My trend following strategy and experience

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willthrill81
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Re: My trend following strategy and experience

Post by willthrill81 » Thu Feb 21, 2019 11:55 pm

Chan_va wrote:
Thu Feb 21, 2019 10:15 pm
Thanks OP. Will be following with interest. Since at the end of the day, portfolios are only a means to an end, a suggestion. Could you update the OP with your YTD ( and eventually 1,5 yr) returns and volatility of your portfolio and a benchmark? That way we can keep score with you ( and hopefully cheer you on ).
Indeed I will. :beer
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

StoneFeeler
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Re: My trend following strategy and experience

Post by StoneFeeler » Fri Feb 22, 2019 5:29 am

I am sorry if this is a stupid question, but I am a newbie to the Forum.

When you say you check the indices against 7MMA, do you take 7 monthly figures and average them, or daily figures for 7 months and average them?

Thanks!
"Crossing the steam by feeling the stones"

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willthrill81
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Re: My trend following strategy and experience

Post by willthrill81 » Fri Feb 22, 2019 5:24 pm

StoneFeeler wrote:
Fri Feb 22, 2019 5:29 am
I am sorry if this is a stupid question, but I am a newbie to the Forum.

When you say you check the indices against 7MMA, do you take 7 monthly figures and average them, or daily figures for 7 months and average them?

Thanks!
I don't actually do any of the calculations myself. I use Portfolio Visualizer to do them for me. It uses the closing price as of the last business day of each month for the calculation. There are other free resources out there that will average the daily balances over the last 7 months. Over the long-term, the choice of which method to use hasn't made a substantial difference in the performance of the trend following strategy.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

bloom2708
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Re: My trend following strategy and experience

Post by bloom2708 » Fri Feb 22, 2019 5:26 pm

DOW back over 26,000. Been a rough couple months to be 0/100.

I am patiently waiting for the signal to rejoin the stock (dark) side.
"People want confirmation, not advice" Unknown | "We are here to provoke thoughtfulness, not agree with you" Unknown | Four words: Whole food, plant based

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BlueEars
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Re: My trend following strategy and experience

Post by BlueEars » Fri Feb 22, 2019 5:31 pm

willthrill81 wrote:
Fri Feb 22, 2019 5:24 pm
StoneFeeler wrote:
Fri Feb 22, 2019 5:29 am
I am sorry if this is a stupid question, but I am a newbie to the Forum.

When you say you check the indices against 7MMA, do you take 7 monthly figures and average them, or daily figures for 7 months and average them?

Thanks!
I don't actually do any of the calculations myself. I use Portfolio Visualizer to do them for me. It uses the closing price as of the last business day of each month for the calculation. There are other free resources out there that will average the daily balances over the last 7 months. Over the long-term, the choice of which method to use hasn't made a substantial difference in the performance of the trend following strategy.
This is going to sound picky but what if Portfolio Visualizer had a hiccup in their analysis? Wouldn't you be a bit pissed if you their was an error causing you an unnecessary loss? Or do you perhaps have a way of checking their analysis from time to time?

I personally would want full control of such a process. Then the burden is on me to get the numbers and data entry correct (including data items like distributions). Doing this in a spreadsheet program should be quite easy.

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willthrill81
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Re: My trend following strategy and experience

Post by willthrill81 » Fri Feb 22, 2019 7:00 pm

BlueEars wrote:
Fri Feb 22, 2019 5:31 pm
willthrill81 wrote:
Fri Feb 22, 2019 5:24 pm
StoneFeeler wrote:
Fri Feb 22, 2019 5:29 am
I am sorry if this is a stupid question, but I am a newbie to the Forum.

When you say you check the indices against 7MMA, do you take 7 monthly figures and average them, or daily figures for 7 months and average them?

Thanks!
I don't actually do any of the calculations myself. I use Portfolio Visualizer to do them for me. It uses the closing price as of the last business day of each month for the calculation. There are other free resources out there that will average the daily balances over the last 7 months. Over the long-term, the choice of which method to use hasn't made a substantial difference in the performance of the trend following strategy.
This is going to sound picky but what if Portfolio Visualizer had a hiccup in their analysis? Wouldn't you be a bit pissed if you their was an error causing you an unnecessary loss? Or do you perhaps have a way of checking their analysis from time to time?

I personally would want full control of such a process. Then the burden is on me to get the numbers and data entry correct (including data items like distributions). Doing this in a spreadsheet program should be quite easy.
I'm confident enough in PV's analysis, though I do periodically check their data against that from other sources, and it's always matched.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

StoneFeeler
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Re: My trend following strategy and experience

Post by StoneFeeler » Fri Feb 22, 2019 10:17 pm

willthrill81 wrote:
Fri Feb 22, 2019 5:24 pm
StoneFeeler wrote:
Fri Feb 22, 2019 5:29 am
I am sorry if this is a stupid question, but I am a newbie to the Forum.

When you say you check the indices against 7MMA, do you take 7 monthly figures and average them, or daily figures for 7 months and average them?

Thanks!
I don't actually do any of the calculations myself. I use Portfolio Visualizer to do them for me. It uses the closing price as of the last business day of each month for the calculation. There are other free resources out there that will average the daily balances over the last 7 months. Over the long-term, the choice of which method to use hasn't made a substantial difference in the performance of the trend following strategy.
I am surprised that the use of month-end averages versus daily averages has not made a difference. I hope you are sure about this. Philosophical Economist has not addressed this in his posts (as far as I can tell). Good luck, anyway!
"Crossing the steam by feeling the stones"

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willthrill81
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Re: My trend following strategy and experience

Post by willthrill81 » Fri Feb 22, 2019 11:12 pm

StoneFeeler wrote:
Fri Feb 22, 2019 10:17 pm
willthrill81 wrote:
Fri Feb 22, 2019 5:24 pm
StoneFeeler wrote:
Fri Feb 22, 2019 5:29 am
I am sorry if this is a stupid question, but I am a newbie to the Forum.

When you say you check the indices against 7MMA, do you take 7 monthly figures and average them, or daily figures for 7 months and average them?

