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Technical Market Indicators
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Comparably Measured Technical Market Indicators
Ranked by Profit/Loss Index
The following is an excerpt from my 820-page research book,
Colby, Robert W., The Encyclopedia of Technical Market Indicators, Second Edition, McGraw-Hill Publishing, 2003 (click here for a description).
Comparably Measured Technical Market Indicators: Basic Explanation
Q: Please explain in detail the performance statistics in your book on pages 32-35 for the table, "Comparably Measured Technical Market Indicators". I am particularly interested in ranking performance by the "Profit/Loss Index".
A: The data on pages 32-35 are derived from the Indicator Strategy Example "System Report" table for each indicator. These profit and loss summary statistics are shown in detail in each indicator chapter. You will find definitions of terms in the legend shown in the "System Report".
Note that I consistently started each indicator system test with an amount of $100, and that amount grew according to the Profit and Loss effectiveness of each indicator strategy to the amount shown in the Indicator Strategy Example System Report table "Total net profit" for each indicator.
Time periods used to test each indicator are usually daily data from 1900 to 2001, if available, otherwise the maximum data available. Dates and time periods are specified in each indicator's individual Indicator Strategy Example. Use the index in the back of the book to quickly locate the indicator page number by the name of the indicator.
In some cases, weekly or monthly data had to be used and, if so, that is disclosed in the Indicator Strategy Example for each indicator.
The first column, "Versus Buy & Hold", is the net profit performance of the strategy listed compared to the net profit performance of passive Buy & Hold Strategy. In other words, it is "Total net profit" of the indicator listed divided by the "Buy/hold profit", as shown in the Indicator Strategy Example System Report table for each indicator.
For example, according to the first column, "Versus Buy & Hold", the best performing indicator strategy was the Exponential Moving Average (5 days) crossover. If you compare the numbers shown in the table on page 33 with the numbers shown in the table on page 269, you will see exactly where the numbers on page 33 come from.
The second column, Annual Relative Advantage, is the number in the first column (Versus Buy & Hold) divided by the number of years in the test, which is shown in the Indicator Strategy Example System Report table.
"L&S % Win" column is the number of winning (profitable) long side trades as a percentage of all long trades.
"Short % Win" column is the number of winning (profitable) short side trades as a percentage of all short trades.
"Trades per Year" are 365 days divided by "# of days per trade".
The "Profit/Loss Index" is taken directly from the Indicator Strategy Example "System Report" table for each indicator. It is calculated in 4 steps.
Step 1: Sum the Open Position Value plus the Amount of Winning Trades plus the Amount of Losing Trades.
Step 2: Sum the Open Position Value plus the Amount of Winning Trades.
Step 3: Divide the sum from Step 2 by the sum from Step 1.
Step 4: Multiply the ratio from Step 3 by 100.
Notes:
Note 1: Respect the sign of the Open Position Value, which may be a negative number, and respect the sign of the Amount of Losing Trades, which is always a negative number. Retain these minus signs in the summations in Step 1 and Step 2.
Note 2: The "Profit/Loss Index" figure would be statistically insignificant for an indicator that produced no losing trades, no winning trades, or very few total trades.
Note 3: The resulting product in Step 4 expresses performance on a scale of -100 (representing the worst possible performance) to +100 (the best possible performance), with zero representing profits equal to losses.
Note 4: The "Profit/Loss Index" would be highest (+100) for an indicator with no trading, such as the Buy-and-Hold Strategy, but the statistic is insignificant in that case. That Buy-and-Hold Strategy only entered one trade, which is still open. This also means that it never had a losing trade, of course. This definitely does not mean, however, that the Buy-and-Hold Strategy had the highest performance even or a relatively effective performance. In fact, the profits generated by the Buy-and-Hold Strategy were substantially inferior to the majority of technical indicators shown on pages 32-35.
