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Politics : High Tolerance Plasticity -- Ignore unavailable to you. Want to Upgrade?

To: Libbyt who wrote (17781)	11/22/2002 11:59:40 AM
From: Warpfactor	Read Replies (1) \| Respond to of 23153

<< So...just because this indication has "worked" in the past, it doesn't mean it will "work" right now.>> Hi Libby. I assume you are referring to my RSI strategy. From a review of 4.5 years of data, I have determined that it is preferable to use 2 sets of buy/short trigger points - one for bull trends and one for bear trends. We had some discussion here a little while ago regarding how one determines when a bull market starts, and this yielded some good ideas. As a result, I have decided that the markets are in a Bullish trend, although we are not necessarily in a Bull market. I am using Bull market trigger points and applying to this Bullish trend, since October 10th. Although I really have no idea if a new Bull market has been launced. RSI (and several other indicators) is a measure of oversold and overbought. What if for example I sat around in cash all my life, and only did one thing - go short QQQ when RSI(5) hits 97 and cover when RSI retreats below 80. You would pretty much always make money, but you may go 18 months before you ever see that high of a trigger point. Now if you lower the short trigger to 70 - you would get alot more action, but the returns over time wouldn't be very good. You would do well in a Bear trend, but you would have trouble in a Bull trend. Over time, you would probably have modest returns with such a strategy. Somewhere in between is an RSI level which will maximize performance and returns. For SOX RSI(4), I set a trigger at 85 for shorting in Bull trends. In my backtesting, I have determined that greater returns are gained when 100% of ones position is deployed at the trigger point. However, there are times when this strategy can result in some major haircuts to the overall portfolio value. Haircut risk can be limited by laddering, which is what I do. At RSI(4)-85, I short 1/3 position, at RSI(89), I short another 1/3, at RSI(93), the final 1/3. Yesterday, I shorted 1/3 position. As it stands now, it appears that the SOX is sinking and I will be out at the end of the day with what looks like 2-3% gains on my third. Warp