up to $133. There is still some way to go, but a considerable improvement,
despite the fact that the tighter stop lowered the percentage profitable trades to just
above 25 percent.
When the time came to alter the long-term and short-term true range calcu-
lations, it hit me that down markets more often than not are accompanied by an
increase in volatility, while the original model was looking for the opposite.
Therefore, I decided to reverse the criteria for the volatility, demanding higher
short-term volatility to enter a trade on the short side. This continued to improve
the results (not shown), so for the remainder of the research, this was the logic I
decided to go with.
Experimenting with various true range settings resulted in a long-term true
range of 10 days and a short-term true range of five days, which is the same as
for the long side, but with the logic and ruling reversed. This is good news, as it
indicates some sort of observable way of distinguishing between uptrends and
downtrends. That is, when the five-day volatility is lower than the10-day volatil-
ity, the trend is up and vice versa—perhaps something for you to look into on
your own? Table 12.9 shows that the system now is very close to breaking even
and that the number of profitable trading sequences has increased to 36 percent.
We’re getting there.
Experimenting with the lookback periods for the relative strength calcula-
tions, the same as for the long side, once again resulted in a 10-day lookback for
the slope, but also in a slightly shorter lookback period for the moving average cal-
culation. In this case, it turned out that a lookback period of 60 days produced theCHAPTER 12 Rotation 145
Short only, no trailing stop, 1 percent stop,
3 percent target, 10-day long TR,
five-day short TR, reverse TR criteria PercProf: 36.00
Trades PercWin NetProfit AvgProfit ProfitStD RiskRatio
Average: 64.32 26.55 (13,380.47) (19.58) Market
St. Dev: 49.41 7.00 38,338.45 1,478.71 7,444.69 (0.05)
High: 113.73 33.54 24,957.98 1,459.13 7,425.11 Portfolio
Low: 14.91 19.55 (51,718.92) (1,498.29) (7,464.27) (0.01)
ProfitFactor RiskFactor MaxDD PercDD PercTime AvgLength
Average: 0.96 (0.05) 54,450.76 49.27 21.38 11.07
St. Dev: 0.36 0.25 26,916.56 25.83 7.30 3.01
High: 1.32 0.20 81,367.31 75.09 28.68 14.08
Low: 0.60 (0.30) 27,534.20 23.44 14.08 8.05TABLE 12.9
Reversed the TR Criteria