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To: Neil S who wrote (147)	11/22/1997 9:39:00 AM
From: Neil S	Read Replies (2) \| Respond to of 4808

BACKTEST: 50DMA Vs Buy & Hold I ran a backtest of a simple trading strategy utilizing a 50 Day Moving Average vs a buy and hold strategy for the FC Index. Here are the results for year to date 97. Test Rules: Buy & Hold: Buy the FC Index on Jan 1, 97 and hold. 50 DMA: Buy when the FC Index raises above the 50 Day Moving Ave (positive cross) and sell when the Index declines below the 50 DMA (negative cross) and remain in cash until the next buy signal. Results: Buy & Hold: Bought the Index on Jan 1, 97 at 181.76 Index close on Nov 21, 97 at 143.35 Result = Loss of 38.41 Index points for a 21.13% decline. 50 Day MA: Start the year in cash. Trade #1 Jan 23, 97 Buy the Index at 185.16 Jan 24, 97 Sell the Index at 177.80 (go to cash) Result = Loss of 7.36 Index points or -3.97% (whipsaw). Trade #2 May 5, 97 Buy the Index at 143.03 Sept 26, 97 Sell the Index at 199.99 (go to cash) Result = Gain of 56.96 Index points or +39.82% The trading strategy has generated two round trip trades so far in 97 and has out preformed buy & hold significantly and also would have beaten the major indexes. Who says you can't make money on Fibre Channel . It also would have reduced the exposure of the investor to Market Risk as a considerable period of time has been spent on the sidelines. The Model is currently in cash waiting for a new Buy Signal. Note: Moving Average trading systems work pretty well in Trending Markets, but will whipsaw you to death in Non-trending markets. Intrestingly enough the FC Index has shown a strong tendency to trend (both up and down) since inception. This type of system will not "buy at the bottom" or "sell at the top" but can be used to support investing or trading decisions. It is based on price momentum only and does not factor in any fundamental values. If anyone is interested, i will note the next FC Index Moving Average Buy Signal. With the Index 18.5% below the 50 DMA it doesn't look like it will be soon. Regards, Neil