# Short Term Trading Model

### What the Short Term Trading Model does

**When the market is trending upwards:**

The Short Term Trading Model scales in and out of being long $UPRO (S&P 500’s 3x ETF) based on how high it deems the stock market’s short term risk to be.

- The higher the short term risk, the smaller the position will be (and more cash).
- The lower the short term risk, the bigger the position will be (and less cash).

The Short Term Trading Model also takes very selective short positions when the market is trending upwards.

**When the market is trending downwards:**

The Short Term Trading Model scales in and out of being long $SH (S&P 500’s inverse ETF). It will also take some very selective long $SPY positions.

**The model makes a scale in / scale out change approximately once every 2 weeks. This is an average. Sometimes the model will trade more frequently (e.g. once every 3 days). Sometimes the model will trade less frequently.**

- When the market is trending more smoothly, the model will not scale in/out too much. This is ideal. E.g. you want to let your winners run when the market is trending upwards at a very steady rate. Don’t take your profits too early.
- When the market is very choppy, the model will scale in and out very quickly (often every 2-4 days) to take advantage of short term fluctuations in the market.

### Returns

The Short Term Trading Model yields an average of 21-22% per year.

While the Short Term Trading Model’s returns are lower than that of the Medium-Long Term Model‘s, it has 2 big advantages over the Medium-Long Term Model.

**#1: The Short Term Trading Model carries a much lighter position size.**

The Short Term Trading Model scales in and out of UPRO, from being 25% long UPRO to 80% long UPRO. The average weight is 50% long UPRO and 50% cash. So if the market makes a short term decline that the Medium-Long Term Model doesn’t predict:

- The Short Term Model won’t be significantly hurt by the decline (because the position size is much smaller), and…
- The Short Term Model will profit from the short term declines by scaling in and profiting from the next bounce.

**#2: The Short Term Trading Model’s performance is much more steady.**

The Short Term Model’s year-to-year performance is much less volatile than the Medium-Long Term Model’s year-to-year performance. This is because the Short Term Trading Model takes advantage of a lot of the stock market’s short term fluctuations.

### The Short Trading Term Model scales in and out

The Short Term Trading Model calculates the stock market’s short term risk and ranks it on 10 tiers. Tier 1 = highest short term risk. Tier 10 = lowest short term risk.

- If the S&P’s currently at Tier 1, be 25% long UPRO
- If the S&P’s currently at Tier 2, be 40% long UPRO
- If the S&P’s currently at Tier 3, be 45% long UPRO
- If the S&P’s currently at Tier 4, be 50% long UPRO
- If the S&P’s currently at Tier 5, be 55% long UPRO
- If the S&P’s currently at Tier 6, be 60% long UPRO
- If the S&P’s currently at Tier 7, be 65% long UPRO
- If the S&P’s currently at Tier 8, be 70% long UPRO
- If the S&P’s currently at Tier 9, be 75% long UPRO
- If the S&P’s currently at Tier 10, be 80% long UPRO

So as the S&P’s Tier decreases (e.g. from Tier 3 to Tier 2), you decrease your long exposure. As the S&P’s Tier increases (e.g. from Tier 5 to Tier 6), you increase your long exposure.

This is a snapshot of how the Short Term Trading Model has shifted in and out of UPRO over the past 9 years, based on this Tier concept.

### Short Term Trading Model right now

Join the Membership Program to get real-time access to the Short Term Trading Model’s trade alerts.

I find yout website very educational. However, for those who want to know the current status of every of you main models, it takes some navigation to get to the models every day and see where each stands. would it be possible to:

1- send alerts to the subscribers when the main models are changing status the same way you are currently sending alerts via emails when new articles are made available;

2- Have a tab called “models status” where one could quiclky browse through them?

JC

Hi Jean,

We’re going to be rolling out a new web design over the next few months.

What are you using to determine the short term trading model tiers? Thanks.

A combination of fundamentals + technicals (probability of mean reversion)

Hi Troy,

By the list of last 20 trades you have a couple of short positions (ie long $SH) but here in the short term model description it seems there only a question of how much the allocation is to $UPRO. Does the equity curve graph here reflect the short trades as well or only the UPRO allocation?

Thanks

The equity curve reflects everything. Long and short

Could you provide an underwater drawdown plot for your short term model? Also what time of day are signals made available….and how is that done? (via email? .. or website?). Thank you.

Emailed you Jim

Troy – Can you explain the decision making regarding the introduction of $SH to the position? I haven’t read much here discussing why/when/what to hedge so it comes as a surprise at this time… post-crash with confidence of a bullish med/long term for a few more seasons.

JW

Hi Justin,

It’s just a hedge in the event of a retest. These “crash, quick rally” patterns usually have a retest.

The short position has a tight stop loss, and it’s not looking for a big decline.

Hi Troy,

Can you give us some insight for the extremes of the Short Term Model. What I’ve seen so far is some minor tweeks, percentage wise. The market has pulled back over 4% in the past week, but your research indicates that the medium term is still bullish. I would think that the time to pile in for the short term is now or soon. What I’m asking is, does the Short Term Model ever go 100% in or out? What level of conviction corresponds to 50% or 60% in? Thanks, I find your daily studies to be very informative.

Hi Kyle,

No, the model never goes 100% long UPRO. At most, the model will go 80% long UPRO. Since the short term always has a lot of randomness to it (i.e. 1 big player can come in and smash the market for a day or two, triggering some panic selling), the Short Term Trading Model is by definition more conservative. It needs to be more conservative to not get badly hurt by this short term randomness.

60% in corresponds to relatively strong conviction (but not extremely strong), i.e. in the 75th percentile range

Dear Troy

Email will be fine for the short term trading alert when u scale in to buy or sell.

Thks

Joseph

You are already on the email list Joseph 🙂

Did you not get the alert?

Regards,

Troy

Hi Troy, could you have a shortcut on your website for short term trading model (member) so we know where to find the latest. Or maybe have a dedicated member section so we can find relevant info more easily.

Also when you trade upro and sell/buy, do u do market order or use limit order etc. Thanks.

Hi Julia. It’s in the menu bar

https://bullmarkets.co/membership/

Dear Troy

For the short term trading model,

can u create a trading alert for members to follow when u put in your trade for live trading?

Will do. Do you prefer email Joseph?

Hi Troy, Looking fwd to using it.

Ray

Hey Troy,

You have been publishing a lot of new models lately. Are you going to be sharing the details of how those models work with the membership? I believe you said before that that was the plan.

Hi Alan,

Not for the short term trading models.

Would it possible to show the Equity Curve for the Short term trading model?

Also, the Maximum drawdown and if you have it, the Sharpe and/or Sortino ratios would be helpful.

Thank you.