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Investing/Strategies / Mechanical Investing
|Subject: Re: The Best Measure for the Best Blend||Date: 11/17/2007 11:24 PM|
|Author: Zeelotes||Number: 204016 of 249244|
One timing method that does seem to generally add value is trend following. Something as simple as using a 100 day SMA on the Nasdaq composite over a 45 year period produced some pretty good results.
I wondered if anyone would ask more on this question. I took some time the other day to find a simple way to do this for the typical investor on this board.
I found that it was optimal to use the Nasdaq 100 as a proxy for the market to determine when to be invested in bullish screens and when to be in defensive screens. The primary reason for this is that there are very few signals doing it the way I found as optimal. Only nine signals to be long over the period from 1989 to present. Here are the dates:
This is based on a cross of two EMAs on the Nasdaq 100 -- 40 and 140. For the test of the index itself this produces an ROI of 2067, compared to what you suggested as a 100 EMA crossing the close of the index which produces an ROI of 1000.
Now I also found a way for anyone on this board to easily track this. You just go to this site and sign up for a free subscription.
Once you are signed up you can log in and set up an email alert on the NDX for a 40/140 EMA crossover. Whenever there is a cross you'll receive an email alert that you can act on the next day.
The idea here would be to move between screen sorts -- using very low risk, low GSD, high Sharpe screens when the market is in bearish mode, and use higher risk, high CAGR screens when the market is in bullish mode.
BULLISH MODE: Jensen 10 year lookback
BEARISH MODE: Sharpe/GSD 5 year lookback
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