Time in Trade Comparison

The chart below illustrates what happens to longer-term, trend-following systems when a longer-term trend doesn't exist.



The same number of dots usually develop to the left and right of the vertical line. This means that the percent of winning trades equals or is slightly higher than losing trades. Using a system with an edge in a trending environment, the chart would be skewed to the right by the velocity of the winning trades.

Trend following systems tend to fall out of favor...until a real trend is almost complete, and then the cycle repeats. As long as the system doesn't result in deep, prolonged draw-downs, staying the course will justify riding the oscillations between small gain and losses during consolidation periods.

The Cheetum Market Indicator was created in 2008 as a method to profit during bull and bear markets. With all the revisions to this "all in"( or "all out") method of trading, the CMI could only be loved by bungee jumpers, investment-oriented crab fisherman, and drivers-ed instructors. Even so, anyone following every CMI trade signal from the start would have turned $10,000 into just over $14,000 as of today. Far from stellar results but with all the experimental twists and turns leading up to CMI 4.0, the results have, at the very least, kept pace with the market.

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The last stealthy trade from QLD to QID the other day may a be short one if the market doesn't fall sharply as the CMI expects. Another nice head-fake Mr. Market. Well done. The CMI fell for that one. The good news is that 4.0 recovers faster than 3.0 as can be seen by the higher number of red dots on the chart.


Related post: Melding CMI 3.0 and CMI 4.0