GordonTheGekko
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The first sane and useful post I've seen in awhile. +1
Elite Trader seems quieter than usual today
- Thread starter SteveNYC
- Start date
The first sane and useful post I've seen in awhile. +1
Not sure about the 50/200 cross over system beating buy and hold system. Wouldn't time periods be a factor?
If you bought at the bottom in 1932 and sold at the top in 2007, you would have never experienced any whipsaws.
If you used the 50/200 cross over system, you would have been whipsawed. The whipsaws would put you behind the buy and hold investor.
Nope. The data say otherwise:
http://www.optionetics.com/market/articles/21577
You have to remember that you'd avoid the bulk of an 80%+ drop during the Great Depression and at least three other bear markets in the 50% range. Plus, 50/200 doesn't whipsaw nearly as much as a stand-alone 200 MA.
I suggest doing more research and due diligence and not relying on hunches like "buy-n-hold is always better."
You are talking about a 50/200 moving average cross over system that only takes long positions.
I am talking about a 50/200 moving average cross over system that takes long AND short positions.
We are talking about two different systems here.
The time period is a big factor in whether the long only 50/200 moving average system outperforms the buy-and-hold system.
The article that you cite takes a time period of 109 years with huge market crashes.
People who invest for retirement don't invest for 109 years.
Take away some or all market crashes and which is better?
Also, if you take time periods when market goes sideways, which is better?
If you take a combination of time periods when the market goes sideways and the market goes up but the market doesn't experience a crash or crashes, which is better?
Also, the article doesn't factor in dividends or dividend reinvestments.
Also, the article doesn't factor in transaction costs.
Basically, the 50/200 long only moving average cross over system hedges you against market crashes. If you don't experience market crashes in your investing period, it should under perform the buy and hold system. If you throw in some sideways market action, then it really should under perform the buy and hold system.
No need for all the quibbling. Just admit you were wrong.
1) No one trades a long-term system like this (maybe 1 trade a year on average) on a 100% long-100% short basis. They're always 100% long-100% cash to take advantage of the general uptrend of stocks. Look at the work of Mebane Faber, Ned Davis, etc.
2) Sure, it doesn't outperform buy-and-hold all the time. Nor does any other trend-following or timing system. 109 years means it has outperformed buy-and-hold for a sigficant period. It may not have beat it in the 80s-90s but it surely has since 2000.
3) Look at the equity curve. Missing dividends part of the time isn't going to make up that delta. And dividend yields have generally dwindled over the decades.
4) Transaction cost...are you kidding? Is that one golden cross trade a year going to damage your account? Not unless you have a $200 IRA at a full-service broker or something. You could easily absorb transaction costs and beat buy-and-hold when trading this infrequently.
If you're in the habit of making up baseless qualifications for everything and never admitting you're wrong...I hate to see what the world of trading will bring to you.
The FED's mandate to promote stability gives them broad authority to intervene, as we saw in '09. EU soverign bond prices are quickly deteriorating and it's obvious without a massive backstop, contagion is guaranteed. On that front, a multi-lateral intervention - FED + ECB + IMF - to beef up or expand the EFSF is possible. In our backyard, equities sold-off shortly before the end of QE2. IMO, this was no coincidence. FED could buy the long-end, buy MBS, sterilize US banks from EU soverign issues. To clarify, I don't support more CB intervention. I only expect it. I don't believe the FED + ECB went this far, only to let it fall apart now. Opposition to further QE is strong, but as facts change, so do policy. The debt ceiling debate proved Americans don't have the stomach for austerity. When faced with a meltdown, they''ll scream for another bailout. Bernacke is playing arms-length - letting us twist in the wind, a bit - to foment the necessary political capital for another round of intervention. My 2 cents.
Dayum! Trying to see where I can admit being wrong. Quick recap:
I stated that Death Cross is NOT A RELIABLE INDICATOR by saying that it failed last JULY.
You responded by saying "A sample size of 1? Is that how you judge a trading system?"
I AM NOT TALKING ABOUT A SYSTEM! Apples and oranges...
You even agreed with me by saying "In reality, more than half the downside crosses don't work--they often happen just before a rally (i.e., 10-20% corrections)." DOH!
Then you bring up the 50/200 moving average cross over system BUT you never state "which" stinking cross over system.
I said:
"Not sure about the 50/200 cross over system beating buy and hold system. Wouldn't time periods be a factor?
If you bought at the bottom in 1932 and sold at the top in 2007, you would have never experienced any whipsaws.
If you used the 50/200 cross over system, you would have been whipsawed. The whipsaws would put you behind the buy and hold investor."
I was talking about a 50/200 system that takes long AND short positions.
You responded by saying that I am wrong with a study that used a 50/200 system that ONLY TOOK LONG POSITIONS. You assumed that I was talking about a 50/200 long only ma cross over system.
We are talking about two different 50/200 systems here. Apples and oranges again....
By the way, how does one invest $1,000 in the DOW in August 1900 with ONE TRANSACTION?
The study that you cited stated:
"$1,000 invested in the Dow using a buy-and-hold approach from August 1900 through July 2009 grew to a little over $157,000."
It didn't mention how it exactly invested the $1,000 in the Dow.
ALSO, WHAT ABOUT CAPITAL GAINS TAXES??????
It doesn't factor in the taxes that you would have to pay every time you sell.
