Tuesday, August 11, 2009

TopTicker vs VIX Advantage

After Friday's post on the VIX % Change Advantage I received a number of comments suggesting that the use of the VIX may not really provide any advantage in determining the momentum of the SPX and, after a series of comment exchanges, TopTicker provided some code to test.
Normally I don't do reader requests, my workload is quite full already, thank you very much. But I'm a practical and inquisitive kind of guy, a Capricorn by birth, and my first response to any such query is "show me the code!'.
Now I understand that some bloggers are reluctant to post code, either because they think somebody will steal it and make a gilzillion dollars and they won't get any residuals or any number of other reasons. I have no such reservations. On the downside I have noted with some dismay that some of my dirty dozen systems have been offered on a number of sites as monthly fee based systems. Of course, I was never contacted, offered any revenue split or acknowledged as the author of the code. That's the world we live in. Some eagles and some bottom feeders.
Sorry for the digression.
Nevertheless, I wanted to test TopTicker's hypothesis and ran a backtest of the exact same time frame using only the SPX and the entry TopTicker provided.
I used the same exit signals and the same inputs.
The results are shown above.

Now, to give the system a fair chance, I re-optimized the inputs, which yielded a 9,2 setting as opposed to the %VIX settings of 9,5.
Those results are shown above and reflect a much improved net return.
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The equity curve shown below reflects the re-optimized 9,2 inputs, and does amazingly well until trade 70, which corresponds with Feb, 4 ,2009.
Obviously there's been a basic change in the trading paradigm subsequent to that period as 14 of the last 17 trades have been losers.
Keep in mind that this is an incredibly simple system and we could obviously control the drawdown with a variety of stops and checks.
That being said, a simple "do the opposite" approach to the SPX does appear to merit further investigation . . . which at this juncure I will leave to TopTicker, Michael and others to investigate.
I also highly recommend checking out Jeff Pietsch's spin the DV-2. Jeff is a thinking man's quant whom I am honored to call a friend. He also runs a chat room frequented by a few other notable bloggers and his fee based products IMHO are a exceptional value at 5x the price.

The TopTicker TradeStation 2001 code language is shown below for those that want to fiddle with it some more. Let me know how it goes. . . .

5 comments:

Toptick said...

I thought they would have closer results. With the same parameters (first results shown), the number of trades was identical, at least.

You are a scholar and a gentleman. Thanks!

Michael S said...

RE: "On the downside I have noted with some dismay that some of my dirty dozen systems have been offered on a number of sites as monthly fee based systems."

Okay, I gotta' ask. Which sites? Got to unmask these unsavory fellows.

michael

bzbtrader said...

Michael,
Thanks. I've already taken steps to get those offerings deleted and in order to incur additional legal hassles I'll forego naming the main offending site.

Michael S said...

well done

bzbtrader said...

Michael,
Yes, I have to thank you and your posse for driving me to rethink my underlying assumptions. I'm looking forward to more on your ambitious new project and am intrigued by your results to date:
http://marketsci.wordpress.com/2009/08/10/the-state-of-short-term-mean-reversion-july-2009/