Sector Rotation Trading

E

etfarb

I've been researching some articles based on sector rotation trading and find it pretty damn amazing. If a holy grail in trading existed, I would argue that its based on some form of Sector Rotation Trading.

I'm in the beginning stages of my research in regards to this concept but I wanted to open the thread up to ET. Who uses this, how do you use it, if so could you provide some resources, do you believe that sector rotation trading has some sort of predictive power in trading on an intraday basis or solely with swing trading.

Look forward to hear back from ET on this
 
there was [unable to recall the name] such a fund in the 80's -90's that returned 20+ percent per annum every year. It must have been a long-only fund or something, it lost money like mad after 2000 or so..
 
Quote from Fractals 'R Us:

there was [unable to recall the name] such a fund in the 80's -90's that returned 20+ percent per annum every year. It must have been a long-only fund or something, it lost money like mad after 2000 or so..
More...

That wasn't the the Madoff leveraged prison futures fund?
 
I used to use something similar up until about 2003 or so ( among other methods) when it ceased to work as effectively. I dumped it and moved on.

I suspect today that the volatility chop of the HFT and quant bots will chew up your results since it is harder to detect and stay in real sector rotation trends now. There is theory that supports this kind of trading though, so if you have found a new wrinkle, go with it.

In my experience, most methods decay in efficacy once the herd knows about it. That makes sense if you believe in market efficiency. Of course, new traders have to re-learn this over and over again.

What is coming in bots will be shocking to some, but if my predictions are correct (based on another area of computer technology and my rather general knowledge of AI and neural nets (studied in 1980s BTW)); you ain't seen nothing yet bucko.

Seismic trucks can pick out the tiniest signals in a mass of noise including ant footsteps. That will arrive one day in the markets I think. Large accumulation is just not possible to hide completely.

On a more positive note, it is good to see that you are thinking. Large profits can come from original or at least early (and sound) thoughts. Be very skeptical though - an idea is just an idea and they all look good when first proposed. The real world is a whole lot more complicated though. The trader is not separate from his methodology.
 
Quote from Fractals 'R Us:

there was [unable to recall the name] such a fund in the 80's -90's that returned 20+ percent per annum every year. It must have been a long-only fund or something, it lost money like mad after 2000 or so..
More...

Would love to know which fund this was.

Interesting to hear that this fund had a hard time with this strategy as well as stardust after 2000....

HFT has really changed the landscape for many short term traders but viable strategies still exist, just takes a lot more work to dig them up
 
Quote from StarDust9182:

I used to use something similar up until about 2003 or so ( among other methods) when it ceased to work as effectively. I dumped it and moved on.

I suspect today that the volatility chop of the HFT and quant bots will chew up your results since it is harder to detect and stay in real sector rotation trends now. There is theory that supports this kind of trading though, so if you have found a new wrinkle, go with it.

In my experience, most methods decay in efficacy once the herd knows about it. That makes sense if you believe in market efficiency. Of course, new traders have to re-learn this over and over again.

What is coming in bots will be shocking to some, but if my predictions are correct (based on another area of computer technology and my rather general knowledge of AI and neural nets (studied in 1980s BTW)); you ain't seen nothing yet bucko.

Seismic trucks can pick out the tiniest signals in a mass of noise including ant footsteps. That will arrive one day in the markets I think. Large accumulation is just not possible to hide completely.

On a more positive note, it is good to see that you are thinking. Large profits can come from original or at least early (and sound) thoughts. Be very skeptical though - an idea is just an idea and they all look good when first proposed. The real world is a whole lot more complicated though. The trader is not separate from his methodology.
More...

Stardust thanks for the response and teh food for thought.

I'm curious to hear what your time frame was for those trades...

Have you experimented with regime shifting?

I think the only way to succeed now in the short term is for one to do their homework in regards to HFT and quants

You don't go to a gun fight with a spoon right?
 
Quote from StarDust9182:

I used to use something similar up until about 2003 or so ( among other methods) when it ceased to work as effectively. I dumped it and moved on.

I suspect today that the volatility chop of the HFT and quant bots will chew up your results since it is harder to detect and stay in real sector rotation trends now. There is theory that supports this kind of trading though, so if you have found a new wrinkle, go with it.

In my experience, most methods decay in efficacy once the herd knows about it. That makes sense if you believe in market efficiency. Of course, new traders have to re-learn this over and over again.

What is coming in bots will be shocking to some, but if my predictions are correct (based on another area of computer technology and my rather general knowledge of AI and neural nets (studied in 1980s BTW)); you ain't seen nothing yet bucko.

Seismic trucks can pick out the tiniest signals in a mass of noise including ant footsteps. That will arrive one day in the markets I think. Large accumulation is just not possible to hide completely.

On a more positive note, it is good to see that you are thinking. Large profits can come from original or at least early (and sound) thoughts. Be very skeptical though - an idea is just an idea and they all look good when first proposed. The real world is a whole lot more complicated though. The trader is not separate from his methodology.
More...

LOL... so quants are going to mess up sector rotation? It's a matter of directly or indirectly tracking the business cycle. If quants can upset our business cycle then the tail is definitely wagging the dog..
 
Quote from etfarb:

I've been researching some articles based on sector rotation trading and find it pretty damn amazing. If a holy grail in trading existed, I would argue that its based on some form of Sector Rotation Trading.
More...

can you please provide the link for the articles that you have read on sector rotation. And if others can also give links, this thread might become a good repository of information on this market practice. Thanks everyone.
 
my own $0.02 usd is that quants/hft's/algo's/ufo's/whatever doesn't matter at all once you get past the micro scalping phase.

sector rotation is a multiweek strategy which by definition is not hft. you could trade this using closing prices only for crying out loud.

anyways don't mean to rant just to say traders should be afraid of something that doesn't exist.
 
Quote from etfarb:

Stardust thanks for the response and teh food for thought.

I'm curious to hear what your time frame was for those trades...

Have you experimented with regime shifting?

I think the only way to succeed now in the short term is for one to do their homework in regards to HFT and quants

You don't go to a gun fight with a spoon right?
More...

My time frame was 6 to 18 months and I used a weekly measurement and special entry techniques. Even then stealth and misdirection was the name of the game.

I've never heard of regime shifting - sorry. My methodology was much more basic - money flow and sector.
 
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