Main Description
The Channel Crossover Tool, allows users to see the hypothetical results of buying the stock fund when it crosses above the moving average + a channel offset and holding until it crosses below that moving average – a channel offset. When the stock fund crosses below the lower channel the backtester will invest in the cash fund specified. When the fund crosses above the upper channel again the backtester will then invest in stock fund again. Users can customize the stock and cash fund to invest in, the moving average type and length, the channel size, and the frequency at which the moving average condition is tested.
Below shows green arrows on buys (when the price crosses above the upper channel), and sells in a red arrow (when the price crosses below the lower channel).
Settings
Select Data Feed
Select a data feed to use. The Universal Data Feed has been our default data feed, and provides stock, ETF, and mutual fund data for the US and non-US markets. The Professional Quality Data Feed provides high quality data for US stocks, ETFs, and mutual funds. Additionally there is an option to select historical data, which allows users to select funds with histories that go back as far as 1924.
Enter Stock or Fund and Cash Ticker into Backtester
Enter almost any stock, ETF, or mutual fund ticker into the stock and cash ticker fields. The stock ticker will be bought when its price is above its moving average is above. The cash ticker will be bought and the stock ticker sold when the stock ticker’s price falls below the specified moving average. A single stock ticker and cash ticker is allowed.
Start/End Simulation Date
The date values to start and end the simulation. If a ticker is unavailable for some of the date range entered the default behavior will be to only test the dates when all tickers are available.
Frequency of Updates
This setting allows the user to choose how often the conditions are evaluated and updates to allocation are made. For example a monthly update means once a month (at the end of the month), the back tester calculates the new weight values based on each one of the 5 algorithms and adjusts the weightings of each ticker to match the weightings reported by each of the algorithms. These weightings will be held until the end of next month when the back tester will evaluate (ask the question) again and re-weight the portfolio according to the new values for each algorithm.
Moving Average Filter
This setting allows the user to choose what type of moving average, and how long the moving average is that will be used to determine if the stock ticker is above or below the moving average. Selections for the moving average type are, simple moving average, exponential, weighted, wilder exponential, double exponential, and look back length. The length of the moving average can be set as well, longer values will result in a slower to react moving average but prevent crossovers from happening too frequently.
Second Moving Average Filter
You can enable the second moving average filter by checking the box ‘Use Second Moving Average’. A popup will now allow you to setup the length of the 2nd moving average, keep in mind this should be shorter than the main moving average, same moving average method is used for both moving averages. The second moving average allows you to define a moving average that the main moving average (above) has to cross over to be considered above or below, instead of just using the price of the fund entered.
For example, without a second moving average (box deselected) if the price of the stock at the end of the period is 57.00, and the moving average (main ma, shown above) is at 57.10 then the moving average tool will consider the stock below the moving average and invest in the cash fund instead.
If we are using the second moving average (box selected) the price is 57.00, the main moving average is 57.10, but the second moving average value (50 day moving average show to the right) is 57.20, then the tool will consider the stock above the moving average since we are comparing the second moving average price of 57.20 to the main moving average with value 57.10 and that value is above, so therefore we are in the stock fund.
Channel Sizing
These settings set how high above the moving average (in percent above) the fund’s price has to go before a buy is generated, and the lower sell channel is how low it must go before a sell happens
Buy Rule: Buy when price of the fund goes above the top moving average channel line.
Sell Rule: Sell when price of the fund goes below the bottom moving average channel line.
Hold Rule: Don’t buy or sell until price goes above or below the top/bottom line.
Save Your Settings For Later
At the bottom of the settings area there is a URL, bookmark or save this URL and you will automatically be able to load and save all your settings automatically, without re-entering it every time.
Outputs
The tool outputs fully interactive charts showing day to day equity (not just monthly data), day to day draw-down, transitions from stock to cash symbol, a plot of the correlation of all tickers entered, a summary of performance, % allocation per symbol, annual/monthly performance table.
Portfolio Timing and Channels tool shows the length of time in trade compared to how much that trade returned in %, as well as how much of the time you were invested in each part of the portfolio and cash filter fund.
Downloads
Downloads that are available are a full trade spreadsheet, day by day strategy equity spreadsheet (which can be uploaded to any of our portfolio combination tools), and a list of settings you used to create the results. You may also download an HTML report with fully interactive graphs that you can save and send to others.
Example Strategies and Settings
Low Volatility Switching Strategy
This strategy rotates between the “stock fund” of SPY and the “cash fund” of IEF. This strategy is invested in stocks (SPY) when SPY is above the moving average specified, and invested in bonds (IEF) when the stock market is losing money.
Settings for Members: 110 day Simple Moving Average, update Monthly, channel size of 2.5%.
Aggressive Switching Strategy
This strategy rotates between the “stock fund” of MDY and the “cash fund” of TLT. This strategy is invested in stocks (MDY) when MDY is above the moving average specified, and invested in bonds (TLT) when the stock market is losing money.
Settings for Members: 110 day Simple Moving Average, update Monthly, channel size of 1%.
RotationInvest.com is not a registered investment advisor and does not provide professional financial or investment advice. RotationInvest.com is a tool that produces trade signals and backtesting results according to the set of funds and rules provided for analysis. Any strategies shown including but not limited to the pre-built strategies are only used to highlight what is possible using these tools, they should be regarded as educational in nature only, and not investment advise.