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Dave,
What proxy instruments do you have in mind? I only know of IWM,
IWN, IWO, ProFunds and Rydex. Any others that you can think
of?
The system I'm working on now is built around trading the IWM since 2002
and using the RUT as a proxy for backtesting back to 1988. It
is using the RUT for timing in both cases.
My next project will be to see if I can add some smart logic to trade IWN
or IWO instead of IWM.
At 11:21 PM 1/18/2004 -0500, you wrote:
Chuck,
I assume you've tried trading your various proxy instruments using
signals generated from the R2K, as well as signals from the instruments
themselves, yes? IOW, might certain instruments perform better as a
signal to trade certain of the others?
Dave
Let's say that I have one of those systems that seems to good to be
true. Relax, I didn't get it from Joe.
It makes 100% per year with a 6% DD. As I said, too good
to be true.
Of course, it makes some assumptions. I designed it to
trade the ProFunds
Small Cap Funds (long and short). The tickers are SLPIX
and SHPIX. I'm
assuming that I will get my buy/short signals just prior to the
market
close and that I will enter on the close and that my slippage is
going to
be zero. I might add that this is NOT my normal mode of
trading.
Since these funds are supposed to "closely follow" the RUT
and since data
for these funds doesn't go back very far, I used the RUT for my
design and
backtesting. This is where I got the results that
were so good that I
was ready to tell my wife that she won't have to be waiting tables
and the
local pub.
For the final test, I decided to try it on the ProFunds tickers that
I
mentioned above. Of course, data for these only goes back
to
2002. Well.... since 2002 the system didn't do as well
trading these
funds as it did trading the RUT. The difference was
large, but the
results were acceptable. My wife could switch from
full-time to part-time
work.
My question was/is "why the disparity between RUT and the
corresponding
ProFunds?". I decided to go to the ProFunds
site and see if they have a
comparison of performance between their funds and the
RUT. There it was,
big as could be, the performance of their funds HAS NOT done as well
as the
RUT over the last year or so.
So, the big question. Does anyone know why this is the
case? I will,
of course, ask ProFunds to comment. But I thought that
some of you mutual
fund traders (Fred?) might have a more realistic answer.
How can they say
that these funds track an index when the performance is as much as
10%
different over some quarters?
Please hurry... I'm calling my wife in New Zealand later today and I
want
to make sure I have my facts right before I tell her that she can
retire.
Thanks!
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