Saturday
Dec062008
More Industry Group Tests
Saturday, December 6, 2008 at 12:43AM
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.

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

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.




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

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.

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.

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

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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