Thanks!
I don't actually do any of the calculations myself. I use Portfolio Visualizer to do them for me. It uses the closing price as of the last business day of each month for the calculation. There are other free resources out there that will average the daily balances over the last 7 months. Over the long-term, the choice of which method to use hasn't made a substantial difference in the performance of the trend following strategy.
I am surprised that the use of month-end averages versus daily averages has not made a difference. I hope you are sure about this. Philosophical Economist has not addressed this in his posts (as far as I can tell). Good luck, anyway!
As the sample size increases (i.e. long-term periods), the differences in terms of 'wins' and 'losses' between daily vs. monthly data largely cancel out. Certainly there are short-term periods where the difference has been significant one way or the other, but over the long-term, it hasn't matter significantly.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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tadamsmar
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Re: My trend following strategy and experience

Post by tadamsmar » Sat Feb 23, 2019 2:01 pm

In the OP you say you invest in the available stock index that has the most momentum. Later in the thread, you indicate that you might invest in a bond fund that has higher momentum. And when you are out of the market, you invest in "fixed income", but a bond fund is fixed income. I can't find a clear description of your trend following strategy.

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willthrill81
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Re: My trend following strategy and experience

Post by willthrill81 » Sat Feb 23, 2019 2:14 pm

tadamsmar wrote:
Sat Feb 23, 2019 2:01 pm
In the OP you say you invest in the available stock index that has the most momentum. Later in the thread, you indicate that you might invest in a bond fund that has higher momentum. And when you are out of the market, you invest in "fixed income", but a bond fund is fixed income. I can't find a clear description of your trend following strategy.
I will only move out of stocks into fixed income if (1) the UER is above its 12 MMA and (2) the bond funds I have access to have had higher relative strength over the prior 7 months than any stock index available to me in a given account. When I'm in equities, I move 100% into the equity fund with the highest relative strength over the prior 7 months.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

Always passive
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Re: My trend following strategy and experience

Post by Always passive » Sat Feb 23, 2019 11:43 pm

In an earlier response to the question of what to do if the investor owns the assets in a taxable account, you suggested holding to the assets and using future contracts. For those not familiar with this tool (like me), apart from what i read in the literature, I am very curious to know how you would use futures? Appreciate your help.

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Re: My trend following strategy and experience

Post by willthrill81 » Sun Feb 24, 2019 12:54 am

Always passive wrote:
Sat Feb 23, 2019 11:43 pm
In an earlier response to the question of what to do if the investor owns the assets in a taxable account, you suggested holding to the assets and using future contracts. For those not familiar with this tool (like me), apart from what i read in the literature, I am very curious to know how you would use futures? Appreciate your help.
I've not personally done it, so I'm not the best resource. I would suggest that you start another thread on the topic if you're interested.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: My trend following strategy and experience

Post by revhappy » Sun Feb 24, 2019 9:54 am

bloom2708 wrote:
Fri Feb 22, 2019 5:26 pm
DOW back over 26,000. Been a rough couple months to be 0/100.

I am patiently waiting for the signal to rejoin the stock (dark) side.
Me too! I have significantly reduced my allocation to stocks, from 50% to 33%. The 33% is entirely international/Non-US and it is below water which is why I still didnt sell. I am hoping bad economic news out of US and US stocks plummeting while international doing well. Am I asking too much? 8-)

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Re: My trend following strategy and experience

Post by revhappy » Sun Feb 24, 2019 9:55 am

willthrill81 wrote:
Sun Feb 24, 2019 12:54 am
Always passive wrote:
Sat Feb 23, 2019 11:43 pm
In an earlier response to the question of what to do if the investor owns the assets in a taxable account, you suggested holding to the assets and using future contracts. For those not familiar with this tool (like me), apart from what i read in the literature, I am very curious to know how you would use futures? Appreciate your help.
I've not personally done it, so I'm not the best resource. I would suggest that you start another thread on the topic if you're interested.
OP, sorry I guess, I missed it from your long thread. What is your current allocation?

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Re: My trend following strategy and experience

Post by willthrill81 » Sun Feb 24, 2019 10:17 am

revhappy wrote:
Sun Feb 24, 2019 9:55 am
willthrill81 wrote:
Sun Feb 24, 2019 12:54 am
Always passive wrote:
Sat Feb 23, 2019 11:43 pm
In an earlier response to the question of what to do if the investor owns the assets in a taxable account, you suggested holding to the assets and using future contracts. For those not familiar with this tool (like me), apart from what i read in the literature, I am very curious to know how you would use futures? Appreciate your help.
I've not personally done it, so I'm not the best resource. I would suggest that you start another thread on the topic if you're interested.
OP, sorry I guess, I missed it from your long thread. What is your current allocation?
Exactly what I own varies from one account to the next (e.g. 401k, 457, HSA, IRAs). Mostly, I'm currently in TIAA Real Estate (a unique fund that's very stable) and short-term Treasuries.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

Nova1967
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Re: My trend following strategy and experience

Post by Nova1967 » Sun Feb 24, 2019 10:46 am

I have always been a long term buy and hold DCA investor, Around 2007 I tried the Investors Daily Can Slim
for a portion of my portfolio, The strategy did not keep up with my TSP funds which made me realize the benefits of index investing, The only good thing about the IBD strategy is I escaped the 2008 market crash with only a 12% loss. In summary there are trends that can benefit you for the short term but I believe its best to keep it simple with strategies such the 3 fund portfolio with a proper allocation.

GrowthSeeker
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Re: My trend following strategy and experience

Post by GrowthSeeker » Sun Feb 24, 2019 5:21 pm

willthrill81 wrote:
Fri Feb 22, 2019 5:24 pm
StoneFeeler wrote:
Fri Feb 22, 2019 5:29 am
I am sorry if this is a stupid question, but I am a newbie to the Forum.

When you say you check the indices against 7MMA, do you take 7 monthly figures and average them, or daily figures for 7 months and average them?

Thanks!
I don't actually do any of the calculations myself. I use Portfolio Visualizer to do them for me. It uses the closing price as of the last business day of each month for the calculation. There are other free resources out there that will average the daily balances over the last 7 months. Over the long-term, the choice of which method to use hasn't made a substantial difference in the performance of the trend following strategy.
It's not at all a stupid question.

There are several ways to calculate moving averages. For simplicity, let's say we're always talking about the closing price, P. In each case it will be of N periods. If periods is months, then they're usually using the month-end closing price. But moving averages can be calculated on any data, not just closing price. And periods can be years, months, weeks, days, 5-minute bars or any time period.

SMA: Simple Moving Average is just the sum of the last N values divided by N. Information from N+1 periods ago is completely ignored.

