Can It Be This Simple? S&P 500

[systematictrader]

Can it be this simple, this outperformed the market by 1% and with way LESS volatility and i dont see how it cant do the same again in the future, even if unperformed, the lower volatility might be worth it for some people, at least for me it is

THE SYSTEM IN THE PICTURE is simply the MACD WEEKLY CHART above or below 0, above zero ur in, below zero UR OUT, NOT SHORT, SIMPLY FLAT

below a visual summary, orange shade = in, white = flat

what u guys think?

ive been deploying this 3 years so far

STORY BEHIND IT HERE

about 4 years ago i finally realized that at the time i was still a losing trader, and that there is no point in adding money to a trading account until i establish a consistent upward trend, regardless of the dollar value in my account, at that time i decided to have PLAN B which is to max out my yearly contributions to my 401(k) ($18,000) and IRA ($5,500) and do the standard buy and hold until i become a winning trader and to maximize tax deductions from my income at my job, the 401(k) simply allows either cash, or stocks (S&P 500) nothing else. the IRA allows other stuff which is use for individual stocks (see my other threads)


fast forward 5 years the money became bigger from the contributions and the gains weve been experiencing, i realized no way in hell i can stomach a drop of 2008 magnitude and still cant today considering i have no savings besides these pretax accounts since i squeeze all my resources to hit the maximum threshold allowed by IRS


i wanted to find something ultra-simple that improves simply on buy and hold while lowering volatility and after sometime i did find something, yet it seems too simple but its methods and backtracking results prove its superiority, at least so far,

 

[eganon69]

I use MACD in my trading and I can tell you this method you describe is possibly SLIGHTLY better than just buy and hold and will keep you out of long periods of bear markets but will usually underperform in strong BULL markets which we have had over the last 8 years Even though it is how MACD is generally defined (UP trend above ZERO Line and DOWN trend below ZERO Line) this will have you underperform the S&P index because you will be lagging the up trend in most cases. There will be a cross above ZERO near the beginning of an UP trend and by the time the signal is given the trend is already underway. If the market trends UP (MACD > 0) then retraces DOWN (MACD < 0) and then UP again you will be more profitable because you will enter just after the trend starts and sell during retracements. The problem comes when the market goes sideways or MACD whips above and below ZERO many times causing many losses as you go long and sell with each cross. Bottom line you will NEVER outperform the S&P Index with this method and you CAN (if you are lucky) match it at best but likely will slightly underperform the index compared to buy and hold.

Trust me on this as I have studied this indicator more than any other over the last 10 years and have made it profitable in my trading. I will say you are on the right track but you should try to learn the nuances of MACD and develop specific rules for UP trend and DOWN trend. Try to also compare that with the MACD in at least 2 other time frames. This will make it more useful.

 

[systematictrader]

I use MACD in my trading and I can tell you this method you describe is possibly SLIGHTLY better than just buy and hold and will keep you out of long periods of bear markets but will usually underperform in strong BULL markets which we have had over the last 8 years Even though it is how MACD is generally defined (UP trend above ZERO Line and DOWN trend below ZERO Line) this will have you underperform the S&P index because you will be lagging the up trend in most cases. There will be a cross above ZERO near the beginning of an UP trend and by the time the signal is given the trend is already underway. If the market trends UP (MACD > 0) then retraces DOWN (MACD < 0) and then UP again you will be more profitable because you will enter just after the trend starts and sell during retracements. The problem comes when the market goes sideways or MACD whips above and below ZERO many times causing many losses as you go long and sell with each cross. Bottom line you will NEVER outperform the S&P Index with this method and you CAN (if you are lucky) match it at best but likely will slightly underperform the index compared to buy and hold.

Trust me on this as I have studied this indicator more than any other over the last 10 years and have made it profitable in my trading. I will say you are on the right track but you should try to learn the nuances of MACD and develop specific rules for UP trend and DOWN trend. Try to also compare that with the MACD in at least 2 other time frames. This will make it more useful.

Egonan, first and foremost i want to say we should talk because i also use the macd as a corr in my tradingg and have studied for about 7 years so far, for my trading which is not this,

Now as far as this thread u bring me to a question, based on the time period i posted in the picture it did beat the S&P 500 by 1% annually and most importantly it got out on the two biggest drops

I see what you mean it unserperforms in bull and works in bear but arent we concerned about overall performance rather than year to year in terms of long term investing ? What you think ?

I tried the S&P 500 with timeframes as daily but didnt seem very good

However in ither trading and systems developing where i spend most of my time macd daily is where my bread and butter

 

[Zzzz1]

Ultra simple? There is nothing ultra simple in this game. If you are afraid or perceive too much risk exposure in your retirement/pension account then you should go in cash. You should never gamble with your stash in your retirement account. Regarding your "strategy", MacD and tons of other indicators do not hold up over the long term. You will lose more money than you gain. If you do not have a more intelligent strategy I highly recommend you to stay away from this industry and simply max out your pension account contributions and have your employer match up to their caps. Best advice you will get on this site.

Many professional, institutional traders I know hold tbills in their savings and pension accounts. No other investments. I am not saying thats the most optimal allocation for average Joe but it makes a strong point imho.

Can it be this simple, this outperformed the market by 1% and with way LESS volatility and i dont see how it cant do the same again in the future, even if unperformed, the lower volatility might be worth it for some people, at least for me it is

THE SYSTEM IN THE PICTURE is simply the MACD WEEKLY CHART above or below 0, above zero ur in, below zero UR OUT, NOT SHORT, SIMPLY FLAT

below a visual summary, orange shade = in, white = flat

what u guys think?


