MarketSci Looks at the VIX 5% Rule
MarketSci is a blog that somehow manages to ponder the same sort of issues that I like to chew on. Fortunately, MarketSci does more than ponder. In fact, much like the approach favored by Quantifiable Edges, MarketSci seems to aspire to being the mythbusters of the investment world.
This week MarketSci has particularly interesting series of items on its plate: the Trading Markets 10 Trading Rules. One by one, MarketSci is taking a data-driven approach to determining the usefulness of each of the Trading Markets rules.
In today’s installment, Testing TM Rule #5: the VIX 5% Rule, MarketSci examines the popular TradingMarkets 5% rule that I discussed in 2007 in a post with the unlikely title of The TradingMarkets 5% VIX Rule. In short, MarketSci comes down on the side of the usefulness of the 5% rule as a defensive measure. The full analysis is worth clicking through for, as are the other installments in the analysis of the ten trading rules, most of which are consistent with my own thinking and several of which should probably be part of every trader’s arsenal.
3 comments:
Thanks for the bump bill. I'm hedging my opinion though with a "mildly useful"...definitely not a shining endorsement =)
In your related post at "http://vixandmore.blogspot.com/2007/07/using-vix-as-timing-tool-for-spy.html", the links to Part 1, Part 2 and Part 3 are missing.
Any idea where they are?
--Johnathan
Just eyeballing the chart, it looks like the 5% rule would have had you enter the market at the beginning of Sep. (ugh) and stay in it through the middle of Oct. (ugh). Chart:
http://tinyurl.com/7gvrzd
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