EMA: Exponential Moving Average is a weighted average between the prior EMA value and the most recent data.
EMAi = EMAi-1 + alpha * (Pi - EMAi-1) where alpha = 2/(N-1)
Why this value for alpha? I think because it make an N-period EMA somewhat similar to an N-period SMA.

MMA: Modified Moving Average is essentially an EMA with a different "alpha" weighting fudge factor
MMAi = MMAi-1 + beta * (Pi - MMAi-1) where beta = 1/N

I think an MMA-7 is the same as an EMA-15
Just because you're paranoid doesn't mean they're NOT out to get you.

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willthrill81
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Re: My trend following strategy and experience

Post by willthrill81 » Sun Feb 24, 2019 5:25 pm

GrowthSeeker wrote:
Sun Feb 24, 2019 5:21 pm
willthrill81 wrote:
Fri Feb 22, 2019 5:24 pm
StoneFeeler wrote:
Fri Feb 22, 2019 5:29 am
I am sorry if this is a stupid question, but I am a newbie to the Forum.

When you say you check the indices against 7MMA, do you take 7 monthly figures and average them, or daily figures for 7 months and average them?

Thanks!
I don't actually do any of the calculations myself. I use Portfolio Visualizer to do them for me. It uses the closing price as of the last business day of each month for the calculation. There are other free resources out there that will average the daily balances over the last 7 months. Over the long-term, the choice of which method to use hasn't made a substantial difference in the performance of the trend following strategy.
It's not at all a stupid question.
I never called that or any other question on this forum "stupid."
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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BlueEars
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Re: My trend following strategy and experience

Post by BlueEars » Sun Feb 24, 2019 5:30 pm

willthrill81 wrote:
Sun Feb 24, 2019 5:25 pm
GrowthSeeker wrote:
Sun Feb 24, 2019 5:21 pm
willthrill81 wrote:
Fri Feb 22, 2019 5:24 pm
StoneFeeler wrote:
Fri Feb 22, 2019 5:29 am
I am sorry if this is a stupid question, but I am a newbie to the Forum.

When you say you check the indices against 7MMA, do you take 7 monthly figures and average them, or daily figures for 7 months and average them?

Thanks!
I don't actually do any of the calculations myself. I use Portfolio Visualizer to do them for me. It uses the closing price as of the last business day of each month for the calculation. There are other free resources out there that will average the daily balances over the last 7 months. Over the long-term, the choice of which method to use hasn't made a substantial difference in the performance of the trend following strategy.
It's not at all a stupid question.
I never called that or any other question on this forum "stupid."
Will, I thought the same thing at first. But then I realized this was in reference to the "stupid" in StoneFeeler's post and not your response.
Last edited by BlueEars on Sun Feb 24, 2019 5:31 pm, edited 1 time in total.

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willthrill81
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Re: My trend following strategy and experience

Post by willthrill81 » Sun Feb 24, 2019 5:31 pm

BlueEars wrote:
Sun Feb 24, 2019 5:30 pm
willthrill81 wrote:
Sun Feb 24, 2019 5:25 pm
GrowthSeeker wrote:
Sun Feb 24, 2019 5:21 pm
willthrill81 wrote:
Fri Feb 22, 2019 5:24 pm
StoneFeeler wrote:
Fri Feb 22, 2019 5:29 am
I am sorry if this is a stupid question, but I am a newbie to the Forum.

When you say you check the indices against 7MMA, do you take 7 monthly figures and average them, or daily figures for 7 months and average them?

Thanks!
I don't actually do any of the calculations myself. I use Portfolio Visualizer to do them for me. It uses the closing price as of the last business day of each month for the calculation. There are other free resources out there that will average the daily balances over the last 7 months. Over the long-term, the choice of which method to use hasn't made a substantial difference in the performance of the trend following strategy and not your response.
It's not at all a stupid question.
I never called that or any other question on this forum "stupid."
Will, I thought the same thing at first. But then I realized this was in reference to the "stupid" in StoneFeeler's post.
Ah. In that case, GrowthSeeker should have quoted StoneFeeler rather than myself.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: My trend following strategy and experience

Post by BlueEars » Sun Feb 24, 2019 5:35 pm

willthrill81 wrote:
Sun Feb 24, 2019 5:31 pm
...
Ah. In that case, GrowthSeeker should have quoted StoneFeeler rather than myself.
Well yes that would have been somewhat easier to read. One of my pet peeves on Bogleheads is the overuse of the quote feature. This makes for pages and pages of responses. And then one who does some editing to get short responses can get overlooked with all the quoting that goes on. Oh well, it's just social media after all. I cannot expect too much out of the internet. :happy

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Re: My trend following strategy and experience

Post by GrowthSeeker » Mon Feb 25, 2019 12:27 am

willthrill81 wrote:
Sun Feb 24, 2019 5:25 pm
GrowthSeeker wrote:
Sun Feb 24, 2019 5:21 pm
willthrill81 wrote:
Fri Feb 22, 2019 5:24 pm
StoneFeeler wrote:
Fri Feb 22, 2019 5:29 am
I am sorry if this is a stupid question, but I am a newbie to the Forum.

When you say you check the indices against 7MMA, do you take 7 monthly figures and average them, or daily figures for 7 months and average them?

Thanks!
I don't actually do any of the calculations myself. I use Portfolio Visualizer to do them for me. It uses the closing price as of the last business day of each month for the calculation. There are other free resources out there that will average the daily balances over the last 7 months. Over the long-term, the choice of which method to use hasn't made a substantial difference in the performance of the trend following strategy.
It's not at all a stupid question.
I never called that or any other question on this forum "stupid."
willthrill81, no one suggested that you did.
StoneFeeler said: " ... sorry if this is a stupid question ..."
And I was responding to that saying: "It's not at all a stupid question."

I guess since I responded to your response to his post (as opposed to responding directly to his post), that put some of your words between his statement and my response; but I intended no insult or anything. Sorry for the confusion.

[this is the tradeoff when we all communicate via blogs instead of face to face conversation; we can communicate over a wide range of time and space with a lot of people, but some of the nuance of communication is lost leading to misunderstandings at times]
Just because you're paranoid doesn't mean they're NOT out to get you.

