About the Two Corner Timing Model
The model used for Two Corner Timing's index trading signals is based on a combination of medium-term price and volume trends on the Nasdaq 100 index (NDX), and short-term technical indicators against those trends. Like all market timing systems worth considering, it is completely mechanical and based on publicly available information (in our case, index price and volume data). We developed the model in 2006, based on data going back to 1999. Since then it has been running live, with trades logged on TimerTrac.com. While the details of the model are proprietary, there is much to say about its general nature and behavior.
This is a very active system, with trades lasting on average less than four days. While market trends are taken into account as part of the model, they are only used as a basis of comparison to the shorter term movements of the NDX. This focus on recent action means that not only does our model perform equally well in rising and falling markets, it also appears to make the exact same kinds of choices in both kinds of markets - the average signal length and the ratio of LONG to SHORT days is remarkably constant. In truth, the model's slightly different behavior in different trends is what makes the signals seem to remain steady.
The short-term nature of the Two Corner Timing model means that signals must be acted on quickly. Delaying one day cuts backtest gains down by more than half, and delaying two days actually loses money. It's possible to wait until the open (or at least morning) of the next trading day without too much loss, as mentioned in the "Trading Time" section of our How-To Guide.
The success of the Two Corner Timing model depends on its volatility, more than the current direction of the Nasdaq 100. Volatility isn't the same thing as decline, as a rising market can still be volatile. A market may also be "flat" as far as long-term trend is concerned, but as long as there are sufficient day-to-day moves our system can still take advantage of them. One side effect of this is that Two Corner Timing is a "pessimistic" system, with an average 40/60 LONG/SHORT ratio. While the market goes up more often than it goes down, the downward moves usually have higher volatility; this is why so many associate volatility with decline.
Longer-term market timing methods generally try to find the current direction of the market, but short-term methods are generally counter-trend. While our model has some trending elements, it generally falls into the latter category. Counter-trend is often counter-intuitive, leading to signals that just "seem wrong". Often enough, it is wrong - our model picks about 55% of the days correctly. This can be frustrating, especially at the inevitable times when the model has been wrong several days in a row while stubbornly refusing to change the signal when it "obviously" should. But it's a game of averages, and stepping back a bit tells a different story: while the 55% success rate isn't much better than the market as a whole, our average wins are bigger than the market's, and our average losses are smaller. Counting signals instead of days, two thirds of our signals are correct (and the wins are bigger than the losses).
While our model uses more inputs than just the value of the NDX itself, one day's signal can always be decided from current value of NDX. This allows us to tell investors in advance what to expect so they don't have to be surprised by a signal at the last minute - see "The Current Signal Page" in our How-To Guide for details.
Variations
Two Corner Timing offers some different variations of signals, all of which use the same general model as our flagship Quick signal (the one featured on our home page). These variations aren't meant to be different strategies, but are tailored to different trading needs. A subscription allows access to any or all of these signals. Only the original Quick signal has much recorded real-time history: it has been logged to TimerTrac.com since 2006, the others only since 2009. But they all use the same model developed in 2006.
Quick
While this is the original signal of the Two Corner Timing strategy, it isn't exactly the base signal from which the others derive (that would be Quick Zero, below). This signal is always either LONG or SHORT, never in cash. An average signal lasts 3.5 days, and one-day signals are very rare.
This is a variation of Quick which isn't always invested. About 10% of the days are a CASH signal, with the remainder split along the same 40/60 LONG/SHORT lines as Quick. Its gains have generally been a bit higher than Quick and its average signal length shorter at 2.7 days. Its top historical performance is the reason it was chosen for managed accounts; the only reason Quick Time Out isn't the flagship signal is that the always-invested Quick is simpler to follow and has the longest real-time record.
Quick Zero
This is actually the signal on which the others are based. It's fairly evenly distributed between LONG, SHORT, and CASH, though still a little heavier on the SHORT side. The Quick Time Out and Quick variations were made by adding some post-processing steps to the Quick Zero signal, which wasn't originally designed to be used by itself. But it has done very well since real-time operation began, beating Quick, and more recently Quick Time Out, with the added safety of being in cash one third of the time. It is the most active trader of the bunch, with an average signal lasting only a little more than two days.
Quick Zero T3
This variant is designed for the most restrictive of accounts, cash (i.e. non-margin) accounts that can only trade stocks and require a three-day settlement period between the sale of one stock and the purchase of another (known as the "T3 settlement period"). As the name implies, it's based on Quick Zero, which already spends significant time in cash. Whenever a signal changes, Quick Zero T3 will stay in CASH for a full three days before opening a new position. This ends up spending less that 40% of the time invested, but makes up for it with a tendency to be invested on the more profitable days. In fact, Quick Zero T3 has the highest "while-invested" gains of any of the Quick family of signals.
Flow
Originally intended as only a component of the Quick signals, the Flow signal has done very in its own right for the last few years. While Quick Time Out remains the leader in historical performance, Flow has the highest recent gains. Unlike the Quick family, this signal spends a little more time LONG than SHORT. Signals average three days, and are always at least two days long.
Flow Zero
Flow Zero is a close relative of Flow, which spends about 15% of the time in CASH. Performance is about the same as that of Flow, making this signal a little better for the safety of being in cash some of the time. It's a very active trader, with an average signal lasting just under two days.