New Model for Russell 2000

[professor_56]

Here's one I've been working on. It's based on the RUT Weekly data. It is still on a Buy Signal. I'm not trading it yet because it's only been going in real time for several months, but it looks promising. Since I trade Rydex funds, I would only be buying and selling the Long side, i.e. Mekros(RYMKX), which is designed to track the RUT index @ 150% of the RUT's daily moves.




professor_56

[professor_56]

I trade Rydex funds, so I can't really "sell short", however there are inverse Rydex funds that I can trade, though not a RUT inverse one. The closest inverse Rydex fund to the RUT is RYSHX, which is an inverse small cap fund (no leverage). By the way, I am now trading the RUT model (both ways) with a relatively small amount of money. I have found that the RUT responds to certain indicators & approaches much better than the SPX, NDX, etc., though some of these other funds do quite well using the RUT signals.

professor_56

[Peter123]

Why don't you sell short on the sell signals? Do you use the $RUT because of its good trend characteristics? I noticed Decions Point's PMO works very well with $RUT. Thx.

[professor_56]

It's official. The RUT model is now on a Sell signal. I'll do an update when it gets close to the next Buy signal.

professor_56(Bill O.)

[HenryTo]

Thanks for the update, Professor_56! I was about to send you a PM seeing if you had an update for us.

Please do let us know if your model does officially switch to a sell signal on Friday evening.

Thanks,

Henry

[professor_56]

Barring some very unusual activity in the RUT between now & tomorrow's close, the RUT model will officially be on a Sell signal at tomorrow's close.

professor_56 (Bill O.)

[professor_56]

Yes, we do have different POV's. To me the term "investor" implies buying stocks mostly for fundamental reasons and then holding for relatively long periods of time. Under that definition, I am in no way an "investor". I would describe myself as a swing trader or position trader, two terms that don't seem to have very precise difinitions either. Actually, I almost became a day trader. It wasn't even in 1999-2000 when everyone seemed to be a day trader. I did much research and simulated trading before I regained my senses, figuring out how demanding and stressful day trading would be for me. That was the end of my day trading career.

What I have been doing for years is trading Rydex Index funds, mostly the Dynamic NDX, SPX, and lately Dow Industrials, as well as the Rydex Precious Metals Fund, which closely correlates to the XAU. I also spend a considerable amount of time checking out various indicators, etc. in an attempt to construct trading models to help me trade. I'm always leery of over optimization, so often don't trade my own optimized models unless I do so with very small amounts of money. One lesson I've certainly learned is that making money trading is much more difficult than it looks.

You mentioned trying to protect your investments from market crashes. I believe the ECRI's Weekly Leading Index is potentially a great tool to help anyone do just that. One of these days, I'll subscribe to ECRI to get the data that I could plug into Metastock to check it out in a more systematic way.
Thanks for your reply.
professor_56 (Bill O.)

[nodoodahs]

Thanks professor_56,

I ask because I'm curious.

Differing POV, in the market, I am predominantly a value investor for individual stocks. I started modeling to try and protect that investment from market crashes. After having some success with backtesting and forward testing models, I'm starting to get into system trading.

It seems most of the folks I've corresponded with on this issue are traders first, modelers second, and investors third. There are exceptions but that seems to be the rule. I seem to be investor first, modeler second, and trader third.
_________________
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[professor_56]

Hi, Bill
In answer to your questions:
1) It's entirely TA.
2) The inputs involve Weekly Highs, Lows, & Closes, as well as the Lowest Weekly Lows, and Highest Weekly Highs over various periods. Volume is not one of the inputs.
3) I've been trading funds for many years, so the model came about after I started trading funds. Why did you ask that question?

professor_56

[nodoodahs]

Looks good, professor_56!

Questions ...
(1) is it TA, FA, or both?
(2) do you mind disclosing inputs?
(3) did you make the model before or after starting to trade funds?
_________________
He was wearing my Harvard tie. Can you believe it? My Harvard tie. Like oh, sure, HE went to Harvard.