GrowthSeeker
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Re: My trend following strategy and experience

Post by GrowthSeeker » Mon Feb 25, 2019 12:28 am

willthrill81 wrote:
Sun Feb 24, 2019 5:31 pm
BlueEars wrote:
Sun Feb 24, 2019 5:30 pm
willthrill81 wrote:
Sun Feb 24, 2019 5:25 pm
GrowthSeeker wrote:
Sun Feb 24, 2019 5:21 pm
willthrill81 wrote:
Fri Feb 22, 2019 5:24 pm


I don't actually do any of the calculations myself. I use Portfolio Visualizer to do them for me. It uses the closing price as of the last business day of each month for the calculation. There are other free resources out there that will average the daily balances over the last 7 months. Over the long-term, the choice of which method to use hasn't made a substantial difference in the performance of the trend following strategy and not your response.
It's not at all a stupid question.
I never called that or any other question on this forum "stupid."
Will, I thought the same thing at first. But then I realized this was in reference to the "stupid" in StoneFeeler's post.
Ah. In that case, GrowthSeeker should have quoted StoneFeeler rather than myself.
Yes, I should have, you're right.
Just because you're paranoid doesn't mean they're NOT out to get you.

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willthrill81
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Re: My trend following strategy and experience

Post by willthrill81 » Mon Feb 25, 2019 1:33 am

GrowthSeeker wrote:
Mon Feb 25, 2019 12:27 am
willthrill81 wrote:
Sun Feb 24, 2019 5:25 pm
GrowthSeeker wrote:
Sun Feb 24, 2019 5:21 pm
willthrill81 wrote:
Fri Feb 22, 2019 5:24 pm
StoneFeeler wrote:
Fri Feb 22, 2019 5:29 am
I am sorry if this is a stupid question, but I am a newbie to the Forum.

When you say you check the indices against 7MMA, do you take 7 monthly figures and average them, or daily figures for 7 months and average them?

Thanks!
I don't actually do any of the calculations myself. I use Portfolio Visualizer to do them for me. It uses the closing price as of the last business day of each month for the calculation. There are other free resources out there that will average the daily balances over the last 7 months. Over the long-term, the choice of which method to use hasn't made a substantial difference in the performance of the trend following strategy.
It's not at all a stupid question.
I never called that or any other question on this forum "stupid."
willthrill81, no one suggested that you did.
StoneFeeler said: " ... sorry if this is a stupid question ..."
And I was responding to that saying: "It's not at all a stupid question."

I guess since I responded to your response to his post (as opposed to responding directly to his post), that put some of your words between his statement and my response; but I intended no insult or anything. Sorry for the confusion.

[this is the tradeoff when we all communicate via blogs instead of face to face conversation; we can communicate over a wide range of time and space with a lot of people, but some of the nuance of communication is lost leading to misunderstandings at times]
No prob. :beer
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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ResearchMed
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Re: My trend following strategy and experience

Post by ResearchMed » Mon Feb 25, 2019 7:01 am

GrowthSeeker wrote:
Mon Feb 25, 2019 12:27 am
willthrill81 wrote:
Sun Feb 24, 2019 5:25 pm
GrowthSeeker wrote:
Sun Feb 24, 2019 5:21 pm
willthrill81 wrote:
Fri Feb 22, 2019 5:24 pm
StoneFeeler wrote:
Fri Feb 22, 2019 5:29 am
I am sorry if this is a stupid question, but I am a newbie to the Forum.

When you say you check the indices against 7MMA, do you take 7 monthly figures and average them, or daily figures for 7 months and average them?

Thanks!
I don't actually do any of the calculations myself. I use Portfolio Visualizer to do them for me. It uses the closing price as of the last business day of each month for the calculation. There are other free resources out there that will average the daily balances over the last 7 months. Over the long-term, the choice of which method to use hasn't made a substantial difference in the performance of the trend following strategy.
It's not at all a stupid question.
I never called that or any other question on this forum "stupid."
willthrill81, no one suggested that you did.
StoneFeeler said: " ... sorry if this is a stupid question ..."
And I was responding to that saying: "It's not at all a stupid question."

I guess since I responded to your response to his post (as opposed to responding directly to his post), that put some of your words between his statement and my response; but I intended no insult or anything. Sorry for the confusion.

[this is the tradeoff when we all communicate via blogs instead of face to face conversation; we can communicate over a wide range of time and space with a lot of people, but some of the nuance of communication is lost leading to misunderstandings at times]
Yes, THIS (in red just above) is a REAL problem with all electronic communication, and also much regular written communication.
Even voice conversations... one can hear a chuckle in the voice, or sadness, or anger, or joy. But not in this venue.
And in person, one can also see a smile, or a frown, or just a twinkle of the eye.
Those non-verbal cues can add *so* much.
Worse, email - and the shortened forms such as twitter or various quick messaging - tend to be more and more abbreviated and even just abrupt. That strips out a lot of the humanity...

And that loss does show up, even here in this relatively polite (and thanks to LadyGeek and other mods!) forum.
There will always be "misunderstandings", but modern "communication" tends to make that "easier" - and it can really interfere with whatever message was intended.

RM
This signature is a placebo. You are in the control group.

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tadamsmar
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Re: My trend following strategy and experience

Post by tadamsmar » Mon Feb 25, 2019 5:20 pm

willthrill81 wrote:
Sun Feb 24, 2019 10:17 am
Exactly what I own varies from one account to the next (e.g. 401k, 457, HSA, IRAs). Mostly, I'm currently in TIAA Real Estate (a unique fund that's very stable) and short-term Treasuries.
Is the stock ticker symbol TIAA Real Estate = TIREX. If that is not it, then what is it? QREARX?

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willthrill81
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Re: My trend following strategy and experience

Post by willthrill81 » Mon Feb 25, 2019 5:31 pm

tadamsmar wrote:
Mon Feb 25, 2019 5:20 pm
willthrill81 wrote:
Sun Feb 24, 2019 10:17 am
Exactly what I own varies from one account to the next (e.g. 401k, 457, HSA, IRAs). Mostly, I'm currently in TIAA Real Estate (a unique fund that's very stable) and short-term Treasuries.
Is the stock ticker symbol TIAA Real Estate = TIREX. If that is not it, then what is it? QREARX?
QREARX.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: My trend following strategy and experience

Post by HomerJ » Mon Feb 25, 2019 5:50 pm

So when do you next check to see if you should stay out or get back in?

