Friday, 5 July 2013

Decisions today, trading the FTSE again

I have reviewed some of my US trading. Although I still believe that this is best market in which to trade, US trading through my ISA attracts unacceptable costs. Put briefly, I am not allowed to hold foreign currency in my ISA (a tax shelter for investment which means that I pay no tax on capital gains). This means that I have to pay exchange rate costs on both buying and selling shares. This can reach 1-2% in each trade in each direction. It might be possible to justify this cost in a strong bull market but in a whippy market like this one I end up paying my broker too much to make a decent return. This means that from now on I will restrict my US trading to my SIPP (another tax shelter with different rules which allows me to hold foreign currency:  there are no exchange costs, and I enjoy the benefit of my returns).

This means that I have to switch back to trading in the UK. Unfortunately Vector Vest does not offer the same facilities to backtest strategies as they do in the US. I have no system which tells me when to enter or exit the market. I have to guess.

The FTSE broke an important resistance level on Monday.It continued upward and yesterday it passed my test criterion. If this move had occurred in the US it would have been a clear buy signal. So today I decide whether to buy in the UK. I've left my decision till late in the day. The market is pulling back, I feel bearish, the market is hovering on a resistance line, and the US market is showing weakness. I think I'll leave my decision till Monday.

The market is probably showing strength because the Bank of England announced that it is too early for interest rates to rise. This is interpreted as code for a continuation of the QE policy. A big deal for the market. It has certainly put the knife into the value of the £. I am thinking that in view of that news the market should have been even stronger. More information to make me negative.

Using Vector Vest UK to pick shares

But in the mean time I have been trawling some of the unisearches that I know work well in the UK. Even though I cannot test them with the same rigor that I can in the US tests give me enough information so I will know which searches to use when the time comes to buy.

Some are searches that I have developed myself, others are standard VV unisearches. I have tested them in good times and bad. To paraphrase Longfellow, in good times they are very very good, in bad times they are mostly horrid.

I have chosen time periods that include the good and the bad. The first table shows the return for the whole period and compares it to Vector Vest's own index the VVC/UK. The average shows how well these searches did overall in good times and in bad, weighted by the length of the time period. I have not fully identified the unisearches I have used but some of you can guess. They all do very well except when the market is in free fall as it was in three of my time periods (chosen deliberately to stress test the searches).

The second table shows the annual rate of return so performance in the different tests can be more easily compared. None of this shows how the picking systems would have performed if they had been subject to sensible stop loss criteria or had sensible entry and exit criteria. Hard to test without the simulator.

I think I know which unisearches I'm going to go with.

1 comment:

Ian Taylor said...

Hello. I'm enjoying reading your blog. I recognise SS, HG and SC but what are DBH and VST_PE, please? If they are your own "secret" searches, I will understand - I know that it can take a lot of time and patience to come up with a new and better search.

Ian T.