by billb
12. September 2007 11:51
The results are in. The data is from Yahoo. The system is done with
RightEdge and I posted the trading system on the RightEdge web site for
download here.
Here are the inputs:
IXIC = Nasdaq Composite. Data available was from 1972 to present
GSPC = S&P 500. Data available was from 1960 to present.
DJIA = Dow Jones Industrial Average. Data available was from 1960 to present.
|
Symbol
|
MA Parameter
|
APR
|
Max Drawdown %
|
Trades
|
Buy & Hold APR
|
Buy & Hold ($)
|
APR Diff
|
Net Profit ($)
|
Net Profit Diff
|
|
IXIC
|
50
|
12.47%
|
33.15%
|
220
|
9.27%
|
$ 2,565,700.00
|
3.20%
|
$ 7,297,262.31
|
$ 4,731,562.31
|
|
IXIC
|
100
|
9.90%
|
60.07%
|
144
|
9.27%
|
$ 2,565,700.00
|
0.63%
|
$ 3,071,949.41
|
$ 506,249.41
|
|
IXIC
|
150
|
10.03%
|
63.61%
|
111
|
9.27%
|
$ 2,565,700.00
|
0.76%
|
$ 3,206,736.20
|
$ 641,036.20
|
|
IXIC
|
200
|
9.94%
|
65.28%
|
93
|
9.27%
|
$ 2,565,700.00
|
0.67%
|
$ 3,112,338.98
|
$ 546,638.98
|
|
IXIC
|
250
|
9.36%
|
66.70%
|
69
|
9.27%
|
$ 2,565,700.00
|
0.09%
|
$ 2,542,909.04
|
$ (22,790.96)
|
|
|
|
|
|
|
|
|
|
|
|
|
GSPC
|
50
|
6.04%
|
33.04%
|
362
|
6.91%
|
$ 2,425,985.16
|
-0.87%
|
$ 1,540,305.64
|
$ (885,679.52)
|
|
GSPC
|
100
|
5.40%
|
50.64%
|
248
|
6.91%
|
$ 2,425,985.16
|
-1.51%
|
$ 1,127,345.27
|
$ (1,298,639.89)
|
|
GSPC
|
150
|
6.63%
|
38.20%
|
183
|
6.91%
|
$ 2,425,985.16
|
-0.28%
|
$ 2,034,375.83
|
$ (391,609.33)
|
|
GSPC
|
200
|
6.85%
|
28.27%
|
143
|
6.91%
|
$ 2,425,985.16
|
-0.06%
|
$ 2,263,890.37
|
$ (162,094.79)
|
|
GSPC
|
250
|
7.27%
|
21.61%
|
112
|
6.91%
|
$ 2,425,985.16
|
0.36%
|
$ 2,742,239.76
|
$ 316,254.60
|
|
|
|
|
|
|
|
|
|
|
|
|
DJIA
|
50
|
5.21%
|
33.04%
|
390
|
6.40%
|
$ 1,927,800.94
|
-1.19%
|
$ 1,027,406.97
|
$ (900,393.97)
|
|
DJIA
|
100
|
5.11%
|
50.64%
|
277
|
6.40%
|
$ 1,927,800.94
|
-1.29%
|
$ 976,990.93
|
$ (950,810.01)
|
|
DJIA
|
150
|
5.48%
|
38.20%
|
200
|
6.40%
|
$ 1,927,800.94
|
-0.92%
|
$ 1,173,244.20
|
$ (754,556.74)
|
|
DJIA
|
200
|
5.86%
|
28.27%
|
168
|
6.40%
|
$ 1,927,800.94
|
-0.54%
|
$ 1,414,448.05
|
$ (513,352.89)
|
|
DJIA
|
250
|
5.68%
|
21.61%
|
145
|
6.40%
|
$ 1,927,800.94
|
-0.72%
|
$ 1,297,957.03
|
$ (629,843.91)
|
The MA Parameter column is the moving average that the trading system was run against. I also included the number of trades taken for each run because commission costs vary and will obviously impact performance.
Let me make a few points about the numbers. First off, more often than not timing your entries and exits using moving averages reduces your overall profits in the long run. Second, I've included the drawdown figure, which doesn't necessarily conclude that being out of the market more means less volatility.
Another thing that the system cannot account for accurately without significant are dividends. If you're not in the market, you can't collect the dividend. So how much additional did you lose by being out of the market and missing dividends?
Looking at this data as a trading system developer would indicate that there is no edge and potentially a negative edge to using a moving average to time the major indexes. Based on my results, I'm not in agreement with the other findings that timing with moving averages is a good idea for your long term investments.
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