We are currently running various system update and maintenance programs which may slow response down a bit. At 12:00 Noon PST we plan to do a full system reboot, which will take the whole system down for perhaps 5 minutes. It will be a controlled reboot, so you don't have to worry about loosing any of your work. Thanks for your patience.

Using SectorSurfer

Online SectorSurfer User Guide

  My Strategies Page                Strategy Charts
  • What is a Strategy?    • Charts Demo Video
  Add or Import Strategies    • Chart Links & Popup Text
  View Trade Signal History    • Logarithmic Price Chart
  Strategy Information    • Annualized Return Bar Chart
  • Minimum Hold Time    • Trend Strength Bar Chart
  Strategy Charts Overview    • Probability of Loss - Risk
  • Ticker Symbols (also Extended)    • Sharpe, Sortino Ratios - Risk
  • Buy/Sell Trade Information    • Maximum Drawdown - Risk
 warning icon Warning or Special Advice    • StormGuard Indicator
  Strategy Trade History    • S.G. Bear Market Symbol
 brokerage icon Change Brokerage Link    • Score, Safety, Alpha and Beta
  Delete a Strategy    • Born-On-Date, Backtesting
Got questions?
Ask a question by email.
Never give up!
                See also:
Advanced Topics: Custom Strategies and Portfolio Charts.
Custom Strategies and Portfolios

  My Strategies Page

• What is a Strategy?
Thumbnail of My Strategies. Click to open larger picture.
A Strategy, in the context of Sector Surfing, is a set of up to 12 mutual funds, ETFs, or stocks along with an indicator algorithm to evaluate the performance of each to determine which one, and only one, is currently demonstrating leadership and should be owned. You can browse the performance characteristics of numerous ready-made Free Strategies and Premium Strategies, or you can create your own Custom Strategy using the funds of your choice — an important thing if you are limited to using only those mutual funds offered by a company-sponsored retirement plan.

Click the picture to the right to view the layout and functions of the My Strategies page. This is where your investment Strategies are managed and your Trade Alerts are viewed. To go to the My Strategies page, click the My Account tab on the top menu, and then the My Strategies tab on the second level menu. Since the Strategies on your page are yours alone to manage and edit, creation of an account and login is required. Click Here to create an account — there is no cost to do so.

Algorithm Automation Simplicity!
Although indicator algorithms can be complex and difficult to understand and configure, the good news is that we have totally automated the indicator algorithm configuration for each Strategy according to the character of your chosen funds/stocks. There are significant differences in the behavior of mutual funds, bonds, and stocks. For example, commodities, such as oil and gold, will behave differently from the stocks of companies that manufacture consumer goods, or from funds holding T-bills or certificates of deposit (money market funds). SectorSurfer automatically determines the algorithm and parameters most appropriate for the character of each Strategy so you don't have to. That's why we say "Our computers will do the hard work while you go have a life!" Just throw a set of funds at it, and SectorSurfer automatically figures out how best to treat them.

Making a Custom Strategy
A Custom Strategy is simply made by editing any of the ticker symbols in an existing Strategy, adding new ticker symbol to a Strategy, or deleting an existing  ticker symbol from a Strategy. All of these actions are initiated by clicking the ticker symbol (or blank) to open the popup window to "Find a Mutual Fund, ETF, or Stock." The popup window enables you to search by either ticker symbol or by words in its name. To add it to your Strategy, click the button. The popup window also provides a means to delete the current ticker symbol by clicking . As shown above, when you place the mouse pointer above a ticker symbol, its name, pertinent hold days, and early trade fees are shown. At each step of your Strategy development you can check its progress by clicking the chart icon, and selecting other properties of the Strategy by clicking the information icon.  See more information about Making Great Custom Strategies here, and some simple rules for quickly building a great 401k Strategy here.

Recommended Short Video Tour
We highly recommend that you view the short My Strategies Tour video by clicking the video icon to the left. It will quickly demonstrate all of the significant features and functionality of the page and likely save you a lot of time reading detailed instructions and eliminate the frustration of guessing how everything works.

Making a Strategy-of-Strategies
A Strategy-of-Strategies uses special ticker symbols to refer to your other Strategies. As with a normal SectorSurfer Strategy, it will pick the one, and only one, best performing Strategy from among up to 12 candidates. Use the ticker symbol format of SSSnn, for SectorSurferStrategy # nn, where nn does not have a leading zero if it is only a single digit. You can also mix normal ticker symbols with the Strategy ticker symbols if you like. A Strategy-of-Strategies does make buy/sell decisions and thus is not a free Strategy. Finally, all referenced Strategies must come before (lower number than) the Strategy-of-Strategies because Strategies are processed sequentially every evening and all referenced Strategies must be processed before the Strategy-of-Strategies in order for it to produce meaningful results. See also the concept of a Portfolio-of-Strategies.


My Strategy Page Controls, Column-by-Column

Strategy Number and Subscription Status

In the left column of your Strategies list is the Strategy number and its subscription payment status. Three examples are shown for Strategy #1. The first indicates that it is a  FREE  Strategy that will never require a subscription fee to receive email Trade Alerts and see the most recent trade. The next two are for a Premium Strategy that requires a paid subscription to receive email Trade Alerts and see the most recent trade.  PAID  indicates the subscription fee has been paid.  NOT PAID  indicates that either the subscription fee has not been paid or that the subscription has lapsed, thus disabling the ability to see the most recent trade. To fix a subscription problem, click the button that appears on the page and follow the instructions.

Add Strategies to Your List

The My Strategies page contains your personal list of up to 10 Active Strategies for which Trade Alerts are sent and may require a subscription fee, and up to 20 Sandbox Strategies which are for experimental evaluation, but neither send Trade Alerts nor require a subscription fee. There are three ways to add a Strategy to your list:

1. Select ready-made Strategies by clicking the Strategy icon and considering the Strategies presented in the
    Select-A-Strategy popup window. Click the row of the Strategy to select it, then click the button
    at the bottom of the page to add it to your Strategies list.

