Hello Paul, BCI is a great indicator but I would strongly suggest using it in conjunction with other indicators, otherwise as you rightly remarked - it will just be like flipping a coin.
Regards, Vipul On Tue, Jun 22, 2010 at 5:37 AM, Henrik Rasmussen <[email protected]>wrote: > > > That is some nice work Paul. > > I am not surprised that shorter periods did well, given the short term > volatility of the markets. > > I think the volatility has also been rough on short positions, except maybe > those short on BP stock. : ) > > > _____________ > Rik Rasmussen > > > On Sat, Jun 19, 2010 at 9:28 AM, tzsuj <[email protected]> wrote: > >> Dear Forum >> >> I'm a relatively new user of Best Charts – haven't use it for real yet, >> but am trying to get a handle on it theoretically first. BC seems to be an >> interesting and potentially powerful tool, but unfortunately it will take a >> bit of testing to get it set-up before I can use it with confidence.... >> >> I completed my first test run and I thought I would publish some of the >> results – to get some discussion going on here and also feedback from some >> of the more advanced forum members. >> >> Some specifics of the test: >> >> Test Period: 19 April '10 to 17 May `10 >> Test Stocks: Top 20 Australian stocks by market capitalisation (I used >> these as they are large, well traded stocks – good volumes, and hopefully >> the market is well enough informed such that true technical analysis >> principles can operate) >> Test Indicator: BCI (I only did the BCI indicator as based on previous >> optimisation testing, it seemed to give the best overall gains) >> Parameters: BCI was `optimised' each day (according to the series >> description below). I realise that the last parameter of the BCI is user >> defined and not automatically optimised – I just left this as the default. >> Buy/Sell Triggers: Instruction from the optimisation output each day – >> simply go long when `Bullish' and go short when `Bearish' (as per the intent >> of the test series below) >> Prices Used: Buy/sell at the opening price on the day following the >> signal generation. >> Stop Losses: No stop loss triggers were used – investment was held until >> the signal changed. >> Brokerage Costs: No brokerage costs were taken into account >> >> Test Series: #1 – Test Performance on Long Investment Only >> Optimisation Period: 229 days >> Optimise on Long Only >> Invest Long Only >> >> Test Series: #2a – Test Performance on Long and Short Investment >> Optimisation Period: 229 days >> Optimise on Long & Short >> Invest Long Only >> >> Test Series: #2b – Test Performance on Long and Short Investment >> Optimisation Period: 229 days >> Optimise on Long & Short >> Invest Long & Short >> >> Test Series: #3a to 3h – Test Performance on Optimisation Period >> Optimisation Period: 20, 60, 90, 120, 150, 180, 250, 320 days >> respectively >> Optimise on Long & Short >> Invest Long & Short >> >> Issues that may have affected the results/market: >> >> The overall ASX market during the test period – commenced at the start of >> a downtrend, 3 weeks duration. Recovery in the last week. >> The Greek sovereign debt crisis was rearing its head during the test >> period and got decidedly worse during the latter half of the test period. >> The Australian government announced the imposition of a higher rate of >> taxation on mining companies during the last week of the test period – this >> had a severe negative effect on resource stocks and resource service >> industry type stocks. >> >> >> Test results: >> 1. Interestingly, the percentage of winning trades for each test series >> (so # of winning trades for all 20 stocks in each test series compared to >> the total # of trades for all 20 stocks in each test series) came in at >> around 50% - the law of averages...... series #1 was low @ 38%, but the rest >> ranged from high 40's to mid 50's. This would suggest to me that using BCI >> in the way that I did is no better than flipping a coin – 50% of the time >> you will get heads and 50% of the time you will get tails. This is a bit >> disappointing as I would view the ability to pick a winning trade as one of >> the most important metrics – you need to be on winning trades for something >> like 70% of the time to have some sort of confidence that you are on the >> right track. >> >> 2. In terms of the most number of winning trades, tests 3b (60 day), 3c >> (90 day) and 3e (150 day) were the best performers with winning rates of >> 57%, 54% and 59% respectively. Encouraging, but not stellar. >> >> 3. 