Sunday, November 3, 2013

M5 Refinements....11.3.13

The new accelerated platform is still a week from release as final adjustments are being implemented and tested. 

The goal of this new approach is to use both timing and volatility indicators to keep on the right side of the SPY's momentum. 

To increase potential gains the M5 models are designed to trade only XIV or SSO (the SPY ultra bull ETF) on a daily basis, although ranked positions may beheld for a week or more when market trending is in effect.
The accelerated momentum algorithms are formulated to detect changes in momentum faster than the previous T11 and T6 models.  Since we are effectively buying more risk by trading XIV and SSO ...which have substantially higher beta values than SPY....we need to be a little quicker on the trigger to execute money management stops.

The metrics on the models only run out 6 months as the focus of attention should be on the short term.

With this model we digress from the concept of portfolio management and move to the concept of simply trying to improve SPY returns by selective timing.  The cyclical behavior of the SPY can be seen in the lower 6 month equity chart.
Our goal is to identify likely thresholds in the peaks and the valleys and act accordingly. 

The M5 platform is a response to users who have requested a shorter time frame model that can supplement the various portfolio models.