2. Import a Strategy using a Strategy-ID by clicking the Strategy icon, pasting the Strategy-ID into the text box at
    the upper right. Then click the   button above the text box. To send a Strategy-ID to a friend, click
    the Information icon to find the Strategy-ID, then copy and paste it into an email. 

3. Assemble your own Custom Strategy by clicking the ticker symbol positions in the Strategy List and selecting one
    from the many thousands of mutual funds, ETFs, or index stocks on the list that pops up. Additional details and tips
    for building great Custom Strategies are detailed below.

Thumbnail of Trade History. Click to open larger picture. View Trade Signal History for a Strategy
You may view the Trade Signal History for a Strategy by clicking the History icon. The Trade Signal History, as pictured to the right, should not be confused with the Actual Trade History found in the Trade Information section of the page. The Trade Signal History is what the Strategy algorithm says one should have done to achieve the results portrayed on the charts.

The list shows the entire history of trade signals, days held, performance for each holding compared to the S&P 500 and the cumulative value for both the Strategy and S&P 500 had you invested $10,000 in each at the start of the available data for the Strategy.

The generic symbol $CASH is used when StormGuard directs you to move to the safety of a money market fund. Not everyone has access to the same money market funds, and they are all pretty much like "peas in a pod", so whatever your brokerage has available will work just fine.

At the bottom of the listing you can click the button to download a CSV (comma separated variables) spreadsheet of all the important Strategy statistics and trade signal history. Add "/d" to the end of your Strategy Name to further add daily data for the Strategy and the reference fund. (Note: make sure the "/d" shows up in the name on the chart because if the name is too long and it is cut off the extra data will not be generated.)

Correct Interpretation of History Data: A common misinterpretation of the Trade Signal History data is that each line reports performance associated with the BUY fund. The correct interpretation is that it reports the status on the date found in the left hand column. On the day of the Trade Signal Date, one has only just bought the BUY fund. Thus the performance data reported relates to the SELL fund. A good reminder of this is the 4th column title "Days Held (fund sold)."  Thus, when you click to view the example above-right, the proper interpretation is: On Jan 31st 2011 SectorSurfer signaled to BUY EWY and to sell IIH which had been held for 248 days. During the 248 day period from May 28, 2010 to Jan 31, 2011, the S&P 500 returned 19.5% and the Strategy returned 23.0%.

View Strategy Performance Charts
You may view the current performance charts for a Strategy by clicking its Chart icon. In a single view, five separate charted measures of risk and return performance are provided, as described in the About SectorSurfer Charts section below. Fresh charts are made within a few seconds whenever you make a change to a Strategy to enable evaluation of the change's effects. Fresh charts are also produced: (a) during daily data update processing, (b) when a Strategy is imported to your list, and (c) when you change a fund in the Strategy or change its Minimum Hold Time (see below).

Strategy Information
The Strategy Information popup window contains these elements:
 • Strategy Name editing so you can rename it to something meaningful to you.
 • Strategy Notes editing so you can better remember which investment account this Strategy is meant to control.
 • Strategy Classification to indicate the investment style. This is for your reference only, it does not affect the Strategy.
 • Strategy Minimum Hold Time to control when a Trade Alert can be issued. (See notes just below.)
 • Strategy-ID number for you to copy and paste into an email so a friend can import an exact copy of the Strategy.
Note: The Information icon will be replaced with the warning icon if SectorSurfer detects a problem with one of your Strategies (such as one of the funds going defunct). The warning message will be displayed when the icon is clicked.

• Minimum Hold Time

There are seven choices for the Strategy Minimum Hold Time, as listed below. You can select one in the Strategy Information popup window by clicking the Information icon to the right of the Strategy name.  This parameter can be used to make SectorSurfer's algorithms comply with minimum hold time requirements, whether imposed by a particular fund, or by a particular investment plan. For example, most mutual funds and ETFs have no minimum hold time. However, Fidelity Sector Funds all have a 30-day minimum hold time with a 0.75% early trading fee, most Fidelity International Funds have a 90-day minimum hold time with a 1.5% early trading fee, and all 529 College Savings Plans have a one-year government mandated minimum hold time.

SectorSurfer maintains a file of the minimum hold time and early trading fee for hundreds of popular funds; however, there are many thousands of funds available. If we have the information for your fund, it will be listed in the right column of the Find-A-Fund popup window on the My Strategies page, or in the screen tip text that appears when your mouse pointer is placed over the ticker symbol to display its name. When SectorSurfer knows the minimum hold time for a fund, it is incorporated into the trading algorithm only if the "Trade Automatic" setting is selected. Currently we have the minimum hold information for Fidelity, Vanguard, and American funds. In the future, on request, we will add such information for other funds of importance to you to support your custom Strategies.

SectorSurfer generates a new Trade Alert when trend leadership changes according to the Hold Time Option selected:
 • Trade Automatic - Trade alerts issue at month end only, but will wait additional months if a fund hold time is > 30 days.
 • Trade Any Day - Trade alerts issue immediately, but you'll be warned if a fund hold time is violated.
 • Trade Weekend - Trade alerts issue on the weekend only, but you'll be warned if a fund hold time is violated.
 • Trade Month End - Trade alerts issue at month end only, but you'll be warned if a fund hold time is violated.
 • Trade if >30 days - Trade alerts issue if current fund has been held at least 30 days.
 • Trade if > 60 days - Trade alerts issue if current fund has been held at least 60 days.
 • Trade if > 90 days - Trade alerts issue if the fund has been held at least 90 days.
 • Trade if > 6 months - Trade alerts issue at month end only if current fund has been held at least 6 months.
 • Trade if > 1 year - Trade alerts issue if current fund has been held at least 1 year.

Note: Trade Automatic is the default setting for a good reason. Not only does it watch out for special hold time rules for funds, but it also trades month-end, which almost always performs better than Trade Any Day because it can be shown that the trend signals actually do become more reliable around the end of the month when many fund managers start making next month's changes. This is documented in the Hurst Exponent Fingerprint section of the Sector Rotation Theory page. If you are anxious to have a faster responding system, please read about The Faster Response False Dilemma.

