Long Term Trading signal

Discussion in 'Strategy Development' started by Joanna Q, Aug 1, 2008.

  1. Joanna Q

    Joanna Q

    Hi, I'm now doing a long-term trading strategy, back-testing for 10 years. This strategy should be automated, a system giving signals to show buy or sell. Cash equity and index can both be used.

    My question is: is there any momentum signal or combination of mementum signals that can provide me with more accurate signals? I'm now using moving averages, but it does not work well through out all 10 years.

    Please give me some advice.
     
  2. Lots of systems that I test show some losing trades.

    Define "accurate".

    I do not know of any way to reliably predict future price behavior.

    I remember moving average systems testing profitably sometimes.

    Price momentum systems can show profitable test results:

    http://www.elitetrader.com/vb/showthread.php?s=&postid=1489906
     
  3. this was a terrible example of the value of TA.

    Your last example:

    I never think of Marathon Oil. Same momentum system as above. Daily price data (37.40 years) beginning 2 January 1970 ending 1 June 2007.

    Number of trades 67
    Total profit $ 556,569
    Profit after subtracting $ 100 commission & slippage per trade: $ 549869
    Greatest drawdown is 0.0515 (5.15 %)
    Initial capital is $ 100,000
    Another profitable system based on technical analysis.

    ...
    ...
    ...
    Let us try the same on marathon Oil with Buy&Hold (much less work)
    http://finance.yahoo.com/q/hp?s=MRO&a=00&b=2&c=1970&d=05&e=1&f=2007&g=m

    price in Jan 1970... $7
    price in June 1 2007... 126.76
    Number of trades 1
    Total profit $ 1,800,000
    Total profit $ 1,700,000
    Initial capital is $ 100,000

     
  4. Yes, a buy and hold method often shows much greater return than trading in my simulation studies.

    It is also possible for the price value of a stock to decrease to $ 0.10 / share.

    Use of an exit rule can avoid holding a stock position during large price value decreases and make it easier for me to sleep at night.

    Each trader decides how they choose to live.
     
  5. Joanna Q

    Joanna Q

    The exit rule is a really good advice. I'll try that. Thanks!
     
  6. A 10-year time horizon? 7 or 8 years would be better. All you would do is buy stocks in the year that ends in "2" or "3" and then sell several years later in the year that ends in "0". If you believe strongly enough in something that simplistic, you can still buy stocks now and then get ready to sell in 2010. We'll see how it goes. :cool:
     
  7. Joanna Q

    Joanna Q

    Really? That's amazing. I'll test that tomorrow to see if this cycle exists.:)