I was able to build a great long system that works just wonderfull!
I took some parts from olikea systems (thank you!!!) put in a year of work and I am really happy with it.
The system uses the market timing of portfolio123 (EPS Trend), the market is up, the system is up 20% since the beginning of Jan 2012 and it made around 8% in the really difficult year 2011. Great!
But: This will not last forever and I want to prepare for worse times when markets tank.
So I am looking for good shorting system, would you give me some hints on systems or parts of systems (ranking and so on) that are good for putting together a system.
To create a good short Sim you need to look for one that loses money on a regular basis without any large gains. Be sure to use negative Fees and Slippage.
If you search Sims using the word Short in the title block you will get over 150 short Sims. You need to find Sims that have a high average loss per stock per day. You can order them by clicking on the heading Sharpe Ratio (click on it twice to get the worse performance at the top). That will order them with the higher loss per stock per day Sims near the top. From that list look for Sims that a large loss during the recessions and long pullbacks. In these Sims add market timing that causes the Sim to go to cash during growth periods. You can try the inverse of the long Sim market timing rules.
Hi,
A good place to start is to simply invert a ranking system by switching it to favor lower values, rather than higher values. I prefer trading long/short to market timing which I find much easier to do with hindsight than in real time. I may not have the highest returns but I have made money relatively consistently with low risk, and that is important to me.
At this time no, I am not using any market timing at all. That’s not to say I won’t ever use it again, and it can certainly help if you are trading long only. I suggest you develop your strategies and then combine the results in a spreadsheet to see how they would have performed as a portfolio, with or without market timing, or vary the long/short allocation based on market timing. Initially I varied the long/short allocation but improvements to the short strategy have made that more trouble then it’s worth.
In my testing, long/short beats the best market timing rules that I know of for risk adjusted returns, and I consider a short strategy with over 3000 trades to be much more robust than market timing rules with only a dozen or so trades. Since I started trading short in the fall of 2009, I have made more money on the short side than the long, and my best strategy over this timeframe is a short strategy.