Note: Changing Minimum Hold Time will cause the algorithm to re-evaluate and determine what the best parameters are for the Strategy, and could result in using a longer or shorter trend measurement period, and consequently a possible change in the one designated as the trend leader. Determining the trend leader depends heavily on the period of time over which the trend is measured. Imposing a holding period imparts a delay effect much like changing the trend measuring time constants, thus it should be expected that changing the Minimum Hold Time rule will case a change in the optimum trend measuring time constants.

• Fund or Stock Ticker Symbols
By clicking the position of a ticker symbol, the Find a Fund, ETF or Stock popup window will appear and enable you to search by either ticker symbol or by words in its name. To add it to your Strategy, click the button. The popup window also provides a means to delete the current ticker symbol by clicking . As shown above, when you place the mouse pointer above a ticker symbol, its name, pertinent hold days, and early trade fees are shown.

Mutual Funds & ETFs: There are in excess of 12,000 mutual funds and ETFs available to choose from. Please contact us if there is a mutual fund or ETF that is important to you but is not on the list. We will do our best to make it available provided it has at least 3 years of data. The reason for requiring 3 years of data is that SectorSurfer's algorithm cannot properly characterize a fund that has not seen a variety of market conditions, and you risk the possibility of unexpected Strategy behavior in the future. If you must have a fund or ETF with shorter duration history, you may be in love with it for the wrong reason. The right reason is having increased probability of higher returns and decreased probability of loss. A sexy name and low introductory fee is not a sound reason for a financial marriage — long-term character matters.

U.S. Stocks Available for Strategies: Our database, from FastTrack, contains well over 3,000 U.S. Stocks from the three major exchanges (NYSE, AMEX, NASDAQ), which include many foreign stocks listed for trading on the U.S. markets as an ADR (American Depositary Receipt). However, we generally do not make new stocks available until  they have about 3 years of data. SectorSurfer's algorithm cannot properly characterize a stock that has not seen a variety of market conditions, and you risk the possibility of unexpected Strategy behavior in the future.

Foreign Stocks Available for Strategies: Our database also includes most of the Australian Stock Exchange ASX-100, all of the Toronto Stock Exchange TSX-60, and most the London Stock Exchange FTSE-100. The symbols for these stocks have ".A", ".T", or ".L" appended to them for their corresponding exchange to prevent confusion with possible duplicate ticker symbols on other exchanges. Unfortunately our system is currently limited to a maximum symbol length of five characters, thus the stocks with greater than three characters are too long in our system when the two-character suffix is added, and therefore have been excluded. When searching for these stock in our system, try entering just the two-letter suffix to specifically find these stocks.

Note: Ticker Symbol Changes Causes Re-Optimization: Each time you change one of the ticker symbols, SectorSurfer will re-make your Strategy chart so you can immediately see the effect of your changes. Note: Changing any ticker symbol or the Strategy minimum hold time causes SectorSurfer to re-evaluate and determine what the best parameters are for the Strategy, and could result in using a longer or shorter trend measurement period, and consequently a possible change in the one designated as the trend leader. Determining the trend leader depends heavily on the period of time over which the trend is measured. Performance ranking last week is not the same as performance ranking last month. Consider that there are many routes to your favorite restaurant, and right now there is an optimum set of roads in the route. But that may change if some roads are closed and new ones are opened, or if you impose a rule for how frequently you can make a turn. Likewise in a Strategy, there are often multiple sequences of ticker symbols that produce fairly similar results, and small changes to the Strategy can cause a different sequence to become the optimum sequence.

Extended History Ticker Symbols The data history length of each of your Strategy ticker symbols can can have a profound effect on the projected performance of your Strategy. For example, if you are modeling a Strategy with the original 9 SPDR sector ETFs and you want to see if additional safety is afforded by adding either IEF or TLT (treasury fund ETFs) to the Strategy, you will quickly note that neither of these ETFs has data that extends back past mid-2002 and thus they cannot suitably model performance of the intended Strategy during the 2001-2002 market crash. Matters are even worse if you want to use the UBT (2x treasury ETF) because its data does not start until January 2010, thus making it impossible to model performance during either of the two recent market crashes.

One solution to the problem of satisfactory modeling is to create  artificially extended versions of important modeling symbols.  Some of these symbols can be artificially extended by adding on older data portions taken from another fund that can act as a proxy for this fund during earlier periods. Sometimes a 2x or 3x scaled ETF is extended by using the 1x version of the fund and appropriately scaling the extended proxy data used. These ticker symbols have a "-" added to them to indicate they are extended versions. A list of the available extended history ticker symbols follows:

Extended History Ticker Symbols 

Symbol Name Start Date  |  Orig. Date Extension Method Used
SHY- Treasury, 1-3 Year 1-2-1992   |   8-1-2002 VFISX
IEI- Treasury, 3-7 Year 1-2-1992   |   1-1-2007 IEF- + SHY-) / 2
IEF- Treasury, 7-10 Year 1-2-1992   |   8-1-2002 VFITX
TLH- Treasury, 10-20 Year 1-2-1992   |   1-1-2007 (VFITX+VSUSX) / 2
TLT- Treasury, 20+ Year 9-1-1988   |   8-1-2002 VUSTX
UST- Treasury (2x), 7-10 Year 1-2-1992   |   1-1-2010 IEF- x 2
UBT- Treasury (2x), 20+ Year 9-1-1988   |   1-1-2010 VUSTX x 2
TYD- Treasury (3x), 10 Year 1-2-1992   |   3-1-2009 (TLH- + IEI-) x 1.5
TMF- Treasury (3x), 30 Year 9-1-1988   |  3-1-2009 VUSTX x 3
FLBX- Treasury, Fidelity FLBAX 9-1-1988   |  3-1-2006 VUSTX
QQQ-  NASDAQ 100 Index 1-3-1995   |  3-5-1999 RYOCX
QLD- Ultra (2x) QQQ NASDAQ 100 1-2-2004   |  7-1-2006 QQQ- x 2
MVV- Ultra (2x) Midcap 400 1-2-2004   |  7-1-2006 MDY x 2
MIDU- Ultra (3x) Midcap 400 1-2-2004   |  1-8--2009 MDY x 3
SSO- Ultra (2x) S&P 500 1-2-2004   |  7-1-2006 SPY x 2
SPXL- Ultra (3x) S&P 500 1-2-2004   |  11-1-2008 SPY x 3
EFA- EAFE International Index 2-1-1996   |  9-1-2001 BTAEX
SH- Short S&P 500 9-31998   |  7-1-2006 SPY x -1
PSQ- Short QQQ NASDAQ 100 9-3-1998   |  7-1-2006 RYOCX x -1
AGG- US Aggregate Bond 1-3-1995   |  1-1-2004 VBMFX
HYG- High Yield Corporate Bond 1-3-1995   |  3-1-2007 AHITX
JNK- Barclays High Yield Bond 1-2-2004   |  1-2-2008 AHITX
UJB- Ultra (2x) High Yield Bond 1-2-2004  |  3-1-2011 AHITX x 2
VIXY- VIX Short-Term Futures  4-1-2004  |  10-4-2011 For a detailed explanation for how this data was extended, please see this article: XIV historical data and pricing model since VIX futures are available (2004)

You may also enjoy reading Easy Volatility Investing by Tony Cooper.
VXX- VIX Short-Term Futures 4-1-2004  |  10-4-2011
VXZ- VIX Mid-Term Futures 4-1-2004  |  10-4-2011
VIXM- VIX Mid-Term Futures 4-1-2004  |  10-4-2011
SVXY- Short VIX Short-Term Futures 4-1-2004  |  10-4-2011
XIV- Short VIX Short-Term Futures 4-1-2004  |  10-4-2011
ZIV- Short VIX Mid-Term Futures 4-1-2004  |  10-4-2011

Long-Term Treasury ETF Comparrison Tip #1. One of the better uses for the  long-term treasury ETFs is with StormGuard as the Bear Market Symbol — meaning that when StormGuard triggers, instead of going to the safety of $CASH (your favorite money market fund), you will instead receive a trade alert to buy the specified Bear Market Symbol. Since long-term treasuries are negatively correlated to the S&P 500, you can generally expect a bit of a performance improvement when implemented. Click to expand the Treasury ETFs comparison chart (right) showing the significant difference between these ETFs, and their differences in character from the S&P 500.

Tip #2. The ETFs in the center section are intended to provide a broader selection of good "backstop funds." They are used in a  Strategy to provide a floor of performance the Strategy can fall back to when none of the other funds in your Strategy is performing as well. Most of these were extended only by the amount necessary for compatibility among its peers. While ordinary 1x leveraged ETFs began emerging in the mid to late 1990s, the 2x leveraged ETFs began emerging in the mid 2000s. To provide an opportunity to serve as a backstop fund requires the fund's data to have history length similar to that of the other Strategy funds it serves with.

Tip #3. The VIX futures contract ETNs in the bottom section aren't for the faint of heart. We've posted an example Strategy on the popup list entitled "A Nose for VIX." While it has posted strong returns, its volatility is quite high. It may inspire contemplation (over a glass of red) whether these funds have completely crossed the line from that of investing to gambling. There is not even a remote connection to owning a piece of a company's assets or earnings. Ah, but in the end, is it really any different from owning a pack of faceless companies in a fund that you trade for another pack in just 30 days proving you really are just betting on the froth rather than loyally supporting development of a worthy, innovative corporation?

• BUY/SELL Trade

This is where the trade details can be viewed, including: (1) the trade signal date and BUY/SELL ticker symbol information, (2) a red button to acknowledge completion of the recommended trade and to inform SectorSurfer that you have completed the task so that no further reminder emails will be sent, and (3) a green button to indicate that you have already acknowledged the most recent trade. If you find you acknowledged a trade in error, click the Strategy Trade History icon where you will find the button to undo the trade acknowledgement status in our system (not the actual trade at your brokerage).

When StormGuard indicates it is time to move to/from the safety of a money market fund, it uses the generic symbol $CASH for the Buy/Sell ticker symbol because not everyone has access to the same money market fund. When you see $CASH, substitute your favorite money market fund. When creating a new Strategy it is important to choose a good entry point into the Strategy's recommended fund. If there are only a few days until the next likely Trade Alert or if the last recommended Buy ticker symbol has a short-term trend that has gone negative then SectorSurfer's algorithm will use the $WAIT symbol to indicate you should wait a bit for a better entry point into the Strategy. For Strategies that trade month-end, the $WAIT will always be resolved into one of the ticker symbols at month-end. In the mean time, acknowledge the $WAIT signal by clicking the red button.  There is also important and specific trade advice offered when you see the warning icon icon. Always be sure to read and consider this important information.  The -NEW- ticker symbol will appear as the SELL symbol for new Strategies that have no prior recorded history of trade acknowledgements to specify what you actually do own and should sell.

warning icon Warning or Special Trade Advice
If there is a special situation regarding the recommended trade, the warning icon Warning icon appears instead of the icon. When you click the icon, the warning message will be displayed. The message could be generated for numerous reasons, including: (1) the current fund you own may have a stronger trend signal than any of the funds in the new Strategy you have just selected, (2) one of the funds in your Strategy is defunct and should be deleted or replaced, or (3) you have just created a new Strategy and special advice is offered.

Trade Options Information
If there are no special considerations associated with the suggested trade, the Trade Options Information icon appears to the right of the button, to let you know that there are multiple options for how one might respond to the recommended trade. When the Option Information icon is clicked, the following text is displayed:

You have four options for acknowledging this trade:

1. Click the Broker link to go to your brokerage account and make the trade and then return here and click the Acknowledge Trade button so SectorSurfer will no longer send you email reminder Trade Alerts.

