Stocks Edge Higher – Solid Gold Winners?? February 21, 2010
Posted by Marlowe Cassetti in Blogroll.trackback
U.S. stocks edged higher on Monday as takeover news and gains in bank shares on hopes of a regulatory reprieve 
were offset by uncertainty over the Federal Reserve’s policy intentions.
Until Fed Chairman Ben Bernanke clarifies the Fed’s thinking behind last week’s surprise hike in the discount rate, investors were set to tread carefully as they weigh the likely removal of the extraordinary liquidity that has propped markets up for months, analysts said.
The Dow Jones industrial average gained 15.12 points, or 0.15 percent, to 10,417.47. The Standard & Poor’s 500 Index advanced 2.46 points, or 0.22 percent, to 1,111.63. The Nasdaq Composite Index rose 4.24 points, or 0.19 percent, to 2,248.11.(commentary & photo courtesy of Reuters)
I had an opportunity to do some trading systems testing…..other folks trading systems. It started a few months ago when a cohort shared a somewhat pricey system for my evaluation. Since that time I have collected several other systems for examination. I cannot go into all the details of my investigation, but I can give you a quick synopsis.
- System #1 – Came with a fairly complete tutorial on how to trade the system. Included were a number of examples of successful trades for several stocks. I built a trading module to replicate the examples and I was satisfied that I had properly captured the system. I then proceeded to test the system over a basket of stocks over different time periods. My test results showed that the system was almost always unprofitable.
- System #2 – Was written up in a magazine as a “profitable pull-back” system. I went through a process similar to what I did for System #1. Its trading performance was at best marginal but mostly unprofitable.
- System #3 – Was a system a friend bought about 16 years ago for trading a select set of commodity futures. I built a model of this system and tried it out using commodity ETFs. It was marginally profitable but I have yet to try it out with actual future contracts.
- System #4 – Another magazine example and another failed system. The author does suggest augmenting this system with other, unspecified TA methods. I really don’t believe that such TA helpers exist.
The authors always give examples of profitable trades that I suspect were “cherry picked”. None showed trades over extensive time periods with a large portfolio of stocks or commodities and aggregated the the results. I also noted a lot of evidence of confirmation bias in the presentation of examples. And as a reader of the “systems description” it is quite easy to get sucked into believing that the system is a solid gold winner. NOT SO!!
RSI had no new picks tonight. Catch you tomorrow.
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