Long-Short Model

The Long Short model uses ETFs (DXD - short DOW, DDM - long DOW, QID - short NDX, QLD - long NDX, SDS - short SP500, SSO - long SP500) to have both a long and short position, simultaneously, each day. It trades fairly frequently as you can see below. Here are the positions on the close each day recently:

3/12/2009	sp	ndx
3/16/2009	ndx	dow
3/17/2009	dow	ndx
3/18/2009	ndx	sp
3/19/2009	sp	dow

As with the other systems, we already know what the position will be for the close a day ahead. So we know what the position will be on the close today, 3/19. The short position in the SP from 3/18 will change to a short position in the DOW, and the long position in the NDX will be liquidated and a long position in the SP will be established.

So if one was trading the ETFs, on tonight's close, one would Sell the position in the SDS (short the SP500 established on the close 3/18) and Buy the DXD (short DOW) with the proceeds from the sale of the of the SDS. And also Sell one's position in the QLD (long the NDX established on the close 3/18) and Buy the SSO (long SP500) with the proceeds from the QLD sale.

One begins with 50% of account in the long postion and 50% in the short position. And about once a month I rebalance so the account returns to a 50:50 position.