AccuTrack is a trend-following indicator. When the red line’s price momentum changes relative to the green line’s price momentum, AccuTrack gives a signal. AccuTrack works well when one, but not both, the red or green line is in a strong uptrend or a downtrend.
AccuTrack, like all trend-following indicators, is useless when the market moves sideways trendlessly. AccuTrack is especially unsuitable when both the red and green lines are in downtrends.
AccuTrack Shows Relative Strength
AccuTrack shows the relative performance of the red and green lines. This means AccuTrack can be negative when other indicators are positive. This can occur when the red line is gaining value, but not performing as well as the green line.
Other technical indicators may be positive just because the red line is gaining. Only the AccuTrack indicator suggests that a climbing mutual fund may not be a good selection because it is not keeping up with the other alternative expressed by the green line.
When AccuTrack is positive and rising (bars increasing in height above zero with time), the red line is showing more strength than the green line and is likely to continue to do so for some time. The converse applies when AccuTrack is negative and falling. There are times when AccuTrack is neutral. These periods have no bars. Generally, you neither buy nor sell in neutral periods.
The chart may have up to 6 sections at the same time. This chart shows three sections. Sections are stacked vertically with dates aligned.
The top chart is the T Chart . . . T is for Total Return. The center part is an indicator, AccuTrack. It tells when to be in the red mutual fund and when to be in the green mutual fund. The lowest chart is an Adjusted Return Chart, the J Chart. The J Chart shows the impact of switching an investment between the red and green lines.
AccuTrack Trading Signals
These mark the days on which the AccuTrack says TRADE. You see the tic on your computer screen at the extreme rightmost position of the indicator on the day that the signall occurs (circled above). The tic color tells which issue should be bought.
The advantage of being in the right mutual fund is apparent. The chart above suggests that there is a time to have assets abroad in Oakmark International (OAKIX), and a time to bring them home in Oakmark Growth (OAKMX). The Red/Green composite line of the J Chart shows return nearly as high as the better of the two funds, yet you have been diversified by owning international for a significant portion of the time.
Classic Mutual Fund Trading Strategy
In the beginning, FastTrack strategies were entirely composed to trading between pairs of the Fidelity Select funds. This work welled for the first 10 years of usage but ran into trouble in the 2000-2002 bear market and financial crisis of 2008/2009.
This strategy highlights the power of momentum trading as well a the foolishness of lack of diversity.
AccuTrack with Broad Holdings
For actively managed funds, their success depends on the investing philosophies of their managers. Successful managers have long runs during which their strategies are in favor.
A good fund manager could have a Relative Strength trend that continues up in a market downturn . . . even if his fund goes down. Of course, it would be ideal to not be invested in any mutual fund during bear markets, however, that implies that you can be a successful market timer, a difficult feat. FastTrack investing techniques emphasize being in the right investment based on relative strength. Trading to the strongest issue is much easier than market timing.