Saturday, July 17, 2010

Timing the Market

The single best stand alone indicator for timing this market during the past six months has been the SPX 240-minute Trend Model.  I can make a similar case for the 120 minute and Daily Trend Models, but the 240 minute does provide a very nice balance between the two and in fact, between intraday and end-of-day trading.

SPX_240 Trend Model

I've noticed that while overall performance is good across the board of my intraday/daily models, that at various times some individual models tend to be more prescient then others, i.e providing particularly accurate market timing.  In the spirit of what's working now, here are my back-tested statistics for the 240_minute model:

Period: February 3, 2010 - July 16, 2010
SPX = 1086 -> 1066 
Net = -20 SPX points
Trades:          21
Wins              12
Losses             9
Percent Winners: 57%
Net = +261 SPX points

The characteristics of this performance that stand out are that first, it is of recent price action, reflecting the personality and character of this market, although subject to change at any time; second, that even though almost half of the trades are closed out as losses, that the winners not only compensate for the losses but go on to provide stellar results. 

Finally, the characteristic that maybe is the most striking of all is that this is a purely objective, mechanical market timing methodology.  There is no subjectivity (read: stress) whatsoever in the trading system.

What does it take to trade something like this?

The jury is out.  Belief is certainly up there on the list, discipline too.  Maybe the elimination of ego is also critical to successful implementation.  All three seem to be essential, along with the simple algorithm that draws the trend line, which is updated throughout the trading day in my subscription service.

The model went SHORT on Friday.


 Past performance does not guarantee future results.

1 comment:

Anonymous said...

Belief,discipline, (trust)

My issue is Fear.
which sort of encapsulates all those other words.

My fear isnt about whether your mechanical system is reliable.
My fear is that I believe the government manipulation of markets ultimately overrides Any technical mechanical system,and that unless a system can take into account the rigged game aspect of government manipulation....I will always have that fear in the back of my mind.

I'm so convinced that the whole market is a purely rigged game,that I cannot force myself to ignore that factor. and simply play along with the mechanical signal system.

even though your charts show how well it works.

maybe some day ,I'll finally get it.