Here are some trades so far this morning of a crossover SPX/OFV intra-day system. In other words, when OFV, after being calibrated, crosses above or below SPX. So this is a SAR system. The first trade below goes short, then the second trade exits the short and goes long, and so on. So it is always in the market: 01/31/2012 08:31:02 OFV = 1316.11069778727 Sell SPX at 1318.09 01/31/2012 08:57:59 OFV = 1319.57568382652 Buy SPX at 1317.42 01/31/2012 08:59:15 OFV = 1313.02821585646 Sell SPX at 1317.72 01/31/2012 09:01:06 OFV = 1317.17332681642 Buy SPX at 1315.36 01/31/2012 09:01:43 OFV = 1313.12739561409 Sell SPX at 1315.1 01/31/2012 09:08:29 OFV = 1312.69454728506 Buy SPX at 1311.9 01/31/2012 09:09:05 OFV = 1310.56607782829 Sell SPX at 1312.11 This is just for fun to see what happens. The system I am actually considering going live with is when the spread between SPX and OFV goes >= 2.5 in either direction, playing SPX to converge to OFV, convergence occurring when difference between SPX and OFV is ~.50. [Edit] A couple of more trades since I posted 01/31/2012 09:16:33 OFV = 1315.86008332844 Buy SPX at 1313.6 01/31/2012 09:17:10 OFV = 1309.02756326242 Sell SPX at 1314.04
It didn't take long for me to realize that I should have both systems in. This is a mixed strategy that is probably closer to being Nash optimal.
I admire your ability to see patterns from small number of data points. Speaking of Nash, did you watch Beautiful Mind?
The intraday system needs work. Here are the values going into the close: SPX, 1312.98. FV, 1106.24. OFV, 1303.51. POFVF, 1310.08. OFV and SPX never converged within .5, and even though we had a MFE of about 9 points, it gave it all back. I am not sure what the right way to think about this at this point. Things like trailing stops and time stops seem artificial to me. So we go flat at 1312.98. The system, on its first day, made money, but gave back all the gains from its biggest trade.
SPX, 1322.28. FV, 1127.86. OFV, 1321.93. POFVF, 1311.81. Crossover system: 02/01/2012 08:50:26 OFV = 1321.92881786677 Sell 1322.28
02/01/2012 08:52:51 OFV = 1323.25520783488 Buy SPX at 1323.07 02/01/2012 08:53:28 OFV = 1322.76462840609 Sell SPX at 1323.1 02/01/2012 08:54:04 OFV = 1322.95562397477 Buy SPX at 1322.49 This sometimes happens to x-over systems (lots of ins and outs) when the market is "hovering."