Jeffrey Tennant, investor and author of the new book ?The MEJT System: A New Tool for Day Trading the S&P 500 Index? talks to www.tradingdiary.co.uk about trading and creating the MEJT system.
1. Who are you?
I am a private investor who has been interested in technical analysis of the stock market since 1979. I have seen many predictions based on chart patterns, wave counts, bar counts, moving averages, candlesticks, the calendar and probably tea leaves and entrails somewhere along the way. I enjoy studying different approaches.
2. What kind of trading experience do you have?
I began trading for my own account in 1979 as well. There is no greater stimulus to learning than having ones own money at risk.
3. What is your new book about? What is the The MEJT System?
The MEJT system is based on the premise that market action during certain times of the day can both predict future price movement and establish support and resistance levels. The methodology is different than anything else I have seen on the market. It has made numerous accurate calls which I could not duplicate using other approaches. It explains the logic of afternoon trading, which has a reputation as being erratic and unpredictable.
4. How did you create the MEJT system?
Many years ago another trader found that a certain time period acted a support/resistance level. He developed his own method for trading based on that principle. I was unaware of his technique, so I developed my own rules for trading based on that time frame and on another time frame I found myself. The rules were quite different from those which he used, and I believe they have been more accurate.
5. What kind of testing did you do on it? And what kind of results are you getting with the MEJT system?
When there have been unfilled targets at the end of the day, I have posted them online since 2002. Most recently I have posted at timeandcycles.com; the predictions based on the system are clearly marked as mejt predictions.
The system generates about 500 predictions a year. Since I began keeping track of the results in the fall of 2005 there have been 18 targets which have not been satisfied. These targets have tended to occur in bunches around times of impulsive market movements or major changes in trend; it is a question of semantics whether one should consider this a failure or a signal in itself.
At least 90% of the time the target prints within two trading days. Please note that not every signal is tradable (because the target is not far enough away) and that some targets print very long after they are signaled. As with any system, it is good but not perfect. One must use stops.
6. How come you picked the S&P 500 for this system? Would a similar system work on other indices?
The MEJT system does not work on anything but the S and P 500 index. I cannot say why it does not work elsewhere and cannot say with certainty why it works so well with the index for which it was designed.
7. What other kinds of trading systems and investment strategies do you use?
I like the work of Tom DeMark and Rod David. I also find moving averages and Bollinger bands to be helpful.
8. What has writing this book taught you?
It is not enough just to have a good trading methodology. If one writes a book that people will wish to buy, it is important to have it packaged in a way which will be attractive to the prospective purchaser, easy to understand and well-indexed. I am indebted to my publisher, Harriman House, for helping me with these aspects of the book.
9. What simple advice you could give the reader to improve his/her trading success?
I would never rely on just one trading methodology, no matter how good it is, to make predictions. I believe that knowing what the MEJT system predicts will be useful to traders who have the same philosophy.
10. Your author biography lists one of your interests as ?trivia?. Can you give a few examples?
I like watching Jeopardy and Who Wants to be a Millionaire. I would rarely lose a game of Trivial Pursuit when it was new and before people memorized all the answers.