I have finally decided to make a change in Rainier. Starting on Monday, October 22, 2012, the watchlist will change to the most liquid stocks in the S&P 500.


What to Expect


The system will generate orders every evening after the market closes. There will be far more orders generated when the market is weak than when it is strong. Only a fraction of the orders will be filled.


Position Management


When a position is opened, you will receive a sell at limit order or profit target for the next day. The vast majority of trades will last 1 or 2 days. If the position is still open on the third day, it will be closed with a market order. Rainier does not "average down" or add to losing positions.

I strongly recommend that you don't allocate over 12% of your account to a single position. Doing so can increase risk to an unacceptable level. Rainier was designed to use a maximum of 12% position sizing, but you can use less if you want. Smaller position sizes will reduce both profits and drawdowns, but this would be appropriate for many risk-averse individuals. At any rate open 16 positions and then stop buying.

You can size your positions as a percentage of Rainier's position size. The formula is X% = YA / (RE * 2) * 100. YA is Your Account (the amount you're allocating to Rainier), RE is Rainier's Equity (you multiply it by two because it uses 2:1 margin). For example if you allocate $50,000 to trading the system and Rainier's equity is $180,000 the formula would be X% = 50,000 / (180,000 * 2) * 100 = 13.9%.


Margin


The use of margin increases both profits and drawdowns. Market exposure can vary from 0% to about 192%. Historically, with 12% position sizing, the average market exposure has been under 25%. If you don't want to use margin, just use 6% for position sizing.