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Bill Brower sent this to the list, but it's too big to post as is.
I've put the mail Bill sent in my ftp area:
ftp://ftp.eskimo.com/u/j/jimo/tsexpress
Here's the text part:
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jimo@xxxxxxxxxx
maintainer of the omega list
omega-list-request@xxxxxxxxxx
---------------forwarded msg---------------------
X-Envelope-From: 1000mileman@xxxxxxxxxxxxxx Mon Apr 20 11:11:33 1998
Old-Date: Mon, 20 Apr 1998 14:11:18 -0400 (EDT)
Message-Id: <199804201811.OAA10627@xxxxxxxxxxxxxxxxxxxxx>
To: omega-list@xxxxxxxxxx
From: William Brower <1000mileman@xxxxxxxxxxxxxx>
Subject: A Sample of TS Express
To Omega List Readers:
I have been encouraged to post a sample of the articles in TS Express. I am
assured that this will ameliorate the number of missiles directed my way,
and might increase circulation (of TS Express, not blood flow to my wounds).
Below is such a sample from the Jan/Feb 1998 issue. The graphics from the
original article are in the 9802sea.zip file attached. Enjoy.
BOND SIX PACK SYSTEM
By Bill Brower
Readers of this periodical know that I have been critical of seasonal
systems. Seasonality, in the most classical sense, involves buying or
selling at predetermined times identified by the trading day of year.
Unfortunately, seasonality has been shown to lack consistency. Sheldon
Knight demonstrated this in an exhaustive piece of research which has been
presented to the attendees of several Futures Conferences.
However, from time to time I revisit the concept. Recently, I wrote a
seasonal indicator, for Murray Ruggiero which will be marketed by him in his
soon to be released home study course. It generates, in histogram format, a
profile showing, for each trading day of the year, the percent above or
below the yearly average. The nice thing about this tool is that it shows
the relationship of each bar with all of the other bars in the year and
compares to the yearly average. It is easy to see if there is a time of
year where prices tend to be above or below the yearly averages. Since the
scale is measured in percentage points, it is possible to grasp the
magnitude of the potential moves.
I developed and tested this tool on a ten year continuous, back-adjusted
contract of the US bonds. To my astonishment, the indicator generated a
very clear pattern of seasonality. You can see the histogram in Figure 2
below. From the end of December, to mid-January the market turns down.
Then there is a small upward bias until early February. Next, there is a
downward bias until late April. This is followed by a strong upward bias
until early August where a short downward bias takes over until late in
August. Then begins the powerful August to December upward bias.
I estimated the possible entry dates and the corresponding trading day of
year. After a little optimizing, I arrived at a seasonal system that takes
6 trades every year on the same trading day of year. The system is always
in the market and uses no stops. It has had a rather remarkable run over
the last 10 years. The results are posted in Figure 3 on page 6. These
results were output to the Printlog window by SystemStatsScanner which is an
inexpensive system reporting utility that I developed and market.
The system is highly profitable with a relatively low drawdown. It has an
very high average profit per trade and a remarkable profit factor. The net
profit to drawdown ratio is over twenty which puts this system in the
extraordinary category. The mark-to-market drawdown is still quite
reasonable, coming in under $8,000. These results were generated assuming
$150 for slippage and commission which is quite generous for the bonds.
OK, "So where is the out-of-sample test?", you ask. Good question. The
results for 1997 are all-out-of sample since the indicator is always one
year behind. In 1997, this system had 6 winning trades worth over $25,000.
The system has not lost a trade since August 1995. To be fair, I tested the
system on data prior to 1988. The system did not fare as well. In fact,
the seasonal pattern did not begin to become evident until 1984. Also the
system would have had you long from August 1987 through the crash in October
1987. This would have been intolerable, because bonds declined dramatically
before the crash and experienced a bungee like rebound after the crash.
Despite the poor showing prior to 1988, the system has a remarkable ten-year
batting average. This is not easy for a system always in the market. If
the patterns are not just coincidental, then the system may just be
tradable. Even if you discount seasonal patterns heavily, the seasonal
patterns might be useful in tempering some of your trades. Would you really
want to buy bonds in mid-February or sell them in late August? The code for
this system is in the sidebar below.
Sidebar: Bond Six Pack
By William Brower
Vars:
OK2Sell(False),
OK2Buy(False),
TradeDayNum(0),
ACntr(0);
If year(d)>(year(d))[1] then TradeDayNum = 0;
TradeDayNum = TradeDayNum+1;
OK2Sell =TradeDayNum =24 or TradeDayNum = 149 or
TradeDayNum = 248;
OK2Buy = TradeDayNum = 7 or TradeDayNum = 79 or
TradeDayNum = 164;
If OK2Sell then Sell market;
If OK2Buy then Buy market;
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