Replies to post #5581 on Profunds index and sector trading (PRO)

[Namiar]

Here is my new trending strategy for NDX.

Once a scalp is over, go long 100% (in bull markets). I actually use 50%, but that is a matter of personal comfort.

Stay long 100% until an OB (overbought) position is achieved. Once this OB level is achieved, you are living on "borrowed time" until a correction sets in.

In previous testing of the post-OB period, I suspected that it would be profitable over the course of the backtest to reduce exposure to 50%, or even to 0%. But these strategies were not as profitable as simply staying at 100%.

I suspected that there was a better way to play the post-OB period of the trending strategy. What I came up with was the following rules:

1) If NDX has a "big" up day, then reduce exposure to 0%.
2) If NDX has a "big" down day, then go long 100%
3) If NDX has a little day (up or down), then looks to the day before. If day before was big up, then go long 40%. If day before was big down, then go long 60%. If day before was also a little day, the re-establish prevailing long strategy at 50%.

This strategy appears to outperform the "stay long 100%" strategy by about 20% over the backtest period. I haven't tried too many combinations yet, so it may be possible to improve upon it to some degree.