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Greetings AmiBroker Group --
Following is the response I received from Werner Gansz about the RUTxx
trading systems.
Howard
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Howard, the RUTTR signal was developed in the Summer of 1998 with the same
stochastic and MACD parameters it has now. It was originally intended to be
a sanity check on another signal that was being followed on the old Prodigy
BB. Over the next year the No-Sell conditions using RSI 14 were added but
they have had a minor impact on real time performance. the Trade file that
computes it creates two versions, RUTTRNF which is the original signal
without the no-sell filter and RUTTR which uses them so you can compare the
two. In 1999 or early 2000 the volume stochastic was added to RUTTR and
called RUTVol to try to keep RUTTR from buying when volume is falling and to
force it to sell if falling volume chokes of a price rally. RUTVol has
handled the bear market better than RUTTR but because it is a combo of two
signals it has more whipsaws, many of which can be avoided by just looking
at an avg volume chart.
I have no idea how robust it is or even what robust really means. We had
endless discussions about parameters and degrees of freedom and I understand
the theory but to date I have never seen a mathematically "pure" signal that
actually worked. In 1997 or 98 a Dr. Meyer published several market signals
in TASC in which he pontificated endlessly about their statistical purity.
Unfortunately they stopped working almost before the ink was dry on the
magazine. At that point I lost interest in mathematical theory and
concentrated on market dynamics.
I think the parameters will work well enough for RUTTR to beat the market
averages for as long as RUT continues to have high ratio of monthly to daily
standard deviation. I have a discussion about that on the web site. See the
sidebar at the end of part 1 of the article posted there. If RUT becomes a
popular index trading vehicle and its 2000 stocks get driven in lockstep by
heavy index trading the way NDX and SP500 do, the signal will be dead. RUT
will probably become as useless also. Junk bond funds have even higher
monthly to daily volatility ratios and people have been tracking them with a
simple filtered moving average for many years. The better the ratio, the
simpler the indicator needed to track it. RUT is on the ragged edge of
being "trackable".
Good Luck,
Werner
----- Original Message -----
From: "Howard Bandy" <howardbandy@xxxxxxxxx>
To: <wwgansz@xxxxxxxxxxxx>
Sent: Thursday, November 20, 2003 9:40 AM
Subject: The Mango Kayak
Hi Werner --
I am a follower of the AmiBroker Yahoo Group. In a recent post, we were
introduced to the RUTVOL trading system. When I looked at the code, I was
surprised by the large number of parameters it has and posted a question
about its design and out-of-sample performance. Gary A. Serkhoshian
suggested that I ask you directly. Below is a brief history of the thread
that led up to this message to you.
Thanks,
Howard
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