Here is the equity curve from a simple mean-reversion system. How simple is it? Very, very simple. It is RSI2 based with a couple other factors thrown in that regulate position-sizing to limit risk during times when the market is behaving abnormally and applies 2x leverage when trading with the trend. Anyway, after the 2008 disaster (which was a boon for the system), it has not done very much. However, it has recently begun to perform very well.
This could have several implications about the future, and we know that mean-reversion performs better during elevated volatility.
MarketSci’s last post on mean-reversion also seemed to suggest that we might see an uptick.
As you were…
Hey Wood,
How would you qualify abnormal market behaviour. Volatility Bands or VIX or ? Have you posted on this ?
QD
Dutch, Bollinger Bands with non-standard, asymmetrical settings. I haven’t written about it, primarily because I’m still not sure if it is overly curve-fit. I’d be happy to share the idea with you if you want to try it out.
Wood,
Dumb question…but I don’t understand what RSI2 means in this context in either your reference or MarketSci’s.
Is it relative strength or what?
In any case, let’s hope we get the discussed uptick.
Even if we don’t, the PD systems has been working well for me thus far.
As, a case in point, I played the system last week in Vegas while trying to focus on the Mrs. Hawaii, and although often quite inebriated and having lost part of the BZ trade with a wrongly placed stop.
(I was drinking scotch and placed it at 6.35 when the entry price was 6.45)
I was able to get back in the trade the next morning at 6.34 and able to exit at 6.64.
All and all while attempting to focus on the vacation and not my trading, I still walked away with almost 1% of the port.
Now that’s pretty damn good!
It’s fall. Mid term elections in the U.S.
Might even be a Federal election here in the True North.
Time for some volatility, me thinks.