2/20 stocks did extremely well in terms of the # of test series with >> winning trades <70% - RIO (6/11 test series) and WOW (8/11 test series) – >> one resource stock and a consumer staple stock. During the test period, RIO >> was in a major down trend and WOW was in a range-bound pattern. As a >> comparison other stocks in the test population of 20 came in at 2-3 (at >> best) with series trades >70% winners. I don't know if there is anything to >> be read from this observation...... >> >> 4. % winning LONG trades (41-67%) was decidedly greater than the % >> winning SHORT trades (29-36%) for all test series. This is interesting, but >> not sure what I can conclude from it. It seems to suggest that BCI's >> shorting accuracy is less than that of long trigger accuracy. If you were >> to extend this concept and say, only invest long (but optimise on long and >> short), you would come up with a better outcome, but you would still only >> get in the high 60%'s for # of winning trades – close but not quite at the >> comfort level. WOW performed very well in terms of % of long winning trades >> – 7/11 tests achieved >70% winners. >> >> 5. It is difficult to present statistically correct and meaningful data >> for this item, but in general, the % gain/trade for winning shorts was >> significantly greater compared to the gain/trade for winning long trades. % >> Losses/trade for losing longs and losing shorts were about equal. >> >> 6. Performance against benchmarks – 4 benchmarks were used - #1 was the >> `buy and hold' movement of the share price for each stock during the test >> period, #2 was a theoretical 7% pa return, #3 was the movement of the ASX >> 200 index (top 200 ASX stocks) over the test period, and #4 preservation of >> invested capital. >> 6a. Stock buy and hold - All test series performed considerably better >> than the buy and hold scenario for each stock – the BCI series achieved >> gains > the benchmark for between 70-90% of the 20 stock test set. >> 6b. Nominal 7%pa interest – Mixed results. Series 1 and 2a were >> decidedly worse than the benchmark (10-15% of stocks outperformed the >> benchmark) – this is logical as these were series without shorting (so less >> time in the market compared to a constant 7% earning rate). Other series >> ranged from 40-70%, with best performers being 3b (70%), 3c (65%) and 3e >> (65%). The remainder averaged out at the 50% mark......the law of averages >> again ?? >> 6c. ASX200 buy and hold – similar to 6a – not surprising given make-up >> of ASX200 index. >> 6d. Preservation of capital – initial investment capital was preserved >> in most series (generally 60-70% of the 20 stocks preserved capital, for >> each of the test series), with the exception of series 1 and 2a (only 20% of >> the stocks preserved capital). The inability to short in these series is >> the obvious difference to the other series, however this doesn't explain the >> poor performance – if you couldn't short, then you just keep the money >> uninvented – so no risk. The only reason I can think of here is that the >> falling market did not correlate well with the 229 day test period data and >> the long only optimisation condition (for test 1) and the mismatched >> optimisation (long and short) vs investment practice (long only) (for test >> 2a) resulted in BCI not predicting well. >> >> 7. Annualised % returns across the 20 stock spread – if you invested >> equal initial amounts across the 20 stocks for each of the series, the >> following annualised returns are realised: >> >> Series 1 -38% pa >> Series 2a -41% pa >> Series 2b -1% pa >> Series 3a 22% pa >> Series 3b 47% pa >> Series 3c 44% pa >> Series 3d -26% pa >> Series 3e 20% pa >> Series 3f 24% pa >> Series 3g -13% pa >> Series 3h 3% pa >> Benchmark 1 -87% pa >> Benchmark 2 7% pa >> Benchmark 3 -94% pa >> Benchmark 4 0% pa >> >> >> So, in summary, the BCI testing showed OK results against a `buy and hold' >> strategy in a falling market, but the specific process used did not deliver >> consistently high probability results (refer point 1). Shorter optimisation >> periods (60 and 90 day) seem to work the best in this instance. Long >> trading was more successful than shorting (don't know why – this is counter >> market trend) and shorting wins were bigger than long wins. No results came >> close the optimised theoretical backtest results of ++100%pa (not sure if >> this is realistic though). >> >> I will conduct more testing going forward. >> >> Any comments or suggestions. Analysis spreadsheet is available upon >> request (it is a bit messy, but you will get the idea). >> >> >> Paul >> >> >> >> >> ------------------------------------ >> >> Yahoo! Groups Links >> >> >> >> > > >
