Has anyone used the two down day indicator? I found it intriguing in this article this simple indicator has worked for so long and making YTD 17.5% in SPY.
I stopped reading after the first paragraph. "This simple but persistent anomaly shows the U.S. stock market has been far from efficient. The anomaly is present due to highly negative serial correlation in market returns and when used as a strategy, year-to-date has outperformed SPY buy and hold by 150 basis points. It’s interesting this simple anomaly has been so persistent..." Uh huh. A persistent anomaly. You want to know what is the true and persistent anomaly? The fact that since inception, the major stock indices do nothing but go up over time. So they can all KISS MY ASS, THESE DAMNED INDICATOR PEOPLE! PLEASE, BUY MY INDICATOR, SO YOU CAN POSSIBLY MAKE A FEW PERCENT MORE THAN THE INDEX YOU ARE TRACKING! Really? Have a steaming hearty cup of STFU Mr. Indicator. Seriously. (Not you OP, but the author of the article.) Everyone has a gimmick they are trying to sell. They can all bite a chode.
Stock indices are baskets of stocks. Stocks represent ownership in business entities. Business entities are valued based upon future free cash flows and the discount rate. Free cash flows have been rising for major stocks as the discount rate has fallen. Hence, the value of stock market indices should, in general, move up. For market indices to move down for an extended period of time: 1. Cash flows need to sequentially come in lower than expected for the time period you are hoping for (a 1-year bear market needs multiple quarters of earnings declines) 2. Discount rates need to be materially higher than free cash flow growth rates for multiple periods Otherwise, the best you'll get is a quick move own to BTFD!
Nope, but if you hum a few bars we can pick it up. What are the instructions for your Entry trigger, Stop Placement, Exit trigger?
You are asking a lot of questions, but you have been at this for a long time (September 2007!). Read @Overnight's Journal??? It is weird, back in 2007, I was no longer asking ANY questions. I had to figure it out all myself (within myself). It was all very internal/personal at that stage...
don't click the link !!! & don't use those indicators! go develop your own holy grail. some even develop their own indicator and sell it.
I've never used the indicator but the entire Taylor Trading Technique is based upon a similar concept. Marty Schwartz, one of the greatest S&P traders of all times referred to it as 'the greater fool theory' A host of other well known traders rely on similar logic. It's also the departure point for several successful quant strategies. I'm not sure why a person would need an indicator for it?
I appreciate your passion. The interesting thing is that the same logic is profitable on the short side. (and has been for decades) What do you think about that?