DV2 Performance In Review
Below is a chart of the DV2 indicator, an oscillator that I designed in 2008, otherwise known as the DVB (DV Bounded) as popularized by MarketSci in July of 2009. As you can see performance is strong this year- up over 30% despite a deep drawdown in May during the flash crash. The DV2 is on par for a typical year which is consistent with the lacklustre volatility we have seen YTD. Once again it is important to emphasize that it can be very difficult to outperform simple but highly effective strategies. Most traders would be better served paying attention to the best 3-5 strategies to form a composite judgement than trying to make highly nuanced predictions based on 10+ inputs that may not be among the best available (or worse yet multi-collinear). That said, strategies come and go, and watching the equity curve performance is important as an indicator of future performance persistence going forward. Strategies that break down immediately out of sample and never regain form are likely to be overfit. So far the out of sample performance of the DV2 is very strong, which is not surprising considering it is fairly simple to construct.