I have been using a simple inflection system based on weighted moving averages to determine the long term direction of the market. So far, it has worked extremely well in entering and exiting long, market based positions.
I have also found that it works extremely well intra-day, using constant volume bars.
Unfortunately, when I try to apply this to individual equities with daily bars, it completely falls apart. I can't seem to identify a good moving average without optimizing for each equity -- which, even over a long period of time, I find to be too much of an exercise in curve fitting and not based on any fundamental truth of the market.
I think I must add an additional parameter for recent volatility as well as covariance to market and sector movements (and perhaps their volatility as well?). An excellent example would be CAT recently: I was alerted that it was undervalued at around $65. However, volatility has been so high recently, moving averages barely budge. I never ended up investing and seem to have missed the opportunity -- the stock quite simply moved too fast due to recent market volatility.
I have come up with a system that seems to be excellent at screening fundamentals to determine undervalued picks, but my timing is horrible -- and when fundamental data can be up to three months lagging, timing based on price action is a must!
Thoughts?
Thanks!
C
I have also found that it works extremely well intra-day, using constant volume bars.
Unfortunately, when I try to apply this to individual equities with daily bars, it completely falls apart. I can't seem to identify a good moving average without optimizing for each equity -- which, even over a long period of time, I find to be too much of an exercise in curve fitting and not based on any fundamental truth of the market.
I think I must add an additional parameter for recent volatility as well as covariance to market and sector movements (and perhaps their volatility as well?). An excellent example would be CAT recently: I was alerted that it was undervalued at around $65. However, volatility has been so high recently, moving averages barely budge. I never ended up investing and seem to have missed the opportunity -- the stock quite simply moved too fast due to recent market volatility.
I have come up with a system that seems to be excellent at screening fundamentals to determine undervalued picks, but my timing is horrible -- and when fundamental data can be up to three months lagging, timing based on price action is a must!
Thoughts?
Thanks!
C