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Comparably Measured Technical Market Indicators
Ranked by Profit/Loss Index
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100.00 � Buy-and-Hold Strategy: the Passive Strategy
100.00 � Call-Put Dollar Value Flow Line (CPFL)
100.00 � Linear Regression Slope, 244 days
100.00 � R-squared
100.00 � Specialist Short Ratio
99.80 � 25-Day Plurality with Bollinger Bands (324, 2sd)
99.70 � Public / Specialist Short Ratio
99.30 � Presidential Election Cycle
98.71 � Margin Debt Overbought/Oversold Bracket Rule
98.67 � Relative Volatility Index (RVI)
98.65 � Put/Call Volume Ratio Jump Strategy
97.33 � 25-Day Plurality Index
96.76 � Call-Put Premium Ratio
96.58 � Member Short Ratio (Envelope, 25 EMA & 10%)
96.56 � Margin Debt crosses trailing 13-month EMA
95.25 � Public Short Ratio
94.37 � Insiders' Sell/Buy Ratio
93.20 � Ultimate Oscillator
92.55 � The Range Indicator (TRI)
91.88 � Aroon 270
90.39 � Key Reversal Day
90.38 � Short Interest Ratio
88.53 � Days of the Month and the Months of the Year
88.43 � Arms' Short-Term Trading Index (TRIN, MKDS)
88.31 � Dow Theory: 90-Day Price Channels
87.10 � Advisory Sentiment Index
86.58 � Moving Average Convergence-Divergence (MACD)
85.56 � Envelopes, Moving Average Envelopes
85.06 � Smoothed Momentum Slope Indicator
84.77 � Ninety Percent Days, Nine to One Days
83.34 � KST (Know Sure Thing)
83.10 � Dow Theory: 8 Different Price Channels
81.91 � Call-Put Dollar Value Ratio
81.70 � Price Channel Trading Range Breakout Rule
80.62 � Bollinger Bands
80.04 � Volatility & Price Channel
78.41 � Percentage 30-week Simple Moving Averages
78.13 � Relative Strength Index (RSI)
77.99 � McClellan Summation Crossing Zero, Long Only
77.25 � Months of the Year (a seasonal strategy)
76.57 � KST with 33% faster parameters
75.93 � Positive Volume Index VS 1-year EMA
75.74 � Coppock Curve (Coppock Guide)
74.81 � Random Walk Index (RWI)
73.16 � Projection Oscillator
72.42 � Open Interest Trend-following Strategy
72.36 � Projection Bands
71.78 � (New Highs - New Lows) / Total Issues Traded
69.28 � Put/Call Premium Ratio
68.28 � Dow Theory
67.81 � Qstick 9, Counter-trend
67.41 � Price Oscillators: Moving Average Oscillators
66.39 � US Treasury Bond Futures, Combined Strategy
64.97 � Keltner Channel with EMA filter
64.18 � Stochastics with EMA Filter
62.29 � Aaa long-term corporate bond yield versus EMA
60.43 � Rate of Change, 18 weeks
60.26 � Chande Momentum Oscillator (CMO)
59.39 � Percentage 10-week Simple Moving Averages
53.61 � Open Interest
52.58 � New Lows / Total Issues Traded <> 3.53%
52.04 � Total Issues Traded (270-day EMA)
47.24 � Days of the Month
46.79 � Volatility, CBOE Volatility Index (VIX)
42.84 � Stochastics (7 days, 3 SMA, B 30, S 70)
42.53 � Parabolic Time/Price System (Contrary)
36.76 � Triple EMA (TEMA), 6-days
35.01 � TRIX (triple exponential smoothing)
34.79 � New Highs - New Lows
34.74 � Linear Regression Line, 5-days
34.49 � Absolute Breadth Index
33.76 � Exponential Moving Average (120 days)
32.96 � Simple Moving Average (126-days)
32.84 � Herrick Payoff Index
32.71 � Percentage Hughes AD Oscillator with 8 Parameters
32.62 � Negative Volume Index (NVI)
31.95 � Double Exponential Moving Averages (DEMA)
31.80 � Advance-Decline Line, A-D Line
31.57 � Advance / Decline Ratio
31.35 � Advance-Decline Non-Cumulative (Hughes)
30.67 � Sign of the Bear
30.28 � McClellan Oscillator Crossing Zero, Long and Short
30.28 � McClellan Summation Index Direction, Long and Short
29.55 � Schultz Advances/Total Issues Traded (A/T)
28.93 � Volume : Cumulative Volume Index
28.56 � Lowry's Buying Power Minus Selling Pressure
27.18 � Volume: Klinger Oscillator (KO)
26.99 � STIX: The Polymetric Short-term Indicator
26.91 � General Motors as a Market Bellwether Stock
26.77 � US Treasury Bond Futures versus 16-day EMA
26.04 � Lowry's Short-term Buying Power
25.68 � Odd Lot Sales / Purchases
25.37 � Aroon, Aroon Oscillator
25.06 � Unchanged Issues Index
24.88 � Commodity Channel Index Crossing Zero: Zero CCI
24.74 � Call-Put Volume Ratio
23.60 � Indicator Seasons, Colby�s � Optimized
23.58 � Accumulation Swing Index (ASI)
23.46 � Multiple Time Frame Analysis (10, 50, 200)
23.36 � Breadth A/D Indicator: Breadth Thrust
23.29 � Number of Advancing Issues
23.20 � Volume Acceleration
22.47 � Qstick 1, Trend-following
22.38 � Haurlan Index
22.28 � Pivot Point Reverse Trading System
22.27 � Exponential Moving Average (5 days)
21.48 � New Highs / Total Issues Traded >< 1.55%
20.30 � Dow Theory: using 3-day EMA
20.30 � Upside/Downside Ratio
19.58 � Demand Index (DI)
19.15 � Volume * Price Momentum Oscillator (V*PMO)
18.41 � Weighted Moving Average (6-days)
18.34 � Number of Declining Issues
18.28 � TICK (Crossing 11-day EMA)
17.76 � Volume: On-Balance Volume (OBV)
17.73 � Indicator Seasons, Colby�s Variation
16.18 � Commodity Channel Index (CCI)
15.60 � Arms' Ease of Movement Value (EMV)
15.58 � Days of the Week
15.16 � Directional Movement Index
12.34 � Odd Lot Short Ratio
10.86 � Volume: Williams' Variable Accumulation Distribution
10.81 � Accumulation / Distribution ( AD )
10.39 � Volume Accumulation Oscillator
7.63 � Volume
4.03 � Volume Reversal
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