Market is up 15% since you got out. Rather painful to sell back on January 4th and buy back in 15% higher, eh?

Or does it look like the indicators are leaning towards you staying out for another month?
The J stands for Jay

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Re: My trend following strategy and experience

Post by willthrill81 » Mon Feb 25, 2019 5:59 pm

HomerJ wrote:
Mon Feb 25, 2019 5:50 pm
So when do you next check to see if you should stay out or get back in?

Market is up 15% since you got out. Rather painful to sell back on January 4th and buy back in 15% higher, eh?

Or does it look like the indicators are leaning towards you staying out for another month?
It definitely looks like the stock indices will be above their 7 MMA at the end of this month, and if so, my strategy calls for me to move back in to stocks. If so, this will be a whipsaw. But that's the price to be paid for being a trend follower, and I have no regrets. No pain at all. Similarly, I doubt that you experience pain knowing that 50% of your portfolio has had a real return of 1% since 2014. Different roads to Dublin! :D

It's important for us to not conflate the viability of a strategy with the benefit of hindsight. If you win when a fair die is rolled lower than six, then the fact that it rolls a six does not mean that you made a poor choice.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Rowan Oak
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Re: My trend following strategy and experience

Post by Rowan Oak » Thu Feb 28, 2019 8:56 pm

This is from Michael Batnick with Ritholtz Wealth Management. They use a trend following strategy for clients.
One of the challenges with tactical portfolio management, particularly with trend following, is that whipsaws are part of the deal. They can only be avoided by data mined backtests. In the real world, these false moves should be thought of in terms of a premium you pay the insurance company. While you never want to put in a claim, they aren’t much fun to pay either. I can’t think of anything to say other than, hey, that’s the way it goes sometimes.
Killer Vees
Posted February 28, 2019 by Michael Batnick

https://theirrelevantinvestor.com/2019/ ... ller-vees/
“If you can get good at destroying your own wrong ideas, that is a great gift.” – Charlie Munger

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Re: My trend following strategy and experience

Post by willthrill81 » Thu Feb 28, 2019 8:59 pm

Rowan Oak wrote:
Thu Feb 28, 2019 8:56 pm
This is from Michael Batnick with Ritholtz Wealth Management. They use a trend following strategy for clients.
One of the challenges with tactical portfolio management, particularly with trend following, is that whipsaws are part of the deal. They can only be avoided by data mined backtests. In the real world, these false moves should be thought of in terms of a premium you pay the insurance company. While you never want to put in a claim, they aren’t much fun to pay either. I can’t think of anything to say other than, hey, that’s the way it goes sometimes.
Killer Vees
Posted February 28, 2019 by Michael Batnick

https://theirrelevantinvestor.com/2019/ ... ller-vees/
:thumbsup That's precisely my take as well. If you don't want to get whipsawed, don't practice trend following. But be prepared for your stocks to occasionally experience a deep drawdown. Pick your poison.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: My trend following strategy and experience

Post by Rowan Oak » Thu Feb 28, 2019 9:06 pm

Yes. Made me think of what you've said about trend following when I read it.
“If you can get good at destroying your own wrong ideas, that is a great gift.” – Charlie Munger

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Re: My trend following strategy and experience

Post by willthrill81 » Fri Mar 01, 2019 11:07 am

I have stock indices in all of my accounts that are now above their 7 month moving average, so per my strategy, I am moving back in stocks today, almost exclusively mid-cap growth but with a small amount in large cap blend and a REIT index in my two smallest accounts.

As I noted above, this move turned out to be a whipsaw, but I'm fine with that. It's par for the course and the first whipsaw this strategy has encountered since 2009, which is something that few other trend following strategies can claim.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: My trend following strategy and experience

Post by marcopolo » Fri Mar 01, 2019 11:24 am

willthrill81 wrote:
Fri Mar 01, 2019 11:07 am
I have stock indices in all of my accounts that are now above their 7 month moving average, so per my strategy, I am moving back in stocks today, almost exclusively mid-cap growth but with a small amount in large cap blend and a REIT index in my two smallest accounts.

As I noted above, this move turned out to be a whipsaw, but I'm fine with that. It's par for the course and the first whipsaw this strategy has encountered since 2009, which is something that few other trend following strategies can claim.
How much of large drawdown do you expect your approach to avoid?

Based on this whipsaw, it does not seem like it would take too many of them to negate most of the benefit gained from avoiding a portion of a big drawdown.
Once in a while you get shown the light, in the strangest of places if you look at it right.

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Re: My trend following strategy and experience

Post by willthrill81 » Fri Mar 01, 2019 12:44 pm

marcopolo wrote:
Fri Mar 01, 2019 11:24 am
willthrill81 wrote:
Fri Mar 01, 2019 11:07 am
I have stock indices in all of my accounts that are now above their 7 month moving average, so per my strategy, I am moving back in stocks today, almost exclusively mid-cap growth but with a small amount in large cap blend and a REIT index in my two smallest accounts.

As I noted above, this move turned out to be a whipsaw, but I'm fine with that. It's par for the course and the first whipsaw this strategy has encountered since 2009, which is something that few other trend following strategies can claim.
How much of large drawdown do you expect your approach to avoid?

Based on this whipsaw, it does not seem like it would take too many of them to negate most of the benefit gained from avoiding a portion of a big drawdown.
During 2007, the strategy would have returned about 6.45% nominal, 5.05% in 2008, and 25.94% in 2009, compared to VTSMX's 5.39%, -37.02%, and 26.49%. Remember that losses have a disproportionately greater impact on returns than do gains.

And while this was a significant whipsaw, this one was historically very high, and I really don't expect "too many of them" going forward, but this is obviously unknowable. It hasn't shaken my confidence in the strategy at all.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: My trend following strategy and experience

Post by marcopolo » Fri Mar 01, 2019 12:54 pm

willthrill81 wrote:
Fri Mar 01, 2019 12:44 pm
marcopolo wrote:
Fri Mar 01, 2019 11:24 am
willthrill81 wrote:
Fri Mar 01, 2019 11:07 am
I have stock indices in all of my accounts that are now above their 7 month moving average, so per my strategy, I am moving back in stocks today, almost exclusively mid-cap growth but with a small amount in large cap blend and a REIT index in my two smallest accounts.

As I noted above, this move turned out to be a whipsaw, but I'm fine with that. It's par for the course and the first whipsaw this strategy has encountered since 2009, which is something that few other trend following strategies can claim.
How much of large drawdown do you expect your approach to avoid?