2. Delay making the trade until a later or better time and don't click the Acknowledge Trade button until then.

3. Reject this Strategy in favor of another Strategy by clicking the Strategy icon and selecting a new Strategy from the list.

4. Exit for the sidelines to sit in cash (any money market fund) for a while by changing to the Free Strategy called
Sidelines In Cash.
Click the Strategy icon select the Sidelines In Cash Strategy. 

View Strategy Trade History
You may view the history of trades you have made in a Strategy by clicking the History icon in the Trade Information column. Unlike the "Trade Signal History" controlled by the Strategy algorithm, this is a list of all trades you have acknowledged, rejected, or that still may be pending. It is a log of your activity for this particular "bucket of money," not a list of "trade signals" for the Strategy. If you acknowledged a trade in error, click the button on this screen to undo the trade acknowledgement status in our system (not the actual trade at your brokerage).

brokerage icon Change Brokerage Link
In the far right column is the link to your brokerage to make the actual trade. You can change the brokerage link by clicking the brokerage icon Brokerage icon. There you can select from a list of dozens of brokerages, or enter your own brokerage name and link.

Delete a Strategy from Your List
To delete a Strategy, click on the Delete icon on the far right of the Strategy line. You will be asked to confirm that you really do want to delete the Strategy before it is removed. The first Active Strategy has a grey icon indicating you cannot delete the first Strategy - but you can edit it or import another Strategy over it.

  Strategy Charts

• Charts Demo Video
We recommend viewing the short demo video, to the right, describing our comprehensive Strategy charts. Each SectorSurfer Strategy chart contains the information you need to evaluate a Strategy's risk and return performance. By clicking the SectorSurfer Chart Icon Chart icon, you can instantly compare and contrast the performance of Strategies you are evaluating. Fresh charts for each Strategy are generated (a) each night during our daily processing, (b) when you import a Strategy to your list, and (c) instantly when you make any change to the Strategy.

Thumbnail of My Charts. Click to open larger picture.Seven-In-One Charts Each SectorSurfer chart (click image to the right) contains these 7 features: (1) a logarithmic price chart showing all of the Strategy's constituent funds along with the S&P 500 Index plotted in white and the SectorSurfer's results plotted in yellow; (2) a bar chart comparing the annualized return performance of the Strategy and the S&P 500 Index over 3-Years, 10-Years, and Max-Years; (3) the Sharpe Ratio measure of risk; (4) the 10-year maximum drawdown; (5) the probability of loss of real money; (6) the relative trend strength for each fund in the Strategy; and (7) the StormGuard Indicator.

• Screen Popup Text
Each major element of the chart has popup explanatory text when you place the mouse pointer over it, and some further provide clickable links to portions of this page. CLICK HERE to see an example of the popup text.

• Logarithmic Price Chart
A logarithmic price chart has the advantage of vertical interval spacing that provides the same percentage change for each interval. On a logarithmic price chart, performance is measured relative to its price at the start of the chart — hence everything starts at 0.0% return on the left side and goes from there.

On the chart to the right, the first vertical interval above 0.0% is 41.4%. A 41.4% gain at the first vertical interval grid line means our total account value at this level is 1.414 times as large as the starting value. We have the original unit amount (1.0) plus the return (.414). Thus, if we started with $1,000, we would now have $1,414.

Likewise, the next interval up will be another 41.4% return, compounded on top: $1,000 x 1.414 x 1.414 = $2,000, which is a 100% return on the original amount. With another 41.4% return we would have $2,000 x 1.414 = $2,828, which is $1,828 more than what we started with and a total return of 183% — and so on.

One nice feature of this is that a straight line represents a constant percent return per year. For example, if you drew a straight line along the crests of the bumps of the yellow curve, it would have a slope that takes approximately 11 years to raise 7 intervals (.64 intervals per year), or roughly  .64 x 41.4% = 26.5% per year.

As can be appreciated when viewing this chart, the relative performance of the Strategy's performance (plotted in yellow) can be compared to the S&P 500 index (plotted in white) and each of the constituent funds. By clicking one of the blue buttons in the lower right, the logarithmic chart can be viewed in three different time scales — 3-Years, 10-Years, and Max-Years (where Max is the full number of years in the fund database for at least two of the funds). If fewer than 10 years of data is available, the 10-Year button will disappear.

• Annualized Return Bar Chart

Below the logarithmic price chart is the annualized return bar chart that compares the annualized return (average yearly return) performance of the Strategy to the S&P 500 Index over the most recent 3-Years, 10-Years, and Max-Years. The numerical value for SectorSurfer's performance for each of those periods is located below its corresponding vertical bar.

• Sharpe Ratio Risk Measure
The Sharpe Ratio is commonly used in the financial industry to measure an investment's added return over that of a very safe money market fund relative to the higher investment risk taken. It is named for William Sharpe, Professor of Finance, Emeritus, at Stanford University's Graduate School of Business and the winner of the 1990 Nobel Memorial Prize in Economic Sciences. The mathematical expression for the Sharpe Ratio is:

                Sharpe Ratio = (Fund Average Return - Money Market Return) / (Fund Standard Deviation)

The Fund Average Return is calculated by first finding the ratio of the ending value to the starting value of the fund, finding its Nth root, and subtracting one — where N is the number of years between the starting value and the ending value. The  Fidelity SPRXX money market fund is used as the riskless reference return to beat.

               Fund Average Return = (EndValue/StartValue)^(1/N) - 1

The Fund Standard Deviation is calculated by stepping through the database day-by-day and calculating gain/loss from one year earlier less the Average Annual Return, squaring it and summing it to form a TotalVariationSquared value. The TotalVariationSquared is then divided by the total number of days. By taking the square root of this value we get the Fund Standard Deviation. 

• Sortino Ratio Risk Measure
TThe Sortino Ratio is commonly used in the financial industry to measure an investment's added return over that of a very safe money market fund relative to the higher investment risk taken. The ratio is named for Dr. Frank A. Sortino, an early popularizer of downside risk optimization. The mathematical expression for the Sortino Ratio is:

                Sortino Ratio = (Fund Average Return - Money Market Return) / (Downside Deviation)

The Fund Average Return is calculated by first finding the ratio of the ending value to the starting value of the fund, finding its Nth root, and subtracting one — where N is the number of years between the starting value and the ending value. The  Fidelity SPRXX money market fund is used as the riskless reference return to beat.

