08 March 2011

Long over 200DMA & Short below 200DMA

How can I end this series of returns related post by not telling you the best strategy discovered till now! Well obviously it is in hindsight, but just imagine how strong it is by looking the below performance chart compared to buy and hold. This trading idea is to Long Nifty over 200DMA and Short Nifty below 200DMA.

The CAGR here is 46%, with which I feel even the smartest fund manager would be jealous of. I am sure this will make you feel jittery. And I would slice this strategy's performance more so that we can see exactly where it fails and what is its strength.

The easiest thing to point out about its performance is the fact that is over a very long period, another that it gets the benefit to ride the biggest bull run Indian market has seen from 2003 to 2007. But also see its performance from 1992 to 2003, where Nifty actually has gone nowhere, maybe did some sharp rallies and then fell back, but the return during that period is no less.

While you digest this shocker, I need to check out where can this fail.


manu said...

hi tarique..got confused..can u make it simple how u calculated cagr..

and chart ?

Tarique Anwar said...

CAGR can be calculated by the formula..
FV = PV(1+R)^N
FV is future value, PV is present value, R your CAGR and N the number of years

i think how the calculation of these numbers are done would need a post in itself..

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