Hope everyone had a great weekend. So I have to apologize to everyone for taking something for granted. Last week I wrote that daily blog talking about how everyone will be getting different intraday prices when executing trades. You can check it out here if you missed it, but I had a lot more responses to it than I thought I would with many people saying it put their mind at ease that they weren’t doing anything wrong.
This is a part of trading that we can’t control intraday prices, and it’s unfortunately part of human nature that we tend to remember the bad fills and forget the good ones and don’t realize that it evens out in the long-run. But I’ve been doing this for so long that I basically trade like a robot now following my own signals. I’ve forgotten what that feels like to wonder if I’d be getting better prices at different times of the day, but I definitely should be talking about this every few months for the newer members that may not yet be at that stage.
So the natural follow up to that article is, why do I personally execute my trades at market close? Let me give three reasons:
1) I like to execute trades at the same time every day for consistency. It’s not actually necessary through. You can if you want just do it when convenient. Sometimes as soon as you get the email, and other times if you’re busy at work or with family then anytime throughout the rest of the day is fine. Like I said in the long-run it will average out about the same.
However for me I’m very structured in my investing and whenever possible I like to normalize things. I also suffer from a mild case of OCD so doing it at the same time every day eases my busy mind. For ETF trades I can use “market on close” orders that execute at the closing bell, and for option trades I can just manually execute near the close. It works for me and doesn’t bother my OCD nature.
2) End of day is where most of our market data is. I do a ton of testing, both optimizing my existing strategies as markets evolve as well as constantly testing out new ideas and strategies in hopes of diversifying the portfolio. We have quite a bit of data points for market open so that would work as well, but I definitely don’t like to trade within the first hour or so. That’s when the possibility of whipsaws and changes of direction is highest.
We have by far the most readily available data for market close so it just makes sense that I would keep my live trading and my testing the same time for comparisons and optimization.
3) Front running. Since I am the one giving the signals, ethically speaking it’s only fair that I’m allowing everyone time to get their trades in before I actually take mine. That way there is no conflict of “front running” where a manager is signaling a trade that they are already in. Now it wouldn’t really effect things either way. It is still a large free and open market and we only trade liquid assets. Our VTS community is just a drop in the bucket but still, from an ethical perspective the community should have the first opportunity to get into their trades.
The bottom line though is that intraday prices are a random walk and we just have to accept that it’s a 50/50 proposition. Half the time we will get a better fill price and half the time it will be worse. It will all average out in the long-run but if you need to put your mind at ease, start tracking it in a simple excel spreadsheet. The asset price at the time you receive the signal in one cell and your price in another. It won’t take long to see that it’s already starting to average out. Then it’s just a matter of being mindful that our brains are always trying to trick us with cognitive and emotional biases.
Current VTS Total Portfolio Solution Allocations
10% VTS Conservative Vol Strategy – Optional replacement for lower risk tolerance investors
10% VTS Aggressive Vol Strategy – Optional replacement for higher risk tolerance investors
Temporarily paused: VTS Tactical Volatility Strategy
Want to see our current positions and daily trade signals?
Consider Subscribing – Free 2 week Trial for all subscriptions
Sign up for the Awesome VTS Newsletter – Free 1 month access
The Volatility Advisor
Making volatility investable through education and active management
Start your FREE 2 Week Trial Now
Gain full access to all 4 of our successful trading strategies for a full two weeks, absolutely free.
It's time to start growing your retirement fund