Based on this whipsaw, it does not seem like it would take too many of them to negate most of the benefit gained from avoiding a portion of a big drawdown.
During 2007, the strategy would have returned about 6.45% nominal, 5.05% in 2008, and 25.94% in 2009, compared to VTSMX's 5.39%, -37.02%, and 26.49%. Remember that losses have a disproportionately greater impact on returns than do gains.

And while this was a significant whipsaw, this one was historically very high, and I really don't expect "too many of them" going forward, but this is obviously unknowable. It hasn't shaken my confidence in the strategy at all.
It would have been positive in 2008 (avoiding the big drop), while maintaining most of the gain 2009 as well?
That is pretty impressive. I was expecting that it would maybe cut the losses in half.

Good luck with the approach going forward.
Once in a while you get shown the light, in the strangest of places if you look at it right.

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Re: My trend following strategy and experience

Post by BlueEars » Fri Mar 01, 2019 5:15 pm

Will, I noticed that at the end of trading today (March 1st) the unemployment number for February is still not yet reported. I do not know how late in the month the BLS reports for the previous month. Do you?

This brings up the question: how do you account for this in your trend following exit rule? For instance, you would not necessarily be able to exit at the start of January (Jan 2 was the first trade day) because the BLS might be tardy in reporting the December data. And this is not taking into account the government shutdown which was hopefully a very unlikely future occurrence.

It could affect the historical performance of your strategy but it is unclear how much. For instance, in exiting later then Jan 1st you probably actaully got a better result (less of a whipsaw) as January started on an upward trajectory.

A few more data points I found:
The Sept 2018 unemployment was reported on Oct 5 (Oct 1 was the 1st trade day for October)
The Nov 2018 unemployment was reported on Dec 7 (Dec 3 was the 1st trade day in December)

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Re: My trend following strategy and experience

Post by diy60 » Fri Mar 01, 2019 6:04 pm

BlueEars wrote:
Fri Mar 01, 2019 5:15 pm
Will, I noticed that at the end of trading today (March 1st) the unemployment number for February is still not yet reported. I do not know how late in the month the BLS reports for the previous month. Do you?
I asked WT this question and he indicated 1st Friday of the month, but I found this instead "The Employment Situation for February is scheduled to be released on Friday, March 8, 2019, at 8:30 a.m. (EST).", so I wondering why WT pulled the trigger.

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Re: My trend following strategy and experience

Post by BlueEars » Fri Mar 01, 2019 6:14 pm

diy60 wrote:
Fri Mar 01, 2019 6:04 pm
BlueEars wrote:
Fri Mar 01, 2019 5:15 pm
Will, I noticed that at the end of trading today (March 1st) the unemployment number for February is still not yet reported. I do not know how late in the month the BLS reports for the previous month. Do you?
I asked WT this question and he indicated 1st Friday of the month, but I found this instead "The Employment Situation for February is scheduled to be released on Friday, March 8, 2019, at 8:30 a.m. (EST).", so I wondering why WT pulled the trigger.
Thanks for the info. Will uses the unemployment data just in the market sell condition not for the buy back.

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Re: My trend following strategy and experience

Post by BlueEars » Fri Mar 01, 2019 6:14 pm

diy60 wrote:
Fri Mar 01, 2019 6:04 pm
BlueEars wrote:
Fri Mar 01, 2019 5:15 pm
Will, I noticed that at the end of trading today (March 1st) the unemployment number for February is still not yet reported. I do not know how late in the month the BLS reports for the previous month. Do you?
I asked WT this question and he indicated 1st Friday of the month, but I found this instead "The Employment Situation for February is scheduled to be released on Friday, March 8, 2019, at 8:30 a.m. (EST).", so I wondering why WT pulled the trigger.
Thanks for the info. Will uses the unemployment data just in the market sell condition not for the buy back.

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Re: My trend following strategy and experience

Post by diy60 » Fri Mar 01, 2019 6:19 pm

BlueEars wrote:
Fri Mar 01, 2019 6:14 pm
diy60 wrote:
Fri Mar 01, 2019 6:04 pm
BlueEars wrote:
Fri Mar 01, 2019 5:15 pm
Will, I noticed that at the end of trading today (March 1st) the unemployment number for February is still not yet reported. I do not know how late in the month the BLS reports for the previous month. Do you?
I asked WT this question and he indicated 1st Friday of the month, but I found this instead "The Employment Situation for February is scheduled to be released on Friday, March 8, 2019, at 8:30 a.m. (EST).", so I wondering why WT pulled the trigger.
Thanks for the info. Will uses the unemployment data just in the market sell condition not for the buy back.
Ah, yes, thanks for the correction.

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Re: My trend following strategy and experience

Post by willthrill81 » Fri Mar 01, 2019 6:39 pm

BlueEars wrote:
Fri Mar 01, 2019 6:14 pm
diy60 wrote:
Fri Mar 01, 2019 6:04 pm
BlueEars wrote:
Fri Mar 01, 2019 5:15 pm
Will, I noticed that at the end of trading today (March 1st) the unemployment number for February is still not yet reported. I do not know how late in the month the BLS reports for the previous month. Do you?
I asked WT this question and he indicated 1st Friday of the month, but I found this instead "The Employment Situation for February is scheduled to be released on Friday, March 8, 2019, at 8:30 a.m. (EST).", so I wondering why WT pulled the trigger.
Thanks for the info. Will uses the unemployment data just in the market sell condition not for the buy back.
Not quite. Recall that my strategy calls for me to be in stocks unless both the UER is above its 12 MMA and stocks are below their 7 MMA. Since the latter condition is no longer satisfied, I move back into stocks, regardless of what the UER is.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: My trend following strategy and experience

Post by BlueEars » Fri Mar 01, 2019 7:04 pm

willthrill81 wrote:
Fri Mar 01, 2019 6:39 pm
BlueEars wrote:
Fri Mar 01, 2019 6:14 pm
diy60 wrote:
Fri Mar 01, 2019 6:04 pm
BlueEars wrote:
Fri Mar 01, 2019 5:15 pm
Will, I noticed that at the end of trading today (March 1st) the unemployment number for February is still not yet reported. I do not know how late in the month the BLS reports for the previous month. Do you?
I asked WT this question and he indicated 1st Friday of the month, but I found this instead "The Employment Situation for February is scheduled to be released on Friday, March 8, 2019, at 8:30 a.m. (EST).", so I wondering why WT pulled the trigger.
Thanks for the info. Will uses the unemployment data just in the market sell condition not for the buy back.
Not quite. Recall that my strategy calls for me to be in stocks unless both the UER is above its 12 MMA and stocks are below their 7 MMA. Since the latter condition is no longer satisfied, I move back into stocks, regardless of what the UER is.
OK, so had the stocks not been above the 7 MMA you would have waited for the BLS report. For example, if stocks were still declining and if the UER moved above its 12 MMA for February (to be reported on March 8th) then you would have moved back into stocks. So as I understand it you could make moves on either the start of the month (based on equities only) or maybe a week into the month (based on UER only).

