Choppy/Trendy study using Net Move Index

[Mark Johnson <janitor@xxxxxxxxxxxx>]

Robert Barnes's book "Trading in Choppy Markets" suggests
using an indicator called Net Move Index to discern whether
trendy or choppy conditions prevail.  I decided to try it
out on a collection of 75 futures markets, for the period
1/1/1980 thru 9/10/2004.  There were a total of 360,000
market-days in the study.  (Arithmetic would suggest
about 75*24*252 = 453,000 market-days might be present,
but some of the 75 markets didn't start trading until
after 1/1/1980.)

I've put the results on the web, you can download the Excel
spreadsheets if you like.  Go to www dot mjohnson dot
com and navigate to the "Archives" area.  There it is.

The NMI might be used to filter entry signals from
mechanical trading systems, in a method approximately like

   IF(NMI says "choppy") THEN BEGIN
       Ignore new entry signals from trendfollowing systems
       Accept new entry signals from counter-trend systems
   END

   IF(NMI says "trendy") THEN BEGIN
       Ignore new entry signals from counter-trend systems
       Accept new entry signals from trendfollowing systems
   END

A low-resolution .gif image from one of the Excel pages is
attached to this email message; there are several more charts
in the .xls file, including a comparison of the NMI results
against predictions made by a Random Walk hypothesis.

Eleven different lookback-periods ("K") are plotted, ranging
from K=1 days to K=100 days.  They are geometrically spaced,
five per decade, using the multiplier 10^(1/5) = 1.5849.

Attachment: nmi.gif
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