Hi TC,
Been following the resurrection of the MAX, which I always liked. Glad to see it's back.
Question: As you are well aware, the Achilles' heel of crossover systems tends to be the times when there is little trend one way or another. Have you done any kind of analyses as to what the predictors/correlates of those trendless/whipsaw periods might be?
For example, just a simple statistical approach, such as after x number of good crossovers, the probability of a more prolonged period of whipsaws increases to such and such level?
Maybe if it ain't broken, don't fix it..... but I've been thinking about possible solutions anyway. One thing I thought of is to just keep moving from stock to stock every so often, rather than continuously trade the same stock (A Rolling Stone Gathers No Whipsaws Theory).
Another thing that has shown encouraging paper results is to trade several things simultaneously. The odds that everything will whipsaw you at the same time decreases dramatically as the number of positions increases, and I think 5 or more all but ensures that at least something will be trending at all times. And with 5 positions, it is rare that more than 2 are in whipsaw mode at the same time. So, overall volatility gets smoothed out, yet returns are not compromised much (if at all).
You thoughts on the signals indicating heightened likelihood or a whipsaw period?
TIA,
Terry |
