ibs

Cumulative IBS Indicator

Inspired by Larry Connors’ Cumulative RSI(2) (found in this post), and the results of my Cumulative DV2 (found in this post) I decided to test out how a Cumulative IBS indicator would work. The formula for IBS can be found here, and the cumulative IBS is the X-day simple moving average of the IBS. This is a frictionless test on SPY from 1/1/2000 – 12/26/2012. I tested the cumulative IBS using default parameters from the original post I found over IBS (Long if IBS < 45 & Short if IBS > 95).

Equity curves for cumulative 1-9 day IBS. Starts at 1-day in the top left and ends at 9-day on the bottom right. It counts from left to right, meaning that the top middle picture is the cumulative 2-day IBS.

Cum 1-9Day IBS 45 95 1-1-2000 - 12-26-12

Equity curves for cumulative 10-18 day IBS. Follows same structure as above.

Cum 9-18Day IBS 45 95 1-1-2000 - 12-26-12

We can see the equity curves of the cumulative IBS reinforces the conclusion in the cumulative DV2 post.

Here are the individual graphs in anyone is interested:

IBS 45 95 1-1-2000 - 12-26-12

2-day

Cum 2Day IBS 45 95 1-1-2000 - 12-26-12

3-day

Cum 3Day IBS 45 95 1-1-2000 - 12-26-12

4-day

Cum 4Day IBS 45 95 1-1-2000 - 12-26-12

5-day

Cum 5Day IBS 45 95 1-1-2000 - 12-26-12

6-day

Cum 6Day IBS 45 95 1-1-2000 - 12-26-12

7-day

Cum 7Day IBS 45 95 1-1-2000 - 12-26-12

8-day

Cum 8Day IBS 45 95 1-1-2000 - 12-26-12

9-day

Cum 9Day IBS 45 95 1-1-2000 - 12-26-12

10-day

Cum 10Day IBS 45 95 1-1-2000 - 12-26-12

11-day

Cum 11Day IBS 45 95 1-1-2000 - 12-26-12

12-day

Cum 12Day IBS 45 95 1-1-2000 - 12-26-12

13-day

Cum 13Day IBS 45 95 1-1-2000 - 12-26-12

14-day

Cum 14Day IBS 45 95 1-1-2000 - 12-26-12

15-day

Cum 15Day IBS 45 95 1-1-2000 - 12-26-12

16-day

Cum 16Day IBS 45 95 1-1-2000 - 12-26-12

17-day

Cum 17Day IBS 45 95 1-1-2000 - 12-26-12

18-day

Cum 18Day IBS 45 95 1-1-2000 - 12-26-12

DV2 Further Research

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.