Whilst sipping my coffee yesterday morning, as a much needed distraction to rest my enfeebled brain from programming a major update to the venerable DV Indicators for Excel Plugin (* stay tuned), I decided to take a first hand look into the inner workings of seasonality….
While there are many well known and oft written about seasonality effects embedded deep in the investor psyche as old saws such as, Change of Month, January Effect, Sell in May, and so on, this was greenfield for me. Frankly, I wasn’t expecting much. Therefore, to make the study easy on myself, rather than looking into so many varying and distinct effects, I began very simply, encoding the most simple historical effects into a searchable time-based ‘DNA’, if you will. Early results weren’t bad. In fact, they were surprisingly good. Then I took the next step of combining simple timing algo’s along with seasonality effects in tandem — and my jaw hit the floor.
Seasoned systems developers know better than to get overly excited by smooth parabolic equity curves. Count me in that camp. So, after looking for the usual suspects (over fitting/ forward feeding data), I passed the simple algorithm over the fence to fellow trader Corey Rittenhouse to ‘verify’ (always a good idea). Result: clean bill of health.
So what is the source of these returns? How could swing trading possibly be this easy? Is it lunar and solar cycles affecting our collective consciousness? Is there really a secret cabal coordinating world-wide money flow? Have I been reading too much Red Dragon Leo? [respect Leo]
OK, I’m having a bit of fun here and this reads like a bad web sales pitch as it is. But I have to grant, there is probably something to this approach, and I will share select aspects of my findings after I have considered what level of discussion is appropriate for the Internets. Does this make me part of the cabal? The Truth is out there, my friends!
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