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Let's get the question of system performance out of the way first.
Most of the more useful FT signals have been developed in Trade.
Most have been backtested into the mid 90's (although some go back to
9/1/88 - the start of the FT database). The signals tend to fall
into two categories - basic and aggressive. Please understand that
I'm offering a a couple of data points only for illustration.
1. Basic timing -
The basic metric is a signal called RUTVOL. It is a Russell 2000
based timing signal with volume confirmation. It has not been re-
optimized for many years. Here are the results from 9/1/88 - 11/5/03
with 1 day trading delay for the Russell to money market -
Russell 2000 held - 9.05% CAR
Russell 2000 / RUTVOL - 16.63%
HRTVX (Heartland Value) / RUTVOL - 21.83%
Many of the aggressive small-cap's didn't start until 94-97. One
example is Fremont Micro-Cap. Here are the results from 7/6/1994 to
11/5/03 with 1 day trading delay to money market -
FUSMX (Fremont MicroCap) / RUTVOL - 30.02% MDD=19%
2. Aggressive timing -
Here we are getting into the question of acceptable optimization,
robustness, etc. But one of the more robust, aggressive signals is
called FUBAR5. Some might find is premise and construction
controversial, but that is a story for another day. The results are -
FUSMX / FUBAR5 - 41.41% MDD=8.7%
A variation of it that uses shorting during longer term bear trends,
achieve significantly more.
Another major toolset deals with selection. Admittedly, I'm about to
gloss over some issues such as survivorship, and others, but let's
say that we used NCALPHA for fund selecton instead of just trading
FUSMX in the example above. The parameters are - hold 3 funds, min
hold 5 days, max rank held = 6.
FUSMX / RUTVOL - 34.8% (compared to 30.02 w/o selection)
Now, can you use these signals for other things, such as stocks,
ETF's, etc. Yes. More in the next post.
--- In amibroker@xxxxxxxxxxxxxxx, "bruce1r" <brucer@xxxx> wrote:
> I thought that I offer a primer on FT then get to some specific
> trading questions. First, let's separate the FastTrack world into
> four topics -
>
> 1. Mutual fund trading
> 2. FT as a tool
> 3. Trade
> 4. Community
>
> Mutual fund trading may seem conservative to some, but it is just
> another class of issues that range from conservative to
aggressive.
> Much of FT evolved out of agressively trading Fidelity Selects. To
> that end, the FT program has alway concentrated on pair switching -
> trading from one fund to another based on a buy/sell signal. Long
to
> MM is just a special case.
>
> FT for Windows is the current incarnation of the tool that is
bundled
> with the mutual fund data. FT provides "clean" data on funds
(which
> is no small feat) that is back adjusted for distrbutions in a
timely
> manner. The tool is a Windows program in architecture, but not in
> look and feel. Be that as it may, the tool offers some very unique
> capabilities for ranking, manipulation of user defined families,
> switching, etc.
>
> Trade is a language developed Ed Gilbert that is an impressive
piece
> of work that is free. It is vector programming language (like
AB),
> but with calculations extended to families of funds/stocks, is
better
> described as a matrix processor. It is very fast, and allows
> indicators, timing signals, and trading models to be developed very
> quickly. Frankly, until AB, I hadn't found anything close, and
like
> Fred, I've used many of them.
>
> All of this came together into a community of people from varied
> backgrounds. They concentrated on market timing and fund selection
> and developed techniques that may have lacked the rigor of
academia,
> but JUST WORKED ! In 1997, Don Beasley catalyzed this group by
> developing a "Dominant Market Theory" that focused on the Russell
> 2000. This turns out to be a very useful tool for timing. Others
> expanded on this idea. Don Bell, who is very prolific, has
developed
> a myriad of timing signals for small-cap funds, junk bonds, tech's,
> etc. Werner Gansz developed the basic Russell signals and also a
> program called NCALPHA that is the tool of choice for ranking funds
> relative to an index based on non-correlated Alpha (which can be
> thought of as the stock picking skills of the fund manager).
>
> Next - how is it used, what are the results?
>
>
> --- In amibroker@xxxxxxxxxxxxxxx, "bruce1r" <brucer@xxxx> wrote:
> > Chuck - I think that I might be one of the people that Fred was
> > referring to in an earlier post who comes from this FT/Trade
world
> > and also has some experience with Amibroker. I am "stuck"
> somewhere
> > for the next day and will have some time to post an overview and
> > hopefully answer a couple of your questions. If you bear with
me,
> > I'll go until the board tells me to stop. Here are the bullets -
> >
> > 1. The FastTrack community drew a group of people together over
> many
> > years who have done a body of very impressive work on selection
and
> > intermediate term timing. I've become familiar with the depth
and
> > excellent quality of your work, and think that you would find it
at
> > least interesting.
> > 2. The work was focused on funds, particularly small cap's
because
> of
> > their trend persistence, Alpha, and lower volatility.
> > 3. Much of the work is transferrable to stocks as Gary S. has
found.
> > 4. There are approaches to working around the fund trading issues
> as
> > Fred has mentioned.
> > 5. For whatever its worth, I've imported/ported much of the work
to
> > Amibroker.
> >
> > I'm off to dinner. More later.
> >
> > Bruce R.
> >
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