results.
- The option for automatic execution: Subscribers are free to execute long or short positions with their brokers. For those interested, Bubba Trading’s subscribers can sign up for automatic execution through an unrelated third party. Bubba Trading has no economic interest in any automated execution services.
- The Monday Night Call: All members will be invited to Bubba Trading’s Monday Night Call - MNC - each afternoon after the market closes. At the MNC, Bubba Horwitz and Andy Hecht will review the current state of markets, the portfolio components, and other stocks, futures, and markets across all asset classes. The session is interactive, with the opportunity for questions and comments.
- A chat function: A chat room on Seeking Alpha allows subscribers to exchange ideas and chat with Bubba and Andy, who will monitor the room and respond in a timely fashion. Additionally, Bubba or Andy will answer all emails within 24 hours or sooner during the week.
Drawdowns occur, but the long-term results speak for themselves
There are no guarantees in trading or investing. We believe the APS will put you in the best position to profit from market trends over the long term, but drawdowns are a part of life. Sticking with the program over time improves the odds of success. Cherry-picking trades, timing, or any activities that deviate from the APS rules decrease the odds of success.
Portfolio changes only occur daily as the system ignores intraday volatility. We have found that the APS offers a 66% win rate over time, which is different than a 66% return. Winners tend to outnumber losers 2:1. However, the success rate depends on a long-term commitment to the APS method.
As of Oct. 22, the portfolio contained the following 10 assets with the current aggregate closed gain or loss:
Bubba Trading is offering a two-week free trial for new APS subscribers. During the rollout period, beginning on Nov. 2, we offer a 20% discount to the first 100 subscribers from the total price of $79 per month of $799 per year. The 20% discount will apply for as long as you remain a subscriber.
Todd “Bubba” Horwitz has more than 40 years of experience as a market maker in Chicago’s rough-and-tumble trading pits. Only the strongest traders can survive and thrive in the wild environment.
Andy Hecht has been trading and analyzing commodity and other financial markets since the early 1980s. He ran multiple sales and trading businesses for one of the world’s leading merchant firms in the 1980s and 1990s. He traveled the world buying and selling raw materials, structured and executed some of the most substantial proprietary risk positions in history, and is in constant contact with a broad group of producers, consumers, traders, investors, and speculators that make the market tick.
Bubba and Andy have put their heads and experience together to develop the APS. The system aims to reduce stress by eliminating decision making with rules designed to capture trends.
Allow the markets to work for you by eliminating stress from the equation and following the Algo Portfolio System. We look forward to welcoming you as a subscriber. If you have any questions, please feel free to email us at Seeking Alpha.
This video describes the new APS service on Seeking Alpa Marketplace.
Todd “Bubba” Horwitz and Andy Hecht
Partners at Bubba Trading
If you're reading this via Seeking Alpha's mobile app, to try this service right now, go to seekingalpha.com and enter “Trading Places Research" in the site search to visit my Marketplace Service checkout page.
This article was written by
Andy Hecht and Todd "Bubba" Horwitz are partners at Bubba Trading.
Andy has over forty-year experience as a trader and analyst. He is well-known to Seeking Alpha readers. He has been a prolific contributor for years covering markets across all asset classes.
Bubba is a trader and educator with over four decades of experience in the rough-and-tumble futures and options trading pits in Chicago. He appears on all of the major business networks as a contributor.
Together, Andy and Bubba provide an upstairs-downstairs perspective on markets that encompasses a top-down and bottom-up approach to trading and investing. The pair have created proprietary models and systems that remove ego and emotional impulses from trading and investing. An emotion-free approach with Bubba Trading's Algorithmic Portfolio System reduces stress and improves performance, over time. Todd and Andy are collaborating to bring their Algo Portfolio System to Seeking Alpha's Marketplace.
Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
We only disclose long or short positions to APS subscribers. The portfolio is always long or short its ten highly liquid components. Subscribers have daily access to the portfolio and are advised of changes when they occur.
Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.