Investing 101

## TLI Performance Test from 1 Jan 2021 to June 2022:

![TLI levels test](https://storage.googleapis.com/toggle-webcm-prod/https://storage.googleapis.com/toggle-webcm-prod/Screen_Shot_2022_08_03_at_1_55_30_PM_86b8f08a4a/Screen_Shot_2022_08_03_at_1_55_30_PM_86b8f08a4a.png)

**Statistically significant p value < 0.001 for all sample sizes**

_The table above shows the hit rate, forward correlation pushed by 12 days, frequency and the number of TLI alerts generated from January 2021 to June 2022, across different TLI thresholds._

Overall, the TLI performs well on its entire domain: we see a 70% hit rate and a forward correlation of 42% even at the lowest threshold (0.0). 

For the experiment, the bounds were decided as a function of hit rate, forward correlation, and frequency.  Specifically, we wanted to maximise all three variables, which you can think of as accuracy, magnitude proportionality, and number of days when an alert was generated.  You can see that we find diminishing marginal returns once we cross the threshold of 0.15 to 0.2, where the hit rate slightly increases (by 5%), but we lose significantly more TLI alerts - meaning the next threshold did not add as much of a benefit as the previous threshold. 
 
<u>Why weren’t bounds of 0.1 chosen?</u>
 
Although we found a slightly higher hit rate at bounds of 0.1, our back test data found that incorrect instances were more frequent – in other words, even though they were marginally rarer, absolute losses were worse at that bound (which translates to worse performance).
 
**Does the TLI work better in bearish or bullish markets?**   

As we can see from Graph 2, the TLI has historically performed better with its bullish alerts; nevertheless, we can see that bearish alerts still outperform the SPX, by comparing the # of ‘correct’ points in Quadrant III and ‘wrong’ points in Quadrant II.

![tli vs spx price action](https://storage.googleapis.com/toggle-webcm-prod/https://storage.googleapis.com/toggle-webcm-prod/tli_vs_spx_price_action_166dd5c6ef/tli_vs_spx_price_action_166dd5c6ef.png)


Investigating the hit rate, forward correlation, frequency and the number of TLI alerts generated from January 2021 to June 2022

TLI - Deeper Investigation 

Reflexivity's Leading Indicators

_Last updated December 2024_

The Reflexivity Leading Indicator is an aggregated measure of all insights produced by Reflexivity on 9,500 US stocks.

When Reflexivity produces more bullish insights, pressures on the aggregate market are to the upside. And vice versa of course.

When the indicator rallies above 0.15 or falls below -0.15, the chance of seeing upside or downside moves in the broad market respectively becomes statistically higher.

![tli](https://storage.googleapis.com/toggle-webcm-prod/https://storage.googleapis.com/toggle-webcm-prod/spx_classic_tli_94_55fdce3a64/spx_classic_tli_94_55fdce3a64.png)

**Where can I find the TLI?**

The TLI is updated daily on the [MY TOGGLE page](https://toggle.ai/my-toggle) and TOGGLE Pro members get a special daily newsletter highlighting all the indicators we generate. 

**Explanation of the charts** 

The chart below shows the performance of the S&P 500, overlaid with instances when the TLI has hit a bullish and bearish threshold. 

![tli actual main](https://storage.googleapis.com/toggle-webcm-prod/https://storage.googleapis.com/toggle-webcm-prod/Screenshot_2023_08_22_at_12_26_21_PM_c51a1f78ae/Screenshot_2023_08_22_at_12_26_21_PM_c51a1f78ae.png)

As you can see, the market has moved almost accurately against the TLI signals - red downward arrows for when the TLI crossed below -0.15 and blue upward arrows for when the TLI crossed above 0.15. 

However, rallies and sell offs can be extended by real time information. For example, a bullish TLI accompanied by low valuation could result in an extended rally. On the other hand, a bearish TLI coupled with an upcoming FOMC could result in a steeper sell off. Furthermore, in the short term, the market can even move in the opposite direction to the TLI based on the macro picture or investor sentiment. 

![tli main august 2023](https://storage.googleapis.com/toggle-webcm-prod/https://storage.googleapis.com/toggle-webcm-prod/KK_Scratch_10_90b7f09766/KK_Scratch_10_90b7f09766.png)

The following 2 graphs highlight the performance of a position traded based on when the TLI hit the bullish or bearish threshold. 

The 1st chart on the left shows you the historically observed return of the position, against time. 

For bearish episodes, the highest return has been observed with a holding period of 10 trading days. For bullish episodes, returns tend to rise as time goes one, with the highest returns observed 20 trading days after the signal. 

The 2nd chart highlights the probability of seeing the respective performance after the TLI hits a threshold.

For bearish episodes, the highest probability of performance is observed just before the 10th trading day. In bullish times, a 5 day trading horizon has historically shown sufficient probability of seeing upside. 