               Fund Average Return = (EndValue/StartValue)^(1/N) - 1

The Downside Deviation is calculated by stepping through the database day-by-day and calculating gain/loss from one month earlier relative to the monthly return of the money market fund. If, and only if, the monthly return is less than the money market return is the difference in return (StrategyMonthlyReturn - M.M.MonthlyReturn) squared and added to a TotalVariationSquared value. The TotalVariationSquared is then divided by the total number of days. By taking the square root of this value we get the Downside Deviation. 

• Probability of Loss of Real Money
At SumGrowth Strategies, we believe that the two main measures of risk used in the financial industry, the Sharpe Ratio (explained above) and the coefficient of variation (defined as the standard deviation divided by its average value) both miss-characterize risk by ignoring how humans perceive risk. Both use focus on a statistical measure called standard deviation (basically the wiggliness of the line), which is affected by both upside wiggles and downside wiggles. Given that investors pretty much like upside wiggles, it is difficult to make a case for including them in a measure of risk. What scares investors is the possibility of losing real money — money at risk is money that could be lost.

To be meaningful, this measure of risk must include magnitude of loss and probability that it might occur. We determined that a magnitude of about 15% loss is where investors start becoming seriously concerned. As a simplistic example, if a fund experienced a loss of 7.5% year-to-year on average once every 4 years, then our measure of risk should be (7.5%/15%)x(1/4) = 12.5%. The numbers in the upper right corner show the values for the Strategy (yellow marker), and for the reference fund (white marker).

The Chance of a 15% Year-Over-Year Loss is calculated by first stepping through the database day-by-day and calculating the return for each from one year earlier.  If the return is positive then the day is skipped. If the return is negative then it is divided by 15% to normalize/scale it properly, and then it is summed with the losses from other days to form a TotalLoss value.  When all of the days have been checked, the TotalLoss is divided by the number of days that were checked to result in the value for Chance of 15% Loss in a Year.  The Average Annual Return is calculated by first finding the ratio of the ending value to the starting value of the fund, finding its Nth root, and subtracting one - where N is the number of years between the starting value and the ending value. Thus the  Average Annual Return  =  (EndValue/StartValue)^(1/N) - 1  Note that the calculation is performed over the period of time for which data exists for the Strategy ticker symbols and may result in different values for the reference fund in different Strategies. The date range is specified in the title of the risk section on the chart.

• Relative Trend Strength
The Trend Strength is the final singular figure of merit that SectorSurfer generates and uses to determine which one, and only one, of the funds has taken leadership and should be owned. The green-bar trend chart is calibrated in percent return per month and is an indicator of possible returns next month — to the degree that the current trend continues. Although "trend" means that something in the recent past tells us something about the near future, the future is also buffeted by the random events of the world.

Trade Alert vs. Top Trend: It is important to understand that just because a fund/stock makes it to the top of the Trend Chart does not mean that you should instantly run out and buy it. Each Strategy also has a "Minimum Hold Time" rule, such as "Trade Month-End," which determines when the Strategy will actually employ the Trend information and possibly generate an email Trade Alert. In the case of Trade Month-End, only after the market close on the last trading day of each month will the algorithm check the Trend for each of the funds/stocks to determine if there is a new leader, and if so, update the Sell/Buy information for the Strategy and send an email Trade Alert. It's not uncommon for one fund to be in the lead mid-month, but another to take the lead near the end of the month before the actual decision is made. Only with the "Trade Any Day" setting will a new email Trade Alert be sent on the exact day there is a new trend leader. Reasons for selecting more restrictive settings include early trade fees for some mutual funds, and that generally, month-end trading actually does perform better as described here. You can edit the Strategy's Minimum Hold Time parameter by clicking the Information icon to the right of the Strategy name on the My Strategies page.  

Inconsistent Trend Position: It's not uncommon to see a pair of funds in one Strategy have trend ranks become reversed when they are both also in a second Strategy. The reason this is possible (and rational) is that there is no perfect fixed definition for "Trend" that is optimum for everything. One fund may have a better one-week trend, but the other may have a better one-month trend. Thus, positions can swap depending on exactly how the trends are measured. Each Strategy has a custom set of trend algorithm parameters that are determined specifically for the set of funds in the Strategy. If one or more of the funds change, it is likely there will be at least a small variation in what constitutes the optimum measure of trend for the Strategy.

Strategy Editing: Further to the point above, if you change something in a Strategy and then reverse the change, there is no guarantee that the original set of trend parameters will be used again. Parameters are determined in full view of all past market data. Thus, parameters set with data that is current, versus data from one year ago, will likely be a little different. A difference in how trend is measure can result in a slightly different path of fund ownership. Similarly, a change in the Minimum Hold Time will also generally change the optimum parameters for measuring the trend. There is more than one route to your favorite restaurant, but the optimum route will depend on how traffic patterns change over time, on roads that are added or deleted, and on whether traffic lights get installed.

Unsubscribed Premium Strategy: When you view an unsubscribed Premium Strategy, such as this one (click here), you will note the yellow text on the relative strength bar chart that says "Unsubscribed Strategy — 90-day-old trend data." If you are using a Free Strategy, or you have a paid subscription, then this message will not appear and the green bar trends will be current. You may freely evaluate any unsubscribed Premium Strategy and build and evaluate your own Custom Strategies without paying a subscription fee, but the green trend bar chart and the Buy/Sell information will not be current.

