The number of instances is too low to make much out of but the size of the returns is certainly eye-popping. An average return of over 5% in the next 7 sessions. That’s a substantial pop to say the least. For those who would like to review the dates, they are all listed below. Notice how 2002 dominated the study.
While not statistically significant, I find the results noteworthy and interesting. So to the header question: Are we looking at a massive edge or a statistical anomaly?
I'll let you decide.
3 comments:
Most of us agree that one should make studies based on relativity more often than absolute values.
With all the studies you have that you put in % gain or lost as a criterion, which means most of your studies, wouldn't it be more accurate to normalize the lost or gain % depending on the type of volatility there was at that point.
For instance, if the 14D Average True Range is 0,75% and the SPX makes a 2% move it is much more significant than if the SPX make a 2% move and the 14D ATR is at 1,5%.
I can imagine that this takes a lot more work (or maybe not), but it would be interesting to try this hypothesis at least in 1 or 2 of your future (or past) studies to see if this makes the system even better.
Interesting Rob - I went back and looked at all those instances - I found it interesting that the setup was profitable during the 2002-2003 period (highly) but not so much outside of that period. What this suggests to me is that it was a particular characteristic of that sell-off period, while the period we're in now is rather different. So I would say "no" - and be ready to eat my words.
Sell 7 days later = 8 occurrences
Sell 1 day later = 23 occurrences
Why do you always [sic!] ignore "overlapping signals"? All [sic!] your "studies" catch the first occurrence/signal/trade only. If your EasyLanguage Code (I assume that's the prob) can't do the trick ==> Excel.
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