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Using the DVI: Some Performance Stats

December 15, 2009

The best thing about the DVI   is how consistently it identifies “value zones” for the S&P500.  When the DVI is less than .5 the market is oversold and when the market is over .5 the market is overbought. It may not be an indicator that is competent at identifying possible peaks such as the DVDS or DVO, but it is excellent and much more robust at telling you when to close your longs and when to close out your shorts regardless of what other conditions may exist for the long or intermediate trend.  Thus the DVI does not pick out the exact peak or valley but rather an average area that is likely to represent good or bad value. The following table says it all:

CAGR, Win % and Average Daily  Using DVI Indicator on SPY (S&P500) Different Entry Conditions (3000 bars) 
  CAGR w% average daily return
Today is an UP day 3% 55.30% 0.05%  
Today is an DOWN day 10% 57.50% 0.17%  
Close>20 day moving average 5% 58.40% 0.15%  
Close<20 day moving average 6.70% 56% 0.10%  
Close>200 moving average 7.60% 58% 0.12%  
Close<200 moving average 4.40% 54% 0.09%  
  CAGR w% average daily return
Today is an UP day (-7.4%) 47.7% (-.11%)  
Today is an DOWN day (-2.5%) 50.0% (-.04%)  
Close>20 day moving average (-6.3%)  49.0% (-.06%)  
Close<20 day moving average (-3.9%) 47.0% (-.20%)  
Close>200 moving average (-4.5%) 49.5% (-.05%)  
Close<200 moving average (-5.6%) 47.0% (-0.13%)  


Regardless of the entry condition, the DVI subsumed them all–even the 200 day moving average and reverse daily follow through (buying after down days and selling after up days). Buying a DVI<.5 was essentially the value line—below .5 you made money, above .5 you lost money no matter what the setup. Impressively this is just above or below the median! Trading is easy with the DVI……..simply follow the long, short, or intermediate trend and exit your position when the DVI says that the move has likely been exhausted. Re-enter when the DVI is in your favor: for longs this would be below .5 and for shorts this would be above .5. The DVI is something I now use every day to determine whether or not to stay long or short on a given position—when in doubt, follow the DVI!  Later this week, I will show a pretty chart of a couple different strategies using the DVI and how they perform.

3 Comments leave one →
  1. vicken permalink
    December 16, 2009 7:16 am


    Congratulations for your impressive work ! I am a Ninja Trader user, do you will offer your indicators available for NT shortly ?


  2. Ray Safaie permalink
    December 22, 2009 12:16 pm

    Hi Dave, I am big fan of your work, and follow your blog every day. I am also a client of Jeff at Mkt rewind. Will the DVI, DVO or a similar indicator function just as well on an intraday time frame? thx, ray

  3. justin permalink
    July 28, 2010 1:00 am

    Hi Dave. Have you tested this on individual stocks?

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