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Performance of DV2 on the Bottom 50 LTR (DV Index) versus the Top 50 LTR (Trend Index)

April 6, 2010

To continue the story about a tale of two markets within the Nasdaq 100– below is the performance of “The DV Index” or otherwise the equivalent of a  swing or mean-reversion oriented index. The DV Index is constructed using the Bottom 50% of stocks in the Nasdaq 100 by LTR–a proprietary measure of the  historical tendency of a stock or market to trend. For comparsion we show the performance of the Top 50% of stocks by LTR–which is effectively a trend index.  The difference is substantial–similar to what was seen with the reverse daily follow-through (although dv2 was powerful enough to ensure positive performance on both). What is striking is the incredible risk-adjusted returns to be had by sticking with the DV Index versus the Trend Index. Again, this highlights my point that not all markets or stocks are the same–and the smart trader will gravitate to the stocks/markets that best suit their style. Note: The DV Index and LTR rankings for the Nasdaq 100 and S&P500 will be available on a weekly basis to subscribers to the new DV Excel Plug-In with dozens of indicators as well as a new set of adaptive indicators. The plug-in is an incredible research tool and coupled with the  LTR rankings, one can create highly profitable and unique strategies to set you apart from the crowd.

 

14 Comments leave one →
  1. April 6, 2010 8:36 am

    with average trade of 0.28% and 0.49 what happens when one accounts for commissions and slippage?

  2. david varadi permalink*
    April 6, 2010 10:29 am

    hi jt, you are correct however this was not a strategy demonstration–using any type of deeper entry/exit that would easily survive commission or short-term mean-reversion strategy would show the same results—a higher performance for mean-reverting stocks and a lower performance for trending stocks.

    best
    david

  3. April 6, 2010 10:38 am

    David,
    Thank you, great articles!

    One question, isn’t the LTR highly correlated with relative strength? You said you combine the two for the Livermore Index.

    • david varadi permalink*
      April 7, 2010 12:03 am

      hi t, LTR is not highly correlated with relative strength because LTR can go in both directions–ie a trendy stock is a trendy stock regardless of the range or direction of range that it has travelled. in contrast relative strength is an attempt to measure the velocity of the fastest stocks or ones moving up the most/losing the least.

      best
      david

  4. eber terandst permalink
    April 6, 2010 10:53 am

    Which list of Nasdaq 100 stocks you use ? The current one or the list that was at every point in time of the back test ?
    Thanks
    eber

    • david varadi permalink*
      April 7, 2010 12:01 am

      hi eber this is the near suvivorship free version with quarterly updates in holdings.
      cheers
      david

  5. April 6, 2010 12:16 pm

    I don’t know what LTR is, but ADX doesn’t only represent trendiness because it also incorporates strength. Choppiness is probably closer to what LTR is trying to measure and what does that mean? How much ink does it take to trace out the movement of the stock divided by how much it actually moved?

    This may help: http://www.jamesgoulding.com/Research_II/Chaos%20Theory/Chaos%20Theory%20(Measuring%20market%20choppiness%20with).doc

    • david varadi permalink*
      April 7, 2010 12:04 am

      hi alex, indeed choppiness is more relevant in the metric than the presence of a trend. good comment.
      best
      david

  6. Jack permalink
    April 6, 2010 12:56 pm

    David, do you have a release date set for your DV Excel Plug-in? In reading through the recent posts and comments, it looks like it’s pretty close. (I feel like a little kid waiting for Christmas morning.)

    • david varadi permalink*
      April 7, 2010 12:00 am

      hi jack, we should be releasing on Monday the plug-in is complete and the final touches are in progress.

      best
      david

  7. kostas permalink
    April 7, 2010 1:00 am

    Hi David–one suggestion when you present monthly returns over years in the strategies’ scorecard: if you use Excel’s conditional formating tool with color scales, then the cells of the monthly returns get colored depending on their relative size in the spectrum and that immediately helps your readers to “visually quantify” the distribution of returns and compare strategies. K

    • david varadi permalink*
      April 7, 2010 1:57 am

      thanks kostas i will look into that.(or should i say corey will :o))
      cheers
      david

  8. drcharmat permalink
    June 15, 2010 6:16 am

    “Note: The DV Index and LTR rankings for the Nasdaq 100 and S&P500 will be available on a weekly basis to subscribers to the new DV Excel Plug-In”

    Hi, I bought the DV Excel Plug-in a while ago. Based on your note, I have a feeling that there is (or will be) a weekly newsletter to subscribers listing the LTR rankings of the Nasdaq100, and SP500 stocks.
    Could you advice on the state of this?

Trackbacks

  1. The Conceptual Link Behind the “LTR” Ranking « CSS Analytics

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