Now I wonder how you could have backtested such a method since there could be different sell/buy points depending on conditions. Or did you just kind of eyeball this? Not meant as a criticism, just curious.

BTW, I found the schedule for the BLS reporting of UER here: https://www.bls.gov/ces/ces_tabl.htm

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Re: My trend following strategy and experience

Post by willthrill81 » Fri Mar 01, 2019 7:24 pm

BlueEars wrote:
Fri Mar 01, 2019 7:04 pm
willthrill81 wrote:
Fri Mar 01, 2019 6:39 pm
BlueEars wrote:
Fri Mar 01, 2019 6:14 pm
diy60 wrote:
Fri Mar 01, 2019 6:04 pm
BlueEars wrote:
Fri Mar 01, 2019 5:15 pm
Will, I noticed that at the end of trading today (March 1st) the unemployment number for February is still not yet reported. I do not know how late in the month the BLS reports for the previous month. Do you?
I asked WT this question and he indicated 1st Friday of the month, but I found this instead "The Employment Situation for February is scheduled to be released on Friday, March 8, 2019, at 8:30 a.m. (EST).", so I wondering why WT pulled the trigger.
Thanks for the info. Will uses the unemployment data just in the market sell condition not for the buy back.
Not quite. Recall that my strategy calls for me to be in stocks unless both the UER is above its 12 MMA and stocks are below their 7 MMA. Since the latter condition is no longer satisfied, I move back into stocks, regardless of what the UER is.
OK, so had the stocks not been above the 7 MMA you would have waited for the BLS report. For example, if stocks were still declining and if the UER moved above its 12 MMA for February (to be reported on March 8th) then you would have moved back into stocks. So as I understand it you could make moves on either the start of the month (based on equities only) or maybe a week into the month (based on UER only).

Now I wonder how you could have backtested such a method since there could be different sell/buy points depending on conditions. Or did you just kind of eyeball this? Not meant as a criticism, just curious.

BTW, I found the schedule for the BLS reporting of UER here: https://www.bls.gov/ces/ces_tabl.htm
Over the long-term, I would expect the differences to be insignificant. But I could be wrong. I don't feel the need to have backtested every intricacy in order to have confidence in the general results.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: My trend following strategy and experience

Post by BlueEars » Fri Mar 01, 2019 7:29 pm

willthrill81 wrote:
Fri Mar 01, 2019 7:24 pm
BlueEars wrote:
Fri Mar 01, 2019 7:04 pm
willthrill81 wrote:
Fri Mar 01, 2019 6:39 pm
BlueEars wrote:
Fri Mar 01, 2019 6:14 pm
diy60 wrote:
Fri Mar 01, 2019 6:04 pm

I asked WT this question and he indicated 1st Friday of the month, but I found this instead "The Employment Situation for February is scheduled to be released on Friday, March 8, 2019, at 8:30 a.m. (EST).", so I wondering why WT pulled the trigger.
Thanks for the info. Will uses the unemployment data just in the market sell condition not for the buy back.
Not quite. Recall that my strategy calls for me to be in stocks unless both the UER is above its 12 MMA and stocks are below their 7 MMA. Since the latter condition is no longer satisfied, I move back into stocks, regardless of what the UER is.
OK, so had the stocks not been above the 7 MMA you would have waited for the BLS report. For example, if stocks were still declining and if the UER moved above its 12 MMA for February (to be reported on March 8th) then you would have moved back into stocks. So as I understand it you could make moves on either the start of the month (based on equities only) or maybe a week into the month (based on UER only).

Now I wonder how you could have backtested such a method since there could be different sell/buy points depending on conditions. Or did you just kind of eyeball this? Not meant as a criticism, just curious.

BTW, I found the schedule for the BLS reporting of UER here: https://www.bls.gov/ces/ces_tabl.htm
Over the long-term, I would expect the differences to be insignificant. But I could be wrong. I don't feel the need to have backtested every intricacy in order to have confidence in the general results.
Well you are probably right for yourself and have a high probability of being correct as well.

In my case, I do feel the need to rigorously backtest. This is partly because I'm trying to reduce my investment anxieties. :shock: :happy

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Re: My trend following strategy and experience

Post by thx1138 » Sat Mar 02, 2019 10:52 am

Thanks for continuing to update this thread. I understand that in your case the strategy is switching between asset classes available within your various accounts which slightly complicates things and that you didn't notice the UER crossing in early January until a week or so late.

But keeping things "simple" for comparison to more typical indexes and strategies lets say we've got VTI for stocks and VGSH for short term treasuries. Your strategy (including the particular rounding you chose) would have had you trade out on 1/4/19 (the day the BLS UER stats were released) and then back in on 3/1/19 (first day of the month and VTI was above the 7 month moving average again).

VTI was 128.90 on 1/4/19 and 144.42 on 3/1/19 and VGSH was essentially unchanged including interest. So if someone had traded like that they would have ended up with 89.3% of what they would have had staying in stocks the whole period or a 10.7% whip-saw.

Does that seem like a fair representation of just what the "in-out" points and costs are for the more generic strategy stripped clean of the idiosyncrasies of your particular execution?

And so to date for the past few years this trading strategy has been getting the returns of an undiluted 100/0 AA until just now experiencing a 10.7% whip-saw. That a fair assessment?

As a rough estimate if we assume starting in Jan 2014 with $10K in this strategy I think the strategy would have been 100/0 for the entire time period up until 1/4/2019 when it would have switched to VGSH giving roughly a balance on 3/1/19 of 14560. Meanwhile a 85/15 portfolio rebalanced annually across the entire period would have had a balance of roughly 15360. So post whip-saw the trend following was at 94.8% of the steady 85/15 portfolio. So about half the whip-saw losses were made up for in additional exposure to equities prior to the whip-saw. Fair analysis?

