I’ve spent some time looking over the data and decided to add another type of profit, so that makes three types:
- Fixed Amount – FProf on the reports. It used to be SProf. The fixed amount has changed from 100,000 to 10,000.
- Buy and Hold – HProf on the reports. The fixed amount is bought at the beginning of the sequence. Accounting is still done on state transitions.
- Reinvested – The profit or loss from each state is reinvested when the state recurs again, but the funds for each state remain separate. For example if $1000 is made on the first above state, $11,000 will be reinvested at the next above state.
SPY 31R – Daily Dec 2, 2008 – Aug 23, 2019
31R is the 31 period rate of change.
The table has running totals. Investing a fixed amount of $10,000 on every state change made a profit of $15,317. Reinvesting profits from segregated accounts (or whatever) made $24,809, while Buy and Hold made $31,701.
SPY 31R – Price is Above – State = A
One could reasonably have thought that buying SPY when the 31 day rate of change is positive would work pretty well in a relatively decent decade long bull market, but that would not be correct. Note the large gap between HProf and the other two lines. RProf is even underneath FProf.
SPY 31R – Price is Below – State = B
Note how the lines for below aren’t as erratic as the A state. The effects of compounding are apparent in the slope of RProf tracking HProf.
Planning to study natural logarithms next. Cool stuff.