Forum Archive Index - December 2001

[Phaedrus <Phaedrus@techemail.com>]

 AIA closed today below its trendline, closing out a trade entered on 19/9/01. 
Anyone using trendline breaks to trade this stock would have bought at $3.02 
and sold at $3.59 making a gain of over 18% in 13 weeks (about 1.4% per week). 
 The attached line/candlestick chart also shows a Williams' %R momentum 
oscillator providing good confirmation for the trendline break buy/sell 
signals. This oscillator was chosen because backtesting proved it to be the 
most profitable indicator for this particular stock. The default period for W%R 
is 14 days - this gave an annual gain of 10%. Backtesting of all AIA data gave 
an optimum W%R period of 48 days - this gave an annual gain of 41%. These 
figures should be compared with a buy/hold annual gain of 23%. Test conditions 
:- All signals are acted on. All entries/exits are presumed to be at the Close 
on the day of the signal. Brokerage assumed to be 0.1%/trade. 
 Good backtest results do not necessarily ensure good future performance of a 
system - they merely improve the chances of its success. Poor backtest results 
virtually guarantee failure. Why should you expect a system that has not worked 
in the past to work in the future? 
 The shorter period W%R gives good entry and exit points for shorter term 
traders, and the longer optimised period gives excellent confirmation of 
trendline break signals. 

                 Phaedrus.


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