View attachment 170236

ive been deploying this 3 years so far

STORY BEHIND IT HERE

about 4 years ago i finally realized that at the time i was still a losing trader, and that there is no point in adding money to a trading account until i establish a consistent upward trend, regardless of the dollar value in my account, at that time i decided to have PLAN B which is to max out my yearly contributions to my 401(k) ($18,000) and IRA ($5,500) and do the standard buy and hold until i become a winning trader and to maximize tax deductions from my income at my job, the 401(k) simply allows either cash, or stocks (S&P 500) nothing else. the IRA allows other stuff which is use for individual stocks (see my other threads)


fast forward 5 years the money became bigger from the contributions and the gains weve been experiencing, i realized no way in hell i can stomach a drop of 2008 magnitude and still cant today considering i have no savings besides these pretax accounts since i squeeze all my resources to hit the maximum threshold allowed by IRS


i wanted to find something ultra-simple that improves simply on buy and hold while lowering volatility and after sometime i did find something, yet it seems too simple but its methods and backtracking results prove its superiority, at least so far,

 

[systematictrader]

Ultra simple? There is nothing ultra simple in this game. If you are afraid or perceive too much risk exposure in your retirement/pension account then you should go in cash. You should never gamble with your stash in your retirement account. Regarding your "strategy", MacD and tons of other indicators do not hold up over the long term. You will lose more money than you gain. If you do not have a more intelligent strategy I highly recommend you to stay away from this industry and simply max out your pension account contributions and have your employer match up to their caps. Best advice you will get on this site.

Many professional, institutional traders I know hold tbills in their savings and pension accounts. No other investments. I am not saying thats the most optimal allocation for average Joe but it makes a strong point imho.

Few clarification
Iam 28, i got 32 years to retirement, iam not in need of this money neither am i wanting to trade it, iam simply saying i dont believe i can handle a severe drop and wanted to find something that gets me out during major drops, what shocked me about this is i didnt expect it to outperform yet it did by 1 point a year for the last 22 years as shown on chart

And i do max out and get the employer match and this is what this post is about, its about investing and not trading, as u can see in the picture only 13 trades were done which is actually less the recommended quarterly rebalancing

Also isnt buy and hold ultra simple? This seems simply a bit more on top? What you think ?

By the way my employer pension and 401k is one, there isnt the pension of defined benefit, i dont have that

 

[systematictrader]

Ultra simple? There is nothing ultra simple in this game. If you are afraid or perceive too much risk exposure in your retirement/pension account then you should go in cash. You should never gamble with your stash in your retirement account. Regarding your "strategy", MacD and tons of other indicators do not hold up over the long term. You will lose more money than you gain. If you do not have a more intelligent strategy I highly recommend you to stay away from this industry and simply max out your pension account contributions and have your employer match up to their caps. Best advice you will get on this site.

Many professional, institutional traders I know hold tbills in their savings and pension accounts. No other investments. I am not saying thats the most optimal allocation for average Joe but it makes a strong point imho.

The point iam
Getting at is not this is the holy grail but in how could it fail to deliver in details ? Even with whipsaws showing in the picture over all it beat buy n hold and most importantly besides the return it never dufferd more than a 20% drop peak to bottom

 

[Zzzz1]

Cash gets you out, pure and simple

Few clarification
Iam 28, i got 32 years to retirement, iam not in need of this money neither am i wanting to trade it, iam simply saying i dont believe i can handle a severe drop and wanted to find something that gets me out during major drops, what shocked me about this is i didnt expect it to outperform yet it did by 1 point a year for the last 22 years as shown on chart

And i do max out and get the employer match and this is what this post is about, its about investing and not trading, as u can see in the picture only 13 trades were done which is actually less the recommended quarterly rebalancing

Also isnt buy and hold ultra simple? This seems simply a bit more on top? What you think ?

By the way my employer pension and 401k is one, there isnt the pension of defined benefit, i dont have that

 

[Zzzz1]

It looks nice on charts in hindsight. Do you believe anyone on Wall Street would undergo years of extensive college and grad school and then many more years of on the job training to become a derivatives specialist if all the goodies were ready for the picking in MacD? You think you are smarter than the rest? I am not faulting you for assuming such, a lot of people on this website believe so, but I think the reality looks different.

The point iam
Getting at is not this is the holy grail but in how could it fail to deliver in details ? Even with whipsaws showing in the picture over all it beat buy n hold and most importantly besides the return it never dufferd more than a 20% drop peak to bottom

 

[systematictrader]

It looks nice on charts in hindsight. Do you believe anyone on Wall Street would undergo years of extensive college and grad school and then many more years of on the job training to become a derivatives specialist if all the goodies were ready for the picking in MacD? You think you are smarter than the rest? I am not faulting you for assuming such, a lot of people on this website believe so, but I think the reality looks different.

Where is the derivatives specialist and all that coming from, the question is simply where could this fail in getting one out of a serious downtrend, this is no claims that this will make billions or beat the guy who went to school for so many years

 

[systematictrader]

Cash gets you out, pure and simple

The simple notion of buy and hold
Still Works, the question is could it be beat this simply, either by returns or lower volatility as indicated above,

This is not indicating were gonna outdo wall st by a simple indicator