Tuesday, August 10, 2010

DV Indicators XL

Assume that Cerberus was a good dog who kept traders away from financial Hades (and I figure that this Roman sculpture of the single-toothed Cerberus is probably as close as it comes to benign in art history) as opposed to the dog who prevented those who crossed the river Styx from ever escaping. This three-headed dog might then be an appropriate icon for the team that put together DV Indicators XL: David Varadi (indicator writer), Jeff Pietsch (programmer), and Corey Rittenhouse (designer). We know them from the blogs CSS Analytics, ETF Prophet (formerly from Market Rewind), and Catallactic Analysis.

This is one nifty piece of Excel-based software, though I do suggest having a backup copy because in the course of racing through its features I managed to corrupt mine, though it was remedied quickly enough. I never cease to be amazed at what talented programmers can do with Excel; I’m mighty envious of their skills.

The basic edition comes with eleven indicators intended for either trending or mean reversion environments and for short, intermediate, or long-term holding periods. (The average holding period for SPY trades ranged from 2.26 days to 28.21 days.) You can backtest them over a ten-year period on whatever stock or ETF your heart desires, choosing either to go both long and short or to trade from only one side of the market. You can also analyze current conditions with fifteen indicators that combine to give three time frame signals and an overall advisor signal.

A telling exercise, by the way, for those who still believe in the random walk theory is to backtest a mean-reverting indicator as if it were a trending indicator. I tried this on a variety of stocks, both low beta and high beta, and, believe me, the equity curve isn’t pretty!

This software won’t replace TradeStation, AmiBroker, or MetaStock. But for those who aren’t the greatest system builders and testers (and even for those who shy away from system trading) this is a great complement to a full-fledged software package. David Varadi writes simple, elegant, and seemingly robust indicators, which few of us are capable of. I have no idea what their half-life is. All I can say is that I have been playing with the software for hours already and am having one whale of a time. I’m even coming up with some actionable hypotheses of my own. (And, no, I don’t get a kickback from sales of this software like I do from Amazon where so far I have amassed a whopping $7.90 balance.)

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