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After inspecting close to 100 derived Neural Network models for forecasting
the Daily S&P 500 Index over the past two weeks, only one passed all my
tests (One time consuming test remains but I am reasonably confident it
will pass that as well). The Equity Curves for a Buy-and-Hold Strategy
compared to that of the Neural Network are presented in the following
chart, http://pweb.netcom.com/~blee3/spindex7.gif. As seen in the chart,
the Neural Model returned an unleveraged return of approximately 60% while
the Buy-and-Hold strategy for the same eleven (11) month period returned
16%. Individual trades for the "Out-of-Sample" Test Period can be viewed at
http://pweb.netcom.com/~blee3/sp500indexdailytrades.gif. As seen in the
table, the current forecast is Short the Index. All trade signals for a
given day were generated at the close of the prior day, and trades were
initiated following a trade signal at the following day's closing Index
price (Similar to trading w/ Profunds unleveraged S&P 500 Index mutual
funds). Other much higher return models were developed but failed
validation tests indicating the models would most likely not hold up
forecasting into future periods well. I will periodically update this
model's forecasts on RealTraders. My weekly models are on hold at this
point pending the final validation of this model which is far more
lucrative than the weeklies. - Brian
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