Rules:
Buy long if the Value Line Index closes up 4% for the week
Go to cash if the Value Line Index closes down 4% for the week
Simple.
The rational behind the trading system is to trigger long off a 4% thrust, a move which usually indicates upside momentum. The system attempts to capture a bulk of the follow through momentum.
On the downside (going to cash) the system marks its exit by a 4% down week, indicating waning momentum and expected follow through weakness.
I have been trading this system since March of 2009 and here are the trades thus far:
Trades:
I trade the system using the RRY which is a Rydex UWM 2x Russel 2000 ETF.
Current Status of the system is:
Status:
Since the system only trades on Fridays, members will get a warning after the 4pm EST close on a Friday for a Monday entry if the system is setup to trigger on the close.
You can download our TradeStation Ned Davis Indicator and Strategy for BackTesting at those links.
To become a member simply register at the website in the right hand column.
How do you get the value line index values?
$vay on finance.yahoo.com
I back-tested this method to march'09 but I could see that the “buy” initiated on 3/13/09 was to be sold after week of 4/3/09. Thats becuase the VAY index lost little more than 4% that week. Am I missing somehting in the methodology?
It is a week to week measurement. Friday close to Friday close only. The first Friday to Friday > 4% loss was May 15th around 7.4%.
^VLIC on yahoo finance, love this system !! First time in my trading life, I’m short the market right now, based on close of 2 Friday’s ago. Rather than sleepless nights , I’m making money as the market falls, love it
Pingback: Zweig/Ned Davis 4% system approaching 100% return with latest trade.. | RedlionTrader
Simple system with nice pacing, low stress and steady gains, good one!
what if you make it a rolling 5 day period instead of calendar week? does that improve the returns?
Have traded 4% model for years. Believe you missed vay buy on 5/14/2010 (2501.02>2484.76) and sell on 5/21/10 (2363.44<2400.97)
Cheers
2501.20 against 2484.76 gives a poor 0.65% also 2363.44 against 2400.97 gives only a
-1.56% you have the wrong data for ^vay.
BUT YES There was a Buy Signal on 5/14/2010 Close @2501.02 > 5/7/2010 Close @2389.20 i.e. +4.7% so BUY) and again next week a Sell Signal on 5/21/2010 Close @2363.44 < 5/21/2010 Close @ 2501.02 i.e. -5.8% so SELL)
In any case do you care to share your results from your trading ZND 4% over the years ?
Are you satisfied ? I will be glad to know !
I have updated the table and changed the info for a Monday entry as that is how the system is meant to be traded.
Thank you for catching the missing May trade. I have updated the table.
I do not have longer than March 09 results since I only discovered the trading system when there was much talk about a Zweig thrust in that time frame.
Yes- – I transposed the prices from my computer when posting. Since I use a slightly different version of 4%, I won’t post my results except to say that it has proven to be extremely profitable. Of course, like all trend following systems, one must be well funded and psychologically prepared to endure the inevitable drawdowns. However, one must not confuse high standard deviation with risk. Volativity and risk are most certainly not the same entity. It’s a simple successful method. . but that doesn’t mean it’s easy. Lastly, I have found money management to be paramount- – but isn’t it always?
Regards, Jack.
Should 3/16/2010 be 5/17/2010?
Yes, looks like something is wrong there on the 3/16 date.. I will change.. thanks for the catch.
Are you following this anymore?
Yes, it is currently long in a trade waiting for a 4% down week in the value line
Thanks for the update. I wanted to draw your attention to a few sites I came across.
1. http://www.financialwebring.org/gummy-stuff/zweig.htm
A little different approach (due to misunderstanding of the strategy, but good to know.)
2. http://www.iijournals.com/doi/abs/10.3905/joi.5.4.79
This is interesting, and i do not have the full article, but it looks like the professor did a survey and came to a conclusion that the Zweig strategy is only good on paper (results look good only in back test data). Not sure what exactly it is, but your test should be a good response!
3. Last, but not the least, “All About Market Timing” by Leslie Masonson has also some back test done. Should be a good read.
Will keep following here, thanks.
Also, not sure if you have read Robert Lichello’s book on “Automatic Investment Management (AIM)”. An interesting back test can be found here:
http://dburkeaz.hubpages.com/hub/robertlichelloAIMSystem