Join Early Retirement Today
Thread Tools Search this Thread Display Modes
Old 09-07-2009, 02:24 PM   #21
Thinks s/he gets paid by the post
IndependentlyPoor's Avatar
Join Date: Jul 2009
Location: Austin
Posts: 1,142
Okey dokey, here is a chart of the 5066 VFINX daily closings since March 27, 1987 with markers for days when it changed by 3% or more. The green line is +1 for days when VFINX gained 3% or more (69 of them), -1 when it lost 3% or more (also 69), and zero elsewhere.
The long quiet spells are clear, as are the volatile periods around the 1987, 2001, and 2008 crashes. It is also clear that the market has been really volatile lately.

Lest you be tempted to use simple statistical analysis, here is the distribution of the percent daily change charted in 1/2 sigma bins along with a Gaussian distribution of the same mean and standard deviation.
VFINX dist 1.gif
Here they are on a log scale. The "fat tails" are clear.
VFINX dist.gif

IndependentlyPoor is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 09-07-2009, 02:37 PM   #22
Thinks s/he gets paid by the post
Join Date: Jul 2005
Posts: 3,805
Originally Posted by LOL! View Post
That's an interesting observation. Does that mean that a 3% drop and subsequent gain portends an upcoming downtrend?
Nope. It just means that you are likely already in a bear market. Just the fact that you are getting +/-3% days at all was a characteristic of bear markets. I guess they are a bit twitchy.

Neat charts IP!

Animorph is offline   Reply With Quote
Old 09-07-2009, 07:45 PM   #23
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Join Date: Jun 2005
Posts: 7,662
OK, I downloaded data off of Yahoo for VFINX.

Say you bought shares on days when it dropped by 2.5%. You sold those shares within 5 trading days either (a) at first gain above 2%, (b) first loss more than 2%, or (c) 5 days later. I did not put in the no-buy-on-Friday criteria.

I started on Oct 22, 1987 to avoid the 20% drop from 10/16 to 10/19. Note that 10/15 to 10/16 was a drop of more than 2.5%, but the 16th was a Friday, so no buying on that day anyways. The first buy on 10/22 (Thurs) resulted in a loss of 8.3% when closed out on Monday.

There were 111 signal days of a drop of 2.5% or more.
55 of those trades were up 2% or more.
06 of those trades were up less than 2%
50 of those trades were losses.

If I multiply in sequence the trading gains and losses, starting from 1.0, the lowest downside was the first loss of more than 8%, so you had 0.917 of your capital and the high side was 1.77 times your starting capital. The ending value was 1.66 times your capital.

In essence, backtesting with these numbers, says: Why not do this to goose your returns a little bit?

I will test in a moment what the worst possible loss would be if one started on each day since Oct 22, 1987.

OK, if one started this around August 8, 2007 (the worst day to start) then you would be down 25% at some point with your capital and end today still down about 6%. If you had bought on August 9, 2007 (lower than 8/8/2007) and held to today, you would be down about 26.5%.

LOL! is offline   Reply With Quote

Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off

Similar Threads
Thread Thread Starter Forum Replies Last Post
Is Buying on Panic "Market Timing"? Culture FIRE and Money 9 10-13-2008 08:44 PM
Market Timing??? rpow53 FIRE and Money 43 06-22-2007 09:05 AM
market-timing fund ? JohnEyles FIRE and Money 10 02-11-2007 12:29 AM
Market timing !?! Sam FIRE and Money 49 12-07-2006 03:11 PM
Is this market timing? Spanky FIRE and Money 3 05-10-2005 10:15 AM


All times are GMT -6. The time now is 09:20 AM.
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2016, vBulletin Solutions, Inc.