Author Archives: Cesar Alvarez
Author Archives: Cesar Alvarez
A frequently asked question is how I pick which variation from an optimization run to trade. This post will cover a ConnorsRSI strategy on S&P500 stocks. We will use a wide range on the parameters to give us lots choices to be used in the next post. I the next post, I will show how I take the results and narrow it down to one potential variation to trade. And then the final post, I will cover parameter sensitivity to help determine if the results are likely overfit or not.
My last post on Country ETF Rotation generated several ideas of what to test to improve the results. See the original post for the list ETFs being traded. One important test I left out from the original post was a baseline case. An idea applied to all the tests was trading more ETFS. For all tests, I will be showing results of trading (2,5,8) ETFs in the spreadsheet. Testing is from 1/1/2007 to 12/31/2016.
My recent research has been focused on finding strategies that are not highly correlated with the S&P500 index. One of my most popular posts is ETF Sector Rotation. The idea for this post is to apply those concepts to a list of country ETFs. Would this produce decent returns that were not highly correlated to the S&P500 index? I would like to see the correlation under .50. What about adding a filter to not enter an ETF when it is highly correlated with the S&P 500?
My last post on using PercentRank to measure mean reversion proved very popular. A reader looked at the trades and wondered if it would be best to exit after five days because the average trade with longer holds was a loser. I am surprised I have not covered this topic before.
In most of my mean reversion posts, I use RSI(2) to determine if a stock has sold off. In this post, I will explore how to use a stock’s recent return to determine if it has sold off. This will be done in way to normalize the return between low and high volatile stocks. This basic strategy has only two setup rules.
I have done several posts about trading XIV & VXX. In these posts (here, here and here) I refer to using synthetic data before these ETFs started trading. I supported the use of the data due to the very high correlation of daily returns during the overlap period. With a correlation of .97, I thought great the data should be good to use for backtesting.
As anyone who pays attention to the market, the S&P500 is down nine days in a row. I had several people write me about this. I was talking to a trading friend over the weekend about this. Nine days down seems bad. Let us put this in a broader context. How far have we come down in those nine days? Only 3.07%. Now that got me thinking is 3.07% in nine days that bad?
My recent research has been on the volatility Exchange Traded Products. My focus has been on long trades using VXX and XIV. Although VXX has a very strong downtrend, I am not a fan of developing short strategies on it due to the huge upside risk. I wrote about XIV here and expressed some of the dangers of trading these ETFs.
I will be in Texas next week giving presentations. Click the links below for more details. I hope to see some readers there.
For more information see https://www.mta.org/event-registration/austin-chapter-meeting-featuring-cesar-alvarez/
For more information see http://www.afta-dfw.org/schedule.htm meeting #2.
In this short five minute video I will answer the following questions: