The History of EquiTrend

Before I dig into the details of explaining EquiTrend’s long and successful history and the exciting launch of our new service, I want to thank all of our clients over the years for their support.  You have made the difficult job of running an investment newsletter a real pleasure. 

Since it is important to know how we plan to make you money in the future, I hope you will take five minutes to learn about EquiTrend and why I am more excited than ever about our future.  In this update, I am going to cover:

• How we got started
• Enhancements to EquiTrend – EQ2
• What to anticipate from our more responsive signal?

From 1996 to 1999, I spent hundreds of hours of research and development creating the EquiTrend stock market timing system, which would soon become the investment industry’s most successful market timing system. I have been trading EquiTrend in one form or another since the middle of 1999.  EquiTrend, as represented on this web site, has been providing real-time stock market timing signals since June of 2001.

Since our launch date in 2001, EquiTrend has been one of the most successful market timing services on the internet.  We were ranked as the number one timing signal on Timertrac in 2004 click here to see the press release.  What made us great was our consistency.  From 2001 to the end of 2004, we were arguably the top performing market timing service on the internet.  That started to change in 2005 and our performance continually got worse until the launch of EquiTrend II (EQ2) on July 16 2007. 

Sine the launch of EQ2, we are once again the number one service tracked by Timertrac.com.  And we expect to maintain a high ranking for the foreseeable future.

Without question, accurately timing the market is one of the most difficult tasks I have ever undertaken.  The last time I searched through Timertrac’s database, there were few services that added value on a risk adjusted basis for an extended period of time.  There are always flashes in the pan but few services that consistently perform well over the long term.  EquiTrend has one of the longest histories of any service tracked by Timertrac and up until recently, we were consistently ranked as one of the top ten market timing services.  That history doesn’t make any of us money today, but it does show our long term commitment to our clients.

Starting in 2005 EquiTrend lost its edge.  The data that drove our algorithm was increasing becoming less accurate.  Clearly the dynamics in the market, around which we developed our successful market timing system, were no longer the same. 

As you can tell from the research we share with you in our Weekly Market Watch newsletter, we are always conducting research on the markets.  Developing long-term trading systems is difficult and time consuming business that requires rigorous statistical testing.  In 2005, we began an exhaustive research project to improve EquiTrend.  During our 16 month journey, we made significant strides improving the EquiTrend signal. 

Because it is so difficult to develop a robust market timing system that will work in the long term, we don’t discuss our research findings until we see our model(s) work successfully in real-time.  Larry McMillan, the God Father of options trading, once told me that the definition of a drawdown is the amount of money you lose the minute you start to trade a new system. 

Before launching EquiTrend II (EQ2), we traded our algorithm in real-time for 6 months to validate our findings.  Due to EQ2’s success in real-time application, we replaced our old version of EquiTrend with EQ2 on July 16, 2007 and have been running EQ2 in real-time every sense.  For those of you who love to dig through the statistical details, below is an informative presentation on EQ2.    

Be patient, because the flash file takes about 20 seconds to load. 
EQ2 Back-Tested Performance & Statistics

What has proven to be the downfall of most quantitative systems is that they work until they don’t.  The market changes its behavior over time and a system based on static relationships of the market’s components can fall out of favor because it doesn’t adjust fast enough to changes in the way different components of the market interact.  That is what happened to the old version of EquiTrend.  The old version of EquiTrend wasn’t broken, it just didn’t adapt to changing market conditions. 

Our improved algorithm has been designed to adapt much quicker to changing market dynamics.  We expect it to recognize these changes as they occur and adjust accordingly.  Like all quantitative based systems, it will not be perfect but we expect it to perform significantly better than the current version of EquiTrend.  By leveraging our knowledge of systems development and our knowledge gained through extensive market research, we are optimistic that we have hit the preverbal nail on its head.    

What works in today’s market may not work well in the future.  EQ2 has been designed to detect changing market dynamics and weight data differently as data relationships change over time.  Because our improved algorithm dynamically adjusts data relationships, it functions like a system in a system.  In one year, EQ2 may have 30 trades and only 8 trades the following year. 

EQ2 will look, feel and function like a completely different system from year-to-year, month-to-month or day-to-day depending on what is going on in the market.   It may have back to back trades and then not have a trade for several weeks or months.  It may fire long and short trades for many months in a row and then sit in a cash position for several weeks. 

If we have done our work correctly, which our current real-time results make it appear that we have, EquiTrend should soon be adding dollars to your bottom line.