It's been almost two years since i publish this chart. The trade entered on 12/31/11 has a return of 54.79 % now ! This simple strategy has made a total return of 248.3 % vs . 75 % since 2002.
UPDATE : All time high for the SP 500 , YAY! Trade is up 56.08 % as of yesterday close.
BizkitBR
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Love it!!
Algokid
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Hello
I only have Data from 1980 , Here's the bactesting result from May 1980 to March 1994 . For that period the model underperformed the market with return of 114.6 % vs. 161.85 % for the S&P. MAX DD was a brutal 56 % in 1987 ( black Monday) .
Some great work, very interesting indeed, I love this type of stuff.
This is a presentation an investor called Tom, he basically also suggest using the same system, but in this case the example he gave was based on FX. He also shows examples using a 200 SMA and then trades on the pullbacks, using a one candle stop loss.
That solves the black Monday issue, and hopefull Black Swans too. Also for indices specially most of the time, around 95% of the time they don't drop more than -3% on a given day so, an ON DAY -3% stop loss would also be help full.
While this system is effective and certainly works, a shorter MA or rather EMA e.g. between 20 - 60 will most likely be more efficient, not because the signals will be better but simply because it will get out sooner and get in sooner again thus compounded much more efficiently irrespective of a signal quality deterioration.
This is what I think at a least, I would be interested to hear what your take is on a shorter time frames.
PS,
if you simply applied a very small -5% on day loss maximum to your system, I am sure you would find that the results would very good indeed.
Algokid
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Hi Herman
Thanks for the link and stop loss recommendation. I will implement it and see how the returns improve. Thanks again
timwest
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One important consideration for any system (warning: free advice to follow) is to make sure you design something that you believe so that you will follow it no matter how it "feels".
Cheers. Tim
Algokid
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BINGO ! absolutely. Sticking to your trading plan and remove all emotions is key. Easier said than done however :)
HermanBrummer
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Hi all,
Should the system not even during the 1980's period if a reasonable stop loss is added for trades that went pear shaped in the 1980's?
Speculation for stop loss:
a) Perhaps using ATR
b) Exit based on entry candle, meaning if the trade does not head in the right direction then nip it in the bud early. And just try again later.
I have looked at charts going back to 1950 for SP500 based just on the 200 SMA and EMA and they resoundingly worked, in fact when compounded the results were quite something.
I have also conducted the same exercise on CAC, DAX, FTSE, NIKKEI, TIMES, DIA, HANG SENG, and QQQ, going back 25 or 30 years.
All worked, Nikkei less so than others for obvious reasons.
Algokid
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Hi Herman
Hi Hernan
Definitely, this system can be improve by adding a few rules such as ATR for stop losses. I haven't tested this on other indices, but glad to know that the results are about the same.
dmespolet
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I also like to KISS - Keep It Super Simple. I'm also curious to see what your back-testing reveals.