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« Ranking System Magic | Main | Volatility-Based Threshold »
Saturday
Dec062008

More Industry Group Tests

StockMarketStudent

Sphere: Related Content                    Stumble It!

Rabbit and hare race image
Although the results I am getting so far are reasonable I decided to do some more industry-based testing with different TA (moving average and RSI) before moving on to the next stage of  trading system development .   There's no point in being too hasty.  It's better to have the best possible system than try to develop it too fast.
                                                                                  

FMedian("Close(0)",#Industry)/FMedian("Close(n)",#Industry) >
                     (1+0.1*FMedian("ATRN(100,0)",#Industry))

(Please review previous posts for the layman's interpretation of the above formula).  Below is a plot for various lookback periods:

Equity results of volatility-based trading system

Using a Simple Moving Average with Industry Group Median Stocks

Although I am happy with these results I want to explore some other industry group TA-based formulae before moving to the next step of my system development.  The first exercise was to explore industry's price above a Simple Moving Average (SMA) - still using the industry median stock price of course. 


FMedian("Close(0)",#Industry)/FMedian("SMA(n)",#Industry) > X

The following EXCEL plot shows variations of Simple Moving Average (SMA) period n and threshold X.  All stocks in the industry are held and rebalanced weekly from 03/01/02 to 10/29/08.  Starting principal is $100.

Equity results of simple moving average filter system

Using Relative Strength Indicator (RSI) With Industry Group Median Stocks

The next two plots use a very common TA formula:   Relative Strength Indicator (RSI). 

FMedian("RSI(n)",#Industry) > X

The first plot varies RSI between 5 and 10 days.

Equity results of short term relative strength indicator RSI trading system


The second plot shows the results of the optimal settings:  RSI(7) > 60.

Optimized results of relative strength indicator trading system

I absolutely love the optimized short term RSI(7) > 60!  I can see a lot of potential for this both as an entry rule and for a short term holding system.  The results are fairly promising but I have a long way to go before I realize a tradeable system.  I am going to reflect on these results for a while before coming to any decisions on where to go from here.

All for now.

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