Adjusted  Return Charts (J and 2)

Updated 08/08/20

Adjusted Return (J and 2 charts) are NOT indicators. They show the results of trading signals generated by the indicator (tic) above the J or 2 Chart. They do not create buy/sell signals and there are no parameters to set.

 These charts show the results of switching between issues based on signals immediately above the 2 Chart. The red green trading result can be saved as for later analysis.

The J and 2 Charts

• The red line in the J and 2 Charts reproduces the T Chart's red line.
• The J chart's multicolor line is a composite of the returns of the 1 to six lines currently displayed based on multi-colored tics on the T Chart. 
• The 2 Chart's multicolor line is a composite of only the  the Red line and the 2mm issue . The composite is formed using the buy/sell signals of the indicator ABOVE the Adjusted Return charts.
• Clicking on the Chart Label ("adJ return") shows values for the span of the chart regardless of pole position. The yellow SD= value is for the multicolor composite.

In this chart a 10-day moving average is used to trade a junk bond fund to money market. Note: Most junk bond funds do not allow the 20 trades/year that this strategy requires.

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.

The 2 Chart is commonly used in market timing. When the 2MM is set to a money market fund like VMFXX, then the green segments show the periods out of the market (i.e. in money market).

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 12 48 with a 3-day trading delay captures the small cap performance at the end of the bear market.

Timing Using the 2 Chart

The 2 chart is usually used for timing, not selection. The 2 Chart's multi-color line is a composite of the returns of the red and an unseen 2MM  issue, usually a money market fund. The 2MM issue may be changed by right-clicking the chart name and clicking on "Settings" to open the Parameters dialog box.

The green segments of the 2 charts composite come from the 2MM issue and NOT the green line displayed. In this case VMFXX is the unseen money market fund used.

If your use of FastTrack 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 ToolBar and selecting Signal/Reverse. 

Use this technique to trade a trendless issue stuck in a trading range as Microsoft was from much of 1999 -2004. Moving averages may be interpreted in reverse to produce low risk returns during such periods.

In this case a 10-day moving average we used with a 10-day trading delay. There were only 2.72 trades per year and a 51% loss was converted to a 45.5% gain
 . . . during a bear market.

This is still pure timing. Don't expect every tech stock to do well using this strategy. Selection, as discussed throughout this help, always works better than timing.

Using More than the Red and Green lines 

By setting multi-colored signals, FT4WEB can display the return of a complex set of trades on a J Chart.

The J Charts composite line is drawn multi-colored corresponding to the tic colors in the T or P charts. The computation considers that 100% of the assets are switched at each tic.

J Chart Reversal Note: If you select signal reversal by right-clicking the Chart Tools ToolBar, the red tics evoke the return of the green line while all other color lines evoke the return of the red line.

2 Chart Reversal Note: The red tics evoke the green line's return. All other tics evoke the red line's return.

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)

1. Standard Deviation of the red and green lines should be about the same

2. . 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.

Saving the data in a J or 2 Chart's Multicolor Composite Line

1. Be sure the J or 2 is the lowest chart displayed.

2. Select one ColorBar cell by clicking on it turning the background black.

3. Move the mouse on to the chart. Hit the ! key on the keyboard to export  the lowest multicolor composite line to the selected  line of the T Chart.

4. Right-click on the ColorBar red cell and choose "Make FNU/Adjusted for Div. Once written, the FNU replaces the contents of the red cell.

5. Save when the standard Windows file save box pops up. Use a unique ticker symbol as the file name (limit 5 characters), for example, FRED$. The $ ending ensures that that the ticker is not already used in the FT database.

Why save the J or 32 Chart composite line?

• You can use the ticker symbol assigned to the saved data like any ticker for further analysis of the data.

• You may apply a momentum indicator like RSI to a the line that was created in using a price direction indicator like moVing average.

Note: For easy export to Excel.

You can save the data with a .CSV extension. Excel can open .CSV files. In step 5 above, enter the file name as "ABCD$.CSV" using the quote as shown. The saved file will not be accessible to FastTrack ( as a .FNU file), but if you double click on the file after creating it, then Excel will open it.

Key Words: Excel, FNU, Export