So in summary from 1/2014 through 12/2018 the 100/0 portfolio had about 5% additional return over an 85/15 portfolio. Then from 1/4/2019 to 3/1/2019 the trend following got whip-sawed and lost about 10% ending up about 5% behind the B&H.

And of course the trend following is suppose to get whipsawed - that's the cost of doing business - and will look worst immediately after a whipsaw. It is suppose to protect against a crash but we haven't seen that yet to evaluate it.

All seem right as far as summaries go?

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Re: My trend following strategy and experience

Post by willthrill81 » Sat Mar 02, 2019 11:06 am

thx1138 wrote:
Sat Mar 02, 2019 10:52 am
Thanks for continuing to update this thread. I understand that in your case the strategy is switching between asset classes available within your various accounts which slightly complicates things and that you didn't notice the UER crossing in early January until a week or so late.

But keeping things "simple" for comparison to more typical indexes and strategies lets say we've got VTI for stocks and VGSH for short term treasuries. Your strategy (including the particular rounding you chose) would have had you trade out on 1/4/19 (the day the BLS UER stats were released) and then back in on 3/1/19 (first day of the month and VTI was above the 7 month moving average again).

VTI was 128.90 on 1/4/19 and 144.42 on 3/1/19 and VGSH was essentially unchanged including interest. So if someone had traded like that they would have ended up with 89.3% of what they would have had staying in stocks the whole period or a 10.7% whip-saw.

Does that seem like a fair representation of just what the "in-out" points and costs are for the more generic strategy stripped clean of the idiosyncrasies of your particular execution?

And so to date for the past few years this trading strategy has been getting the returns of an undiluted 100/0 AA until just now experiencing a 10.7% whip-saw. That a fair assessment?
Yes, that's a very fair one. Note that I have set up a system since the OP to head off the 'idiosyncrasy', as you so kindly put it, from occurring again.
thx1138 wrote:
Sat Mar 02, 2019 10:52 am
As a rough estimate if we assume starting in Jan 2014 with $10K in this strategy I think the strategy would have been 100/0 for the entire time period up until 1/4/2019 when it would have switched to VGSH giving roughly a balance on 3/1/19 of 14560. Meanwhile a 85/15 portfolio rebalanced annually across the entire period would have had a balance of roughly 15360. So post whip-saw the trend following was at 94.8% of the steady 85/15 portfolio. So about half the whip-saw losses were made up for in additional exposure to equities prior to the whip-saw. Fair analysis?
Yes, that's accurate.
thx1138 wrote:
Sat Mar 02, 2019 10:52 am
So in summary from 1/2014 through 12/2018 the 100/0 portfolio had about 5% additional return over an 85/15 portfolio. Then from 1/4/2019 to 3/1/2019 the trend following got whip-sawed and lost about 10% ending up about 5% behind the B&H.

And of course the trend following is suppose to get whipsawed - that's the cost of doing business - and will look worst immediately after a whipsaw. It is suppose to protect against a crash but we haven't seen that yet to evaluate it.

All seem right as far as summaries go?
Spot on.

I understand that it may take a while for my strategy to be 'vindicated' as it were. It's akin to paying for an insurance policy: you keep paying the premiums as long as you want coverage, and you might never make a claim. But if you never do, that doesn't necessarily mean that carrying the insurance was a poor strategic move because you didn't know that you wouldn't need to make a claim.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: My trend following strategy and experience

Post by tadamsmar » Sat Mar 02, 2019 9:44 pm

willthrill81 wrote:
Sat Mar 02, 2019 11:06 am
It's akin to paying for an insurance policy: you keep paying the premiums as long as you want coverage, and you might never make a claim. But if you never do, that doesn't necessarily mean that carrying the insurance was a poor strategic move because you didn't know that you wouldn't need to make a claim.
You say you are paying premiums on an insurance policy, but you don't say here what you are insuring against. Based on the OP, you seem to be insuring against the risk that you will sell out after stocks drop precipitously (as they did, for instance, on October 19, 1987). It that what you are insuring against? Have you back-tested to determine if this insurer is reliable about paying all these claims that you will need to make? The typical trend-follower will need to make a number of claims over their approximately 60-year investment life.

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willthrill81
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Re: My trend following strategy and experience

Post by willthrill81 » Sat Mar 02, 2019 10:00 pm

tadamsmar wrote:
Sat Mar 02, 2019 9:44 pm
willthrill81 wrote:
Sat Mar 02, 2019 11:06 am
It's akin to paying for an insurance policy: you keep paying the premiums as long as you want coverage, and you might never make a claim. But if you never do, that doesn't necessarily mean that carrying the insurance was a poor strategic move because you didn't know that you wouldn't need to make a claim.
You say you are paying premiums on an insurance policy, but you don't say here what you are insuring against.
Deep drawdowns, particularly those that aren't recovered quickly.

The 'insurance policy' statement is metaphorical.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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tadamsmar
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Re: My trend following strategy and experience

Post by tadamsmar » Sat Mar 02, 2019 10:20 pm

willthrill81 wrote:
Sat Mar 02, 2019 10:00 pm
tadamsmar wrote:
Sat Mar 02, 2019 9:44 pm
willthrill81 wrote:
Sat Mar 02, 2019 11:06 am
It's akin to paying for an insurance policy: you keep paying the premiums as long as you want coverage, and you might never make a claim. But if you never do, that doesn't necessarily mean that carrying the insurance was a poor strategic move because you didn't know that you wouldn't need to make a claim.
You say you are paying premiums on an insurance policy, but you don't say here what you are insuring against.
Deep drawdowns, particularly those that aren't recovered quickly.

The 'insurance policy' statement is metaphorical.
But you expressed a fear that you might sell out. People typically sell out in a panic after the crash well before they know the nature of the recovery. I have never heard of an investor who sold out a year after a crash saying "this recovery is taking too long so I put it all in short bonds".

Drawdowns tend to be harmless if you don't sell out. If you are insuring against something that is harmful, then what is it?

Would your insurer have paid that claim back on October 19, 1987? I figure a trend-follower can expect approximately two of those in an investing lifetime.

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