• StormGuard TM Indicator

There are seven different StormGuard Indicators shown in the figure to the right that are used on SectorSurfer charts to show you the general state of the market. When there is a market storm, SectorSurfer's StormGuard algorithm will override the normal selection of the best fund in the Strategy to instead provide a trade signal to move your funds to a safe money market fund. This is called asset class rotation. The StormGuard Indicator is located on the right side of the title bar of the chart, as shown in the figure to the right. It includes a numerical value which appears to the left of the icon. When the StormGuard Indicator value goes negative the Strategy will produce a Trade Alert (according to the rules below) to indicate that you should move to the safety of a money market fund. StormGuard uses the generic symbol $CASH in the Buy/Sell fields to mean "pick a money market fund available to you" because not everyone has access to a common money market fund.

The character of the StormGuard Indicator is shown in the chart to the right. Its value will typically range from about -4% to +4%. The value is calculated daily using a proprietary algorithm that may be reasonably described as a differential multi-order exponential moving average on a basket of broad market indicators. It is designed to perform a balanced optimization to simultaneously reduce whip-saw losses from knee-jerk reactions to market dips by not reacting too quickly, and minimize the crippling losses from long duration market storms by not reacting too slowly.

For practical examples of how StormGuard reacts to real world events, please check out these two articles:

  •  Japan: A Short Market Slap, or Economic Malaise?  
  •  Should You be Panic Selling on Bad News?  No!   

Please note that the StormGuard Indicator may be slightly different from one Strategy to the next as can be seen when viewing a few of the charts on the Example Strategies page. This is because each Strategy is separately evaluated to determine the amount of storm protection required according the character of its funds. For example, a Strategy composed of broadly diversified funds will do best if it exits to $CASH as soon as broad market averages start a protracted decline, whereas other Strategies composed of sector funds are likely to have one or more funds doing a bit better than the broad market averages as the market decline commences, and thus should be allowed a little more running room before exiting.

StormGuard Versions:  SG-Std,  SG-AQR  and  SG-Armor The standard version of StormGuard is compliant with the trade hold setting for your Strategy, including the Trade Automatic setting which respects extended hold requirements of certain mutual funds. StormGuard - AQR (asymmetric quick response) is designed to "come out of the hole" quicker following a major market selloff, and does not respect the trade hold rules. StormGuard-Armor is designed for maximum safety and the ultimate in using multiple factors to determine when to exit the market. Please read more about these options at the StormGuard-Options page to better understand the features and benefits of each.

The "Faster Response" False Dilemma is a common investment strategy fallacy leading to hair-trigger "ants in the pants" when the markets look scary, with an ever stronger desire for shorter time constants to tighten up the response. The reason this is a false dilemma is because shorter time constants do not lead to better returns. There actually is an optimum time constant, as described earlier, that balances whipsaw losses from when one reacts too quickly, against major decline losses from when one reacts too slowly. Please consider this carefully as you review the meaning of the white chart (that emerges) in the Trade Signal Stationarity topic on the Sector Rotation Theory page. The reason why month-end trading generally performs better is documented in the Hurst Exponent Fingerprint section of the Sector Rotation Theory page. Additionally, if you have not yet done so, please also read this pertinent article: Should You be Panic Selling on Bad News? No! 

Disabling StormGuard can be done to enable "inverse funds" by adding "/i" to the end of the Strategy name in its text box on the My Strategies page. (Use just a single space following the name.) Inverse funds work exactly the opposite of normal funds by producing positive returns when the market is down, and vice versa. In order to benefit from inverse funds during periods of market decline one must disable StormGuard so it does not override the sector rotation algorithm and allows inverse funds to shine through. Please note that market declines are typified by about twice the normal volatility and a commensurate reduction in the quality of the trend signal buried in the market data. Consequently, imagined improvements often fail to be fully met. You can search for inverse funds in the "Find-a-Fund" popup screen by entering keywords such as "inverse," "short," and "ultra-short". Examples of inverse enabled Strategies can be found on the Hall of Fame page.

Special Symbols: SH- and PSQ- were created to provide extended data history for SH (ProShares Inverse S&P500) and PSQ (ProShares Inverse Nasdaq QQQ), where the special symbols have an added dash character. Here is why: Both the SH and PSQ ETFs have data that only goes back through 2006, but in order to improve and optimally backtest Strategies that use SH or PSQ with StormGuard disabled, it is better to have modeling data that additionally includes data for these indexes during the 2000 to 2002 market decline. So, SH- and PSQ- were synthetically created to do just that. By knowing and including their character during that market decline, they help SectorSurfer do a better job optimizing Strategy behavior for the future. Note that if your Strategy funds or stocks do not go back to the year 2000, these extended data symbols should not be used.

StormGuard Bear Market Symbol

The default setting for StormGuard when a bear market rages is to recommend moving to the safety of $CASH (any money market fund). A major market crash can last more than a year, as it did in both the 2001-02 and 2008-09 bear markets. By specifying something other than $CASH for the Bear Market Symbol in StormGuard's advanced options settings, you can do something more proactive than simply hiding until the sun shines on the market again. To access StormGuard's advanced settings, click the Information icon and the button to show the StormGuard options, which include a text box for entering a Bear Market Symbol. The default setting is $CASH, which means that when StormGuard triggers the BUY symbol will be "$CASH" (representing your favorite money market fund). You can change the Bear Market Symbol to anything you like, including mutual funds, ETFs, special extended history ticker symbols, and even the special ticker symbols used for the Strategy-of-Strategies.

For example, setting the Bear Market Symbol to "UBT-" means that instead of modeling the StormGuard period by simply going to $CASH, it will instead model the period using the extended history version of UBT, a 2x leveraged long-term treasury ETF. Long-term treasury funds are somewhat negatively correlated to the market and will almost always make a worthy improvement to your Strategy's performance, particularly when paired with SG-AQR. Treasury funds vary considerably according to the period of time their holdings are committed. Ten variations are listed in the extended history ticker symbols section, which are provided to aid in Strategy backtesting through artificially extending their history to include one or both market crashes.  Strategies that are tamer do well with TLT-.  Sector rotation Strategies will likely do better with UBT- or TYD-.  More volatile stocks and leveraged ETF Strategies will likely do best with TYD- or TMF-.

