Using a trading system for marketing requires looking at a number of trading systems and knowing your personal style of trading. Market timing requires some investment research on past performance. How much past performance? You make the call. I don’t think one year tells me much. I personally don’t think 30 years tells me very much.
System trading strategies can be broken up into two main categories, Trend Following and Swing Trading. If you think that there is one trading system that works for every asset class, you are fooling yourself. Do you really think that the best trading system for the S&P 500 will be the best trading system for China, Oil, or Technology?
I had a call from an Advisor saying that he only wanted to use Trend Following as his Trading Plan.
Our investment research shows that different sectors, trade with different characteristics. He also wanted to know if I had back tested results for 100 years.
I tried to make two points to him.
1. Some assets don’t trade in trends.
2. The second point is that there were not many of the indexes we have today even 15 years ago, let alone 50 or 100 years ago. The active trading allowed today in EFT’s and Sector Mutual Funds open up a whole new world of trading.
Our investment research has shown that Buy and Hold on the XLK Technology SPDR didn’t work over the past 10 years. Now we all know that “Past performance is no guarantee of future results”. Buy if you are trying to outperform a Buy and Hold strategy, I would rather be using something with at least a 5 year 7 year or 10 year history when looking at a trading system. If you changed the time period to 5 years only, the results do change, but our investment research still shows Swing Trading Performed better than Trend Trading and our Adaptive Plans were among the top trading systems.
As a registered investment advisor managing multiple strategies, I understand the issues of frequent trading. We provide investment research with an impartial consistent research process. It is up to each money manager to determine what trading plan to use, which assets to include in their models and what percentage each asset represents.
For the XLK, Technology Select SPDR, if you were limited to Trend Following only with few trades, both Trend Plan 6 and Trend Plan 10 produced much better performance than Buy and Hold. It does not answer the question of “What is the best trading system?” The best trading system for the XLK, Technology Select SPDR seems to be a Swing Trading market timing approach.
For more information on systematic trading, visit www.seleznovcapitaladvisors.com
