One of the indices that I use in my trading systems is the Small Ords. The top red line is a one week Rate of Change line.
Drops greater than 3% in a week have occured every year for the last 3 years. Prior to 2005 we had a dream run from 2002 to 2005 without any one week dropping more than 3%. Even 2002 (not a good year) did not have a week with a 3% drop. Before 2002 3% drops were fairly common.
So, to put the recent market weakness in perspective, it's business as usual for the markets. I can't see any black swans yet!
We have had it so good since 2003 so it's nice to see how our systems perform when the markets turn south.
stevo
5 comments:
Stevo,
Boy, what a lot of questions that chart raises. Firstly, I agree, business as usual. I posted over at ASF recently when someone asked what constituted a crash, that be anywhere close to '87 we needed to see 4150 on the XAO in the next 4-6 weeks. A crash of the same magnitude as '87 would see the XAO well below 4000 points. othing is impossible, but the way this is playing out there isn't anything to suggest this is a likely event, yet.
I'm hesitant to ask too much about the IP you've developed. I'll just say that is looks like this ROC measure could be used like a buy signal on/off switch. Really interesting idea actually.
ASX.G
Hi Stevo.
I have a general question for you please.
Im just starting out using metastock and tradesim and i wanted to ask you, with your data, do you get the historical constituents for the indices (eg. ASX300, All Ords, etc).
Because obviously you would need this if you were to backtest a system using an index as your universe.
Richard Dale from Premium data (my data provider) claims that he nor do any other data providers have this service.
Any suggestions would be very much appreciated.
Nizar.
Nizar
I don't have historical index constituents, only the current index constituents. Tests could be run on different stock universes, even randomly generated universes if you want to have some fun.
I really should be sailing!
stevo
Hi Stevo.
Indeed you should be sailing after cleaning up the markets the last few years!!
I realise that you may want to keep this info to yourself, but would you please shed some light or point me in the right direction as to how you get your drawdowns so small?
Single digits, I mean, for the returns your making, thats very impressive.
Nizar.
Nizar
Over the last few years I have done well because the market has been strong and I have a long term system that doesn't try to do anything too clever - like picking turning points, or buying stocks that are falling!
The next 3 years, or even the next 3 months, may be a different matter.
stevo
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