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Author: Rayvt Big gold star, 5000 posts Top Favorite Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 254157  
Subject: Long/short fixed-income screen Date: 2/22/2013 4:45 PM
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I read of a proposed long/short trading strategy for BND/VBMFX (Vanguard Total Bond Market Index). Since I already had the daily historical data, it was easy to create a backtest.

Rules:
Compute 3 daily SMAs, 13 day, 21 day, and 34 day.
Each day check them.
When rising (sma13 > sma21 .and. sma21 > sma34) go long.
When falling (sma13 < sma21 .and. sma21 < sma34) go short.
Otherwise, stand pat.

Tested with daily data on VBMFX, 6/4/1990 thru 10/7/2011. Total of 5351 trading days.

Another one bites the dust.

CAGR for B&H: 6.86%

CAGR when long: 7.47%
CAGR when short: -5.7%

FWIW: CAGR when the signal said to be NOT long: 6.06% That's right, when the screen says to go short, the return was positive, just smaller.

Net long/short return: 1.8%
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