STOCK MARKET TIMING SERVICES
MIPS is a stock market timing model that sends signals to its members via email at the end of the days when the market (as measured by the S&P500) changes direction from up-to-down or down-to-up (Signal Date). The individual investor trades on this signal (long or short or out) on the opening of the market on the following day (Trade Date). Members then simply keep the position that they acquired on the trade date until the next Signal email from MIPS. It really is that simple. Click the "Signals Action" button to learn exactly what to do when you get a "Signal Change" email from one of the MIPS models.
MIPS Trading Profiles
This section explains how to select and trade with the MIPS models:
(1) which MIPS models to use,
(2) which stock market trading strategy to use (buy/hold, buy/short, etc), and
(3) which equities (or ETFs) to trade.
TRADING FREQUENCIES FOR INDIVIDUAL INVESTORS
Stock market trading can be VERY complex or very simply depending on how investors elect to trade. At MIPS, we stay in the low-to-medium frequency trading range, and leave high frequency trading to the pros. Timing models that do venture into higher frequency trading usually create more work for their clients and get chewed up by the pros. As can be seen in the table below, the MIPS models fit into the trading profiles on the left side.
MIPS MARKET TIMING MODELS
AVERAGE TRADING FREQUENCIES FOR THE MIPS MODES
The MIPS models were designed and developed to be medium-frequency stock market trading modelS with a buy/short/cash strategy, trading ETFs on the next day's Open following each MIPS signal.
Tip #1 (MIPS4MF+ vs. MIPS3/MF)
We recommend using MIPS4/MF+ trading ETFs on the next day's Open,
but MIPS3/MF if you must trade traditional mutual funds on the next day's Close.
Our "flagship" model is MIPS4/MF+, which is a slightly faster trading model than MIPS3/MF (average of 15 trades/year)
- MIPS4 is an offshoot of MIPS3, but uses algorithms from all MIPS models - MIPS4 is more "predictive" than the other MIPS models
- MIPS4's results are also very "smooth".
For this reason, we feel comfortable using the MIPS4/MF+ signals to trade leveraged ETFs
- if you do use leverage, however, we recommend double leverage long, but single leverage short
- for example, you can trade 50% each of SPY and SSO on long signals (essentially 1.5x SPY), and 100% SH on short signals
See Tip #1 above.
Our "Core" model, MIPS3/MF was introduced to the public in Nov. 2005. The "core" algorithms in MIPS3/MF include applied mathematics, pattern recognition, artificial intelligence (self correcting), and common sense to identify changes in direction in the market (Inflexion Points) and possibly a new intermediate-term trend (hence our name Market Inflexion Point Signals or MIPS). This model trades an "average" of 12-15 trades/year, but with a range of 5-20 trades/year in any given year. The "core" algorithms in MIPS3/MF are in all of the other MIPS models, except MIPS1/VLF.
See Tip #1 above.
We realize that there are many investors who do not want to (or can't) trade as often as medium-frequency model require. So, we also offer other models that would be more appealing to these investors. Our two other models are (a) the low-frequency trading model (MIPS2/LF) which trades an average of about 6 times/year, and (b) the very-low-frequency trading model (MIPS1/VLF) which trades an avenge of about only once a year. Of these two, MIPS2/LF is a much better model. See below...
Our low-frequency stock market trading model was developed for investors who does not want to (or can't) make over 5-6 trades/year. MIPS2/LF trades an average of 6 trades/year (but occasionally can trade 2 times in any one month). When coupling MIPS2/LF with a buy/short strategy, it will produce really good results, but not quite as good as MIPS3 or MIPS4. Over time, the MIPS2/LF low frequency trading service should produce results that are at least 65% as good as the MIPS3/LF model (but 2-3 times better than buy-and-hold), with only 1/2 as many trades.
Not highly recommended, but much better than a buy/hold strategy..
Our very-low-frequency stock market trading model was developed for the long-term investor who wants to trade only the long-term cycles in the stock market, and hence trade an average of 1 time per year! Obviously, this model cannot produce results as good as the other MIPS models, but it still has beaten the buy/hold strategy over long periods of time (see the "Studies I and II" under the "Performance" tab). Even without "shorting", the MIPS1/VLF model beat SPY buy-and-hold strategy in the 8 year period of 2003-10 to the tune of +102 vs +43, respectively (see "Study IV" under the "Performance" tab in the main menu).
Using Inverse ETFs not recommended with the MIPS1/VLF model.
- (Mixing MIPS Signals)
Some investors have trouble picking a MIPS model to follow, and get confused when the MIPS models all show different signals.
For peace of mind, those MIPS members may trade a "combination" the MIPS signals when trading ETFs on the next day's open.
- MIPS/Combo is NOT a real model, it simply trades the signal that results from a "combination" of the MIPS2/LF, MIPS3/MF,
and MIPS4/MF signals as described below.
- Use MIPS/Combo only if you trade ETFs on the "next day's Open".
Calculation of Combo Signals:
With the designation of long signals being "+1"; short signals being "-1"; and cash signals being "0";
- the Combo signal is Long when the sum of the signals from the 3 MIPS models is greater than 0
- the Combo signal is Short when the sum is less than 0
- the Combo signal is Cash when the sum is equal to 0
This equates to:
1) Long Combo signals result from
- 2 or 3 long signals, or
- 1 long signals and 2 cash signals
2) Short Combo signals result from
- 2 or 3 short signals, or
- 1 short signal and 2 cash signals
3) Cash Combo signals result from
- 1 long signal and 1 short signal and 1 cash signal
- 3 cash signals
Our performance calculations show that the results from the MIPS/Combo model are very close to those from the MIPS4 model
when trading ETFs on the next day's open.
- and the average number of trades/year is between those of MIPS3 and MIPS4.
(Use MIPS3 when trading traditional mutual funds on the "next day's Close".)
WHAT TO TRADE
About 70-80% of the effort in making money in the stock market is in determining whether "the market" is "trending" up or down. In MIPS terminology, by "the market, we mean S&P 500 Index (which accounts for about 85% of the money in the New York stock exchange). Almost everyone makes money in a up market and vice-versa for a down market.
The MIPS models determine "the market trend" for us with an accuracy of about 65-70%. In addition, the gains from MIPS's winning trades are about 3 times bigger than the losses from losing trades.
Viable Trading Strategies Include:
MIPS works well trading the S&P 500 ETF (SPY) and most stocks or indices ETF that "correlates" well with the SPY. Most small-cap, mid-cap and large-cap US indices are well-correlated to the SPY (like the Russell 2000, the Nasdaq 100, etc). In general, even though these other indices track well with the SPY, their "volatility" is higher than that of the SPY (goes higher than the SPY in up markets and goes lower in down markets). Of course, this is great on MIPS' winning calls, but it is not good on losing calls. Correlates => http://www.investopedia.com/terms/c/correlation.asp
For more aggressive investors, we recommend 1.5 leverage SPY on long signals and 1.0x SPY on short signals. One can do this by trading 50% each of SPY and SSO on long signals and 100% SH on short signals. See right-most trading profile below...
Click here for a full definiton of "Shorting" or "Going Short"...
We do not recommend using "Inverse Funds" to go Short in high volatility markets (better to Short the Index itself) !!!
"Inverse Funds" http://www.investopedia.com/terms/i/inverse-etf.asp
Strategic and Higher-Frequency Trading
Active traders can see more aggressive trading strategies by chicking below
- hedgeing; trading double/tripple leverage; trading high monementum stocks;
trading hottest SP500 sectors; trading options, futures, etc.
Click here ==> Aggressive Trading
Sample Buy/Short/Cash "Signal" from the MIPS Models