If you use a Strategy-of-Strategies special ticker symbol, such as SSS12, then your Strategy will import the equity curve from your own SectorSurfer Strategy #12 as the bear market Strategy to use when StormGuard triggers. A more complex bear market strategy can be made to either (1) ensure that if your chosen symbol is not performing well in the next market crash that Strategy #12 will have automatically selected something else, such as a bond fund or money market fund, or (2) implement a classic long-short strategy using an SS Portfolio in position #12 that holds a pair of underlying Strategies that correspondingly select best long ETF and best short ETF to simultaneously hold (which then provides you with a moderate return from their difference and which also inherently mutually negates most of the volatility).  

• Score, Safety, Alpha and Beta

Score: Each chart contains a Score value intended to represent overall performance in a single number. The formula includes the average return for all years, the average return for the most recent three years, and the Risk Of Loss value for the Strategy. Both long and short term performance are important, and excess risk reduces the Score. The exact equation is shown below. Higher Scores are better.

       Score = (AllYearReturn + 3YearRetrn / 2) / (40% + RiskOfLoss)

Strategies constructed from general purpose diversified funds typically produce Scores in the 45 to 55 range, while a good selection of sector funds may produce a Score in the 80 to 100+ range. If a Strategy has only a short history (of about 5 years or less), be cautious of reading too much into the comparative value of the Score.

Safety: The Safety value is designed to aid evaluation of Strategy suitability for conservative retirement portfolios. It  was scaled to produce a reference value of approximately 100 for the Fidelity Income-Bond Strategy. The Safety value rewards higher returns, but is reduced by twice the average negative deviation from its average return in order to favor a nice straight line of uniform return over the years. The Safety value is additionally radically reduced by the 4th power of the MaxDrawDown as it increases through 15%, and the 4th power of the Probability of Loss as it increases through 2%. The calculations are made from data available in the downloadable CSV spreadsheet on the Trade Signal History popup page. Examples of excellent Safety Strategies with smooth and uniform returns can be found on the Hall of Fame page. 

   Safety = 25*(AvgReturn - 2*AvgNegReturnDeviation) / (1 + (MaxDrawDown/15%)^4 + (ProbOfLoss/2%)^4)

Alpha: Alpha is a risk-adjusted measure of the so-called active return on an investment and is expressed as an annualized return percentage that reflects the excess performance over the index that would be predicted by Beta alone.  It is commonly used to assess the performance of active fund managers.  It is because SectorSurfer both reduces volatility during market crashes and has higher than usual returns that SectorSurfer has quite good alpha measurements.

Beta: An asset has a Beta of zero if its returns change independently of changes in the market's returns. A positive beta means that the asset's returns generally follow the market's returns, in the sense that they both tend to be above their respective averages together, or both tend to be below their respective averages together. Beta is usually measured with respect to an index, such as the S&P 500. A beta of 1.5 would mean that the asset would have correlated price variations 1.5 times greater than the S&P 500.

Alpha and Beta are respectively the vertical intercept and slope of a 'least squares error' line passing through a plotted set of points where the x coordinate is the excess return of the index over an index fund (usually S&P500) and the y coordinate is the excess return of the fund over that index fund. They are calculated as follows:

     Beta = (n*Sxy - Sx*Sy)/(n*Sxx - Sx*Sx)
     Alpha = (Sy - Beta*Sx)/n

     where S represents the sum of all x, y, x*x, or x*y data over n samples.

• Maximum Drawdown 
(Absolute, Realized and Quarterly Realized)
Maximum drawdown is a measure used to evaluate risk of an investment or an investment strategy. SectorSurfer calculates it in three ways: (1) the Absolute maximum decline in value from a prior high that occurred anytime,  (2) the  maximum Realized decline in value from a prior high measured only on Strategy trading dates when gains or losses of a trade are actually realized, and (3) the maximum Quarterly Realized decline in a portfolio's value from a prior high measured only from calendar quarter to quarter. The relative value of the Realized or Quarterly Realized Max Drawdown is marked by an R, or QR, respectively on the colored bar as shown above.

Note that the trades of the underlying Strategies in a Portfolio are generally not aligned with one another, and thus there is no generally suitable set of realized trade dates that can be derived from them for implementing a Realized Max Drawdown for a Portfolio. The primary purpose in knowing the Max Drawdown of a Portfolio generally relates to having confidence financial resources will be dependable during retirement. Thus we reasonably, but arbitrarily, chose the concept of quarterly disbursements from a Portfolio during retirement as the interval for measuring the Realized Max Drawdown of a Portfolio.   

The values shown on the chart are for the full span of the Strategy. However,  the Strategy History Summary CSV download file shows both the All-years values, and the 10-years values as well as the dates when the Max Drawdown occurred. If the history of the Strategy is less than 10 years, the evaluation period is reduced for both the Strategy and the reference according to the history available.  Be aware that the primary shortcoming of the Max Drawdown measurement is that there is no consideration for the duration of a decline or the duration of the prior high - it could be days or years.

• Born On Date

On the left side of the main chart there is a date indicating when the Strategy was born. With Standard SectorSurfer optimization (no Forward-Walk Progressive Tuning) It is set to today's date whenever you edit a Strategy and change either the Min Hold Time setting or any of the ticker symbols, both of which trigger SectorSurfer to re-optimize the Strategy parameters for the current set of conditions you've set. Standard SectorSurfer charts show a combination of back-tested performance and real time performance where the back-tested performance is shown to the left of the Born On Date and the real time performance is shown to the right of the Born On Date. Certainly, Strategies with older Born On Dates have more credibility than do freshly optimized Strategies. However, the trend character of Strategies does exhibit statistical stationarity and is why back-testing to determine the character of a Strategy is valid. See Trend Signal Stationarity on the Sector Rotation Theory Page for additional technical information.

An optional advanced feature of SectorSurfer is the Forward-Walk Progressive Tuning method of backtesting and tuning updates. The Forward-Walk methodology is considered the gold standard of backtesting. Please read more here at the Forward-Walk Progressive Tuning page.

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