The J Chart shows the results of trading the technical indicator displayed in the chart directly above the J Chart.
Adjusted Return (J) Chart is NOT a technical indicator chart. The J Chart does not create buy/sell signals and there are no parameters to set.
The J Chart
- The red line in the J Chart reproduces the T Chart’s red line.
- The J chart’s white line (or alternating red and green line) is a composite of the returns trading the red and green line based on the tics of the chart above.
- Clicking on the chart label (“[+/-]”) shows values for the span of the chart regardless of pole position.
- The SD= value is the standard deviation for the white composite
In this chart a 10-day moving average crossing a 100 day moving average is used to trade the junk bond ETF JNK to money market.
Why use these Charts?
The Adjusted return charts make it easy to review the success of a trading strategy. When used with the funds and a single day delay, the charts show exactly what a real investor would make.
The J Chart is used in selection strategies in which the assets stay fully invested in the lines visible on the T Chart.
Small Cap to Large Cap
Using the J Chart
The J Chart is most commonly used for selection . . picking between two issues. The chart displayed is a FastTrack classic strategy recommended since 1989 (using open end funds)
The chart shows using AccuTrack to signal switches based on the strength of the S&P 500 fund (SPY) and the Russell 2000 small cap fund (IWM)
The J Chart shows that AccuTrack with 12 short and 48 long captures the small cap out performance relative to large caps in mid 2018.
Timing Using the J Chart
The above chart shows timing the junk bond fund JNK with a 10 over 100 day moving average with the V Chart.
The J chart with Money Market in Green is usually used for timing, not selection. The J Chart’s white line is a composite of the returns of the red and and green issue.
If your use of FastTrack or FT cloud is limited to timing switches between a single fund and money market, then you will not likely beat buy-and-hold over the long-term (but you will decrease risk).
Reversing the Signals
The impact of the red and green signals can be exactly reversed by right-clicking the Chart, “Parameters” and then checking the “Reverse Signals” checkbox in the lower right.
Use this technique to trade a trend less issue stuck in a trading range as Exxon was from much of 2016-2019. Moving averages may be interpreted in reverse to produce low risk returns during such periods.
In the case of the chart above, a 50-day Bollinger Band with a deviation of 2. There were only 2.20 trades per year and reversing the signals achieved a 41.52% gain vs XOM’s 4.37% performance over the same period.
This is still pure timing. Don’t expect every stock to do well using this strategy. Selection, as discussed throughout this help, always works better than timing.
Limitations of the J Chart
Trading between market segments works best when the segments have different price movement characteristics (relatively low correlation as measured by Cor=).
To use the J Chart to trade between two carefully selected issues, try the AccuTrack relative strength trading. (The A chart)
- Standard Deviation of the red and green lines should be about the same
- If one of the lines is much more volatile than the other, then the action of AccuTrack will be governed almost entirely by the movement of the most volatile line. AccuTrack will be reduced to working much like a smoothed moving average. That is, being used for timing the red line instead of making investment selection.