The Premium Weekly Signals report is based on signals generated by six trading strategies. Below are some notes on the interpretation of those signals.
For more details about the reports and performance click here.
There are at least three important considerations regarding the signals:
- Strategies to consider
- First time use
- Relative performance variations
Strategies to consider
We offer a good mix of strategies, six in total:
- One adaptive-trend following
- Two mean-reversion
- Two rotational
- One market neutral long/short
Subscribers may decide which strategies to follow based on historical performance and personal criteria. It is not required to follow all strategies. For example, someone may be interested only in the rotation strategies and someone else only in the mean-reversion strategies. We have subscribers only interested in the trend-following strategy and ignore the other ones. But we also have subscribers only interested in the Dow long/short strategy.
First time use
The first time to consider the signals, the Sell and Cover signals are ignored naturally because there are no open positions. Only Buy and Short are taken into account. In the case of open positions, those may be considered depending on strategy nature. For example, since trend-following and rotational strategies stay in positions for a long time, it is usually decided to consider their open positions. For shorter-term strategies, such as long/short or mean-reversion this is not as important.
Relative performance variations
Relative performance of signals depends on the date of first Buy and/or Short signal. There is no robust way of choosing the when to first consider signals. Usually, some traders wait for a drawdown before considering signals of a strategy but this is risky as good performance may persists. In the longer-term the entry point is not important but in the short-term performance variations can be very large.
In the example of a long-short 50/200 moving average crossover strategy in SPY ETF, since 01/200, Trader A starts following the strategy on the first day of 2015 while Trader B does that on the first day of June, 2016.
The difference in performance is large: as of 08/13/2018, total return for trader A is 23% versus 40% for Trader B. Possibly, in the longer-term (after many years) the difference may appear small, but in the short-term it is large. Therefore, first date of following a strategy is important, although a topic rarely discussed due to complexity.
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