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Strategies & Market Trends : Take the Money and Run -- Ignore unavailable to you. Want to Upgrade?

To: AugustWest who wrote (16114)	8/27/2002 1:22:27 AM
From: PuddleGlum	Respond to of 17639

Auggie- Actually, I haven't yet applied my system to sectors (I'll get there some day), but BKX, CRB, BTK, OTC, DJUSCH, DJX, DRG, IIX, MID, SVX, SOX, NDX, NWX, OSX, XOI, XNG and others all go into the computation. I also watch a number of holders like BBH, SWH, etc. It's basically a trend following system, with some score modifiers to help me find tops and bottoms. I evaluate performance vs. the QQQ because I have a reasonably strong tech representation of stocks and indexes that I evaluate every day. System weaknesses include: 1. less than two years of historical data (ouch) 2. Overdependence on VXN. This could kill me some day. 3. Possible bearish skew from VIX. A bearish bent over the last two years would likely contribute to an unsustainably high figure for rate of return. 4. So far it has always been either short or long the market, and the conditions for market-neutral are difficult to reach in real life. I'd like to see more allowance for being market-neutral. 5. Drawdown can be considerable. A buy on 3/6/01 saw the market drop 33% before it rallied to allow an exit on 5/17/01 for just a small loss. Had I been using the system at that time I might have thrown in the towel. Using stops may not solve the problem because swings of 10% counter to the signal are actually quite common. I once developed a system with amazing historical trading characteristics, only to discover (thankfully before I used real $$$) that I used a '-' sign where I should have used a '+' sign. So instead of looking at the last 5 days it was looking ahead 5 days and was able to foretell the future, until one arrived at the current week. What a downer that was!!! Now, as soon as I find a major flaw in my current system all of you will know about it, and I'll have to go hide out in a swamp with the rest of the Marshwiggles.