Now that the Power Dip has launched, I’m anxious to begin working on something new.
Personally, I’m interested in developing a system with a longer time horizon, for example, a system that will hold a trade for a month to 3 months. I think that a rotational system using ETFs might work well. The question is, what is the entry criteria? Relative strength? Rate-of-Change? Breakout?
I’m also interested in continuing work on an existing short-only system, but its time horizon is very short. However, having a good short system that works in all markets would be invaluable.
And then there is always the trend-following system, which was actually the type of system that got me interested in system trading in the first place.
Anyway, I’m open to ideas, in regards to systems to test out. I can’t promise that I will want to test the idea, or that I will be able to code it, but if you have an idea that you are interested in and don’t mind seeing it get fleshed out in public, leave a comment.
You have an email address I can contact you at?
Thanks
Woodshedder73{@}gmaildotcom
Wood,
I emailed you mine, too.
Happy Holidays.
Hello Woodshedder,
most (Stock/ETF) Systems go long after some sort of a DIP. I’m concerned that we / I might miss a major market move such like the Dot-Com bubble because the system is waiting for a pullback (that doesn’t occur in a very strong bull market to the extend needed ).
I would sign-up for a system that buys into strength in order to diversify my systems.
The same is of course valid for the short side.
Regards,
Frank
I agree Frank. I am also interested in something that buys strength.
Hi Wood– both the longer range idea and the short idea sound good.
Sorry I haven’t swung by earlier to applaud your official launch. Way to go Wood. What an amazing accomplishment. I was just catching up tonight on ibc updates and signed up for a year’s subscription to your system.
Thank you for all your hard work Wood and I am looking forward to using your system along with
the PPT and all the great advice of the ibc team. (Not sure how the 10% discount will work re PPT
membership– PayPal pulled the full amount but I’m guessing you all have some system in place
to correct)
Have a wonderful Christmas. And thank you again for all the work and energy you have put into
your system. I appreciate it so much. take care, Lindsay
Thanks Lindsay! I’m glad you find it of value.
I will email Jeremy about the discount.
Best wishes for a great Christmas for you and your family!
Hey, belated congrats on the launch there amigo.
Here’s a thought…see if there are any commonalities between stocks that have 10%+ price drops in a week.
For example, are there previous warning signs such as decreased volume etc.
Hmmm. Interesting Cuervo. Find the 10% droppers will be no problem. Determining what they have in common might be.
Wood,
As if by coincidence, CXO Advisory just put up a blog post regarding a rotational strategy using the S&P Sector SPRDs. Have you also seen Mal Williams’ “Class Outperformance (COP) Strategy at http://www.copstrat.com? That might also provide food for thought on a rotational ETF system.
KTB
Hey KTB, thanks for the excellent links. I’ll be checking those out!
Relative strength is one of the most reliable
Wood, here’s one that always stuck in my mind. Maybe you can expand upon it.
http://www.optionetics.com/market/articles/19054
The main rule is..”At the end of each month, buy and hold the five ETFs from Table 1 that have shown the greatest gain over the previous year.””
Another one that always stuck in my mind (before ETF’s) was the system based on rotating in and out of the various Fidelity sector funds, but unfortunately, I forget the details. Is there still a load fee for those Fidelity sector funds?
Found it..
“Here we look at a mutual fund trading system that trades the Fidelity Select Mutual Funds. The Fidelity Select Mutual Funds are a good choice for several reasons:
* Fidelity Select Mutual Funds historically have persistence in their trends so they can be held for the Fidelity imposed minimum 30 day holding period while realizing a return well above that of the market.
* If you hold the funds for a 30 day minimum, Fidelity allows unlimited trading with no redemption fees.
* With over 40 Fidelity Select Funds, there is a sector fund is available to track most market sectors. If there is strength in any domestic market sector, youíll probably capture it using Fidelity Select Funds.
* Fidelity’s minimum investment requirement for the Fidelity Select Funds is only $2500 per fund, so thatís all you need to start. Fidelity has eliminated the load on the Select funds, so there is no up front cost†to get into them.
Many sector rotation strategies have been published, dating back to the late 1990ís, but this one is one of the simplest for you to follow. The steps are as follows.
1) Track the 25 day (or 5 week) price change in all of the Fidelity Select Mutual Funds.
2) Invest in the Fidelity Select Fund with the highest percentage gain over that 5 weeks.
3) Hold that Select fund for at least 30 calendar days, to avoid the Fidelity early redemption fees.
4) After 30 days, if that Select Fund is still the top Select fund, continue to hold it. Otherwise, exchange it immediately for the currently top ranked Select fund.
5) Hold the new Select Fund for 30 calendar days
For the 1999 to 2005 years that the major indices have been almost flat, this sector fund rotation system would have gained almost 200%, or over 16% per year.
There is one significant drawback to this system. It does not have a much better drawdown than the overall markets. During the down years of 2000 to 2002 this strategy had a drawdown of almost 50%. Fortunately, it has achieved new all time highs in 2006, but that kinds of drawdown need to be factored in to how much you might want to invest in this or any investment strategy.””
Hope this helps. BTW, I see that last year in Sept 2008, you has a ETF rotational strategy on your blog. What happend to that one?
I think that if you combine the two ETF trading strategies I mentioned here, and you optimize them, you can get a pretty good system. The problem with the Fidelity one by itself is that you are always in stocks, hence the big drawdown.. If you combine it with the other one that switches into bonds or commodities, it could work very well.
Sorry, but I forgot to give credit where it is due…
http://fundztrader.com/blog/2009/02/09/sector-fund-system/
The other day someone asked why you recommended trading only a portion of one’s account with the Dip system and you replied that you’d recommend splitting it between a system like the Power Dip and a system that does the opposite to balance things out. Thus, since I’m using the Power Dip system, I’d love to see you explore a complement to it.
Also, I was interested in the series you began a while ago testing the merits of the various indicators like RSI, MACD, etc.
How about this as a concept? Determine the characteristics that the broad market is exhibiting (Bull, Bear, Growth, Value, weak trending, intermediate, strong trending) and pull an algorithm off the shelf that scores and screens for those characteristics. Pour your ETF or mutual fund universe in the top of the hopper and allocate assets to funds that are above some arbitrary cut-off % of the ranked list.
Hang on to the funds as long as they stay above the cut-off and if any slips rotate assets into the strongest fund available that isn’t already in your portfolio.
To avoid the issue of hanging onto the fund that is sinking the slowest in a bear market, include risk benchmarks in the mix and, as they move up through given rank positions in the list, scale out of the weakest fund you own on the day of the trigger into your cash-equivalent fund.
Do you code in Amibroker Formula Language?