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Market Timing

Sunday, December 06 2015

We take drawdowns very seriously...
- in fact, we have comprehensive stats on drawdowns for all of the MIPS models
- we "track" them ourselves AND through 3rd party "tracking" companies (like, etc.)
- remember, our new algos were designed to both: (a) increase performance and (b) limit drawdowns.

A few things to look for in Max Drawdowns with all timing models are:
  1) how severe is the Max DD ?
  2) how many times per year do large DD's occur (and, what is the Average DD) ?
  3) what is the "Average Recovery Time" ("ART") for the Max DD in the model ?
      - Definition: Average Recovery Time = Max DD divided by the model's CAGR.

For answers to the above questions for MIPS4 trading SPY/SH, please refer to the two graphs below:

  1) In Graph #1, you can see that the MAX DD between 2007-Jun'15 was 10.6%, but Graph #2 shows
      a 13.8% Max DD in 2014-2015.

  2) At the bottom of Graph #1, you can see that MIPS4 only had one DD greater than 10% in the
      8.5 years between 2007-Jun'15, and the Average DD between 2007-Jun'15 was less than 5%,
      - but, MIPS4 did have a 13.8% DD between 2014-2015 (see graph 2).

  3) The "Average Recovery Time" for the Max DD of 10.6% in Graph #1 is 4.2 months; and the "ART"
      for the 13.8% Max DD in Graph #2 is 5.4 months.

Graph #1 - By StatsReports (Eric Stats)
                    CAGR = 30.5%        Max DD = 10.6%       Average Recovery Time = 4.2 months

Graph #2 - By
Max DD = $9,380 / $10,880 = -13.8%

Not real pretty, but rather amazing for a model that has compounded out at over 30% (CAGR=30.5%, with no leverage), and made big $'s in 2008 (its younger brother, MIPS3, was verified up over 60% in 2008) !!! 

So, stay tuned to MIPS !!!

- and enjoy the expected, long-overdue market crash in 2016...

Posted by: Dr. G. Paul Distefano AT 05:49 pm   |  Permalink   |  Email

MIPS Timing Systems
P.O. Box 925214
Houston, TX  77292

An affordable and efficient stock market timing tool. Contact MIPS
281-251-MIPS (6477)