Early in September, Jeff Swanson from System Trader Success wrote an interesting article that completely ignores the price. He suggests that a large number of system traders focus exclusively on price based data. Since the market generally rewards those who stray from the crowd, he reasoned that it might be worthwhile to develop a system that uses a non-price based indicator.
システムについて
The non-price based indicator that Jeff elected to build his system around was the Short Term Trading Index (TRIN). This is a relative strength ratio that uses the advance / decline ratio and the advancing / declining volume to produce and oscillating value. TRIN values below 1 indicate general market strength, and TRIN values above 1 indicate general market weakness.
For this system, Jeff planned to trade S&P Futures contracts and use the TRIN value for all of the NYSE stocks. He combined that indicator with the 2-period RSI and used the 200-day simple moving average (SMA) as a trend filter. The system will combine one price based indicator and one non-price based indicator to identify short-term weakness in the market during long-term uptrends.
取引のルール
長いときを入力します。:
- 価格 > 200 日 SMA
- 2-RSI の期間 < 50
- TRIN closes above 1 for three consecutive days
長いときを終了します。:
- 2-RSI の期間 > 65
バックテスト結果
Jeff backtested this strategy on the E-mini S&P Futures market from September of 1997 through September of 2013. Starting with an account of $25,000, the system produced a net profit over that time of $24,470. 合計があった 91 取引.
The system registered a profit factor of 2.2 and won on 76% その取引の. The average annual rate of return worked out to be 4.49%. As usually happens with rough system ideas, the biggest problem with Jeff’s TRIN system was the maximum drawdown, which was over $11,000 ある時点で.
System Analysis and Improvement
ATR の停止
Following the backtesting results, Jeff makes it a point to remind us that this is a very rough idea for a system and that its return could be improved but implementing stop-losses and money management. That is the first recommendation I make to improve just about every system we have profiled here.
This system will trade much like a lot of the short-term mean reversion systems I have profiled. It has the same open-ended loss capabilities as those systems as well. Using a simple ATR multiple stop could go a long way towards protecting profits or even just keeping losses small.
Short Component
One of the improvements Jeff makes to his TRIN system is to add a bear market component. When price is trading below the 200-day SMA, he still looks to enter long positions, he just lowers the required 2-period RSI value. This forces the system to isolate only the very best situations.
I would be interested to see how the TRIN system would perform if instead he reversed all of the entry rules and looked to short the market. In a lot of the backtesting data that I have seen, adding a short component will decrease the overall profitability of a system on a per trade basis, but it will also increase the number of trades that system is able to generate. It would be very interesting to see how that would have worked here.
Multiple Markets
Another way to improve the system would be to find a way for it to generate more trade signals. This could easily be done if it was able to trade multiple markets. しかし, because it uses the TRIN value of the NYSE stocks, it would not be likely to perform very well in other markets.
One way to get more exposure would be to couple the system with another system that could be traded when the equities markets are not above the 200-day SMA. Trading a simpler 2-Period RSI System on commodity or bond futures during these times would certainly increase the number of overall trades, which might improve the numbers across the board.
About the TRIN Indicator
The TRIN Indicator was developed in the 1970s by Richard Arms. It is also referred to as the Arms Index. The name TRIN is short for TRading INdex. The TRIN is calculated by dividing a group’s advance/decline ration by its advancing/declining volume.
TRIN = (advancing issues / declining issues) / (advancing volume / declining volume)
TRIN is most popularly used on the NYSE and Nasdaq because their advance/decline data is widely available. Because bull markets are generally accompanied by large volume, TRIN numbers below 1 are considered bullish. TRIN numbers above 1 are considered bearish. The further the number moves from 1, the more bullish/bearish it becomes.
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