ETF Prophet

Our Flickr Channel Our Facebook Our RSS Feed follow us on twitter
Dave Evans

Recently Michael at Market Sci has had a great serious of posts on David Varadi's DVI indicator which is the medium term cousin of the shorter term DVB indicator.

DVI was proprietary until David kindly made the calculation publicly available via MarketSci.

Here's some useful links:

You can find excel calculations for the DVI and DVB in the above posts.

DVI and DVB are just two of the indicator's available via CSS Analytics' DVixl, an excellent tool with the standard version reasonably priced and a good taster of the full capability of the full premium version which I've had the privilege to use in recent months. 

Now that DVI and DVB are both in the public domain, I thought it would be good to share the results of a method that combines these two indicators along with a modified version of the spreadsheets from Market Sci that provide the calculations. 

The aim is to benefit from the smoothing that DVI provides and the nimble trades that DVB can pick up.

Long @ close: If both DVI and DVB are <0.5
Short @ close: If both DVI and DVB are >0.5

If they differ, go to cash.

The method does a very good job of maintaining profits and smoothing returns. 

26-08-2010 22-57-24

For DVB alone:

Average Win: 0.97%
Average Loss: -0.91
Strike: 53%


Average Win: 1%
Average Loss: -0.91
Strike: 56%

A marginal increase in the strike rate and average winner size are enough to boost returns considerably in the long run. It also seems to give you more bang for your buck with the returns above from just 1454 trades instead of 2672. 

The results above are up to the 20th.

Here are the returns for 2010 so far:


27-08-2010 19-36-47

I have not accounted for any trading frictions, dividends or return on cash when out of the market.

Here's a spreadsheet with the calculations for the DVB and DVI in one place.

It seems a neat little idea, especially with Mean Reversion doing a little better in the last few months. I've just put a couple of things together here really. Full credit must of course go to the guys at DVIndicators for their ideas and MarketSci for making the calcs available.

Comments are closed.