In this post I will test the DV2 with other indicators.
First I tested a simple DV2 system on SPY from 1/1/2000 – 7/30/2012 from Yahoo! Finance data. The rules were:
- Buy/Cover: DV2 < 50
- Sell/Short: DV2 > 50
The orders were taken at the day the signal was generated at the close price. The results were:
- CAGR: 24.08
- MDD: 42.67
All the tests after this use the same test dates, data source etc. as the test above.
DVI
The rules are:
- Buy: DV2 < 50 & DVI < 50
- Sell: DV2 > 50
- Short: DV2 > 50 & DVI > 50
- Cover: DV2 < 50
The results:
- CAGR: 22.40%
- MDD: 20.88%
These set of rules decrease the CAGR slightly yet decrease the MDD by over half.
A different variation of the rules:
- Buy: DV2 < 50 & DVI < 50
- Sell: DVI > 50
- Short: DV2 > 50 & DVI > 50
- Cover: DVI < 50
The results:
- CAGR: 18.14%
- MDD: 27.67%
Performance deteriorated versus the test above yet still beat the original on a risk/reward basis.
A different variation:
- Buy/Cover: DV2 < 50 & DVI < 50
- Sell/Short: DV2 > 50 & DVI > 50
The results:
- CAGR: 15.73%
- MDD: 27.67%
Performance deteriorated more.
A different variation:
- Buy: DV2 < 50 & DVI < 50
- Sell: DV2 > 50 | DVI > 50
- Short: DV2 > 50 & DVI > 50
- Cover: DV2 < 50 | DVI < 50
The results:
- CAGR: 22.76%
- MDD: 20.88%
A different variation:
- Buy: DV2 < 50 | DVI < 50
- Sell: DV2 > 50 | DVI > 50
- Short: DV2 > 50 | DVI > 50
- Cover: DV2 < 50 | DVI < 50
The results:
- CAGR: 22.86%
- MDD: 27.67%
A different variation:
- Buy: DV2 < 50
- Sell: DV2 > 50 | DVI > 50
- Short: DV2 > 50
- Cover: DV2 < 50 | DVI < 50
The results:
- CAGR: 22.37%
- MDD: 20.88%
IBS (or CRTDR)
I found this indicator with some background information at this QUSMA post. It seemed to be useful as an indicator on its own, and as a filter for other indicators. Just like in the QUSMA post, I use a 3-Day MA of the IBS.
The rules are:
- Buy: DV2 < 50 & IBS < 50
- Sell: DV2 > 50
- Short: DV2 > 50 & IBS > 50
- Cover: DV2 < 50
The results:
- CAGR: 24.72%
- MDD: 26.70%
A different variation of the rules:
- Buy: DV2 < 50 & IBS < 50
- Sell: IBS > 50
- Short: DV2 > 50 & IBS > 50
- Cover: IBS < 50
The results:
- CAGR: 24.59%
- MDD: 27.44%
A different variation:
- Buy/Cover: DV2 < 50 & IBS < 50
- Sell/Short: DV2 > 50 & IBS > 50
The results:
- CAGR: 24.42%
- MDD: 31.22%
A different variation:
- Buy: DV2 < 50 & IBS < 50
- Sell: DV2 > 50 | IBS > 50
- Short: DV2 > 50 & IBS > 50
- Cover: DV2 < 50 | IBS < 50
The results:
- CAGR: 25.38%
- MDD: 19.79%
A different variation:
- Buy: DV2 < 50 | IBS < 50
- Sell: DV2 > 50 | IBS > 50
- Short: DV2 > 50 | IBS> 50
- Cover: DV2 < 50 | IBS < 50
The results:
- CAGR: 25.24%
- MDD: 20.33%
A different variation:
- Buy: DV2 < 50
- Sell: DV2 > 50 | IBS > 50
- Short: DV2 > 50
- Cover: DV2 < 50 | IBS < 50
The results:
- CAGR: 24.44%
- MDD: 26.70%
RSI(2)
The rules are:
- Buy: DV2 < 50 & RSI < 50
- Sell: DV2 > 50
- Short: DV2 > 50 & RSI > 50
- Cover: DV2 < 50
The results:
- CAGR: 21.92%
- MDD: 35.00%
A different variation of the rules:
- Buy: DV2 < 50 & IBS < 50
- Sell: IBS > 50
- Short: DV2 > 50 & IBS > 50
- Cover: IBS < 50
The results:
- CAGR: 19.28%
- MDD: 28.34%
A different variation:
- Buy/Cover: DV2 < 50 & IBS < 50
- Sell/Short: DV2 > 50 & IBS > 50
The results:
- CAGR: 20.48%
- MDD: 33.70%
A different variation:
- Buy: DV2 < 50 & IBS < 50
- Sell: DV2 > 50 | IBS > 50
- Short: DV2 > 50 & IBS > 50
- Cover: DV2 < 50 | IBS < 50
The results:
- CAGR: 20.93%
- MDD: 30.02%
A different variation:
- Buy: DV2 < 50 | IBS < 50
- Sell: DV2 > 50 | IBS > 50
- Short: DV2 > 50 | IBS> 50
- Cover: DV2 < 50 | IBS < 50
The results:
- CAGR: 23.02%
- MDD: 30.13%
A different variation:
- Buy: DV2 < 50
- Sell: DV2 > 50 | IBS > 50
- Short: DV2 > 50
- Cover: DV2 < 50 | IBS < 50
The results:
- CAGR: 21.88%
- MDD: 35.01%
Conclusion:
While all the indicators improved the Risk/Reward versus the vanilla DV2 system, the best indicator seemed to be the IBS.
