Category Archives for "ETFs"
March 27, 2024
- in ETFs , Market Timing , Rotation by Cesar Alvarez
UPRO/TQQQ Leveraged ETF Strategy
Recently a reader sent me a leveraged ETF strategy that he wanted tested for the blog. Over the last couple of months, I have been noticing renewed interest in leveraged ETF trading. More clients are coming to me to test out leverage trading ideas. I have been testing my own ideas. What I liked about this strategy is that it moved between leveraged ETFs, non-leveraged ETFs and TLT.
January 24, 2024
- in ETFs , Mean Reversion , Research , Trend Following by Cesar Alvarez
Mean Reversion vs Trend Following Through the Years
Something I am always thinking about is how the markets are behaving now vs the past few years vs several years ago. My edge on the strategies I trade depends on two main ideas. One, current market behavior is similar to what I tested on which is normally the last 5-10 years. Two, not too many others have found the same edge. Unfortunately for (2), more and more people are trading quant style and edges are harder to find and smaller when I do find them. The only thing I can control is continuing to research for new strategies.
November 15, 2023
- in ETFs , Rotation by Cesar Alvarez
Sector Rotation Strategy: Should Trading Rules Make Sense?
I was doing my usual reading when I came across a sector rotation strategy. I have seen lots of these strategies but this one had a different twist. The strategy was a momentum strategy but instead of buying the top three, it was buying the middle three. The article gave no reason other than it works and gives the best results.
In general, people fall into two camps about trading rules.
- The trading rules need to make sense on why they are there.
- Don’t care about the rules if the stats are good and over-fit tests pass.
September 27, 2023
- in ETFs , Market Timing , Research by Cesar Alvarez
Reducing Whipsaws When Using 200-day Moving Average for Market Timing
I was working on testing a market timing indicator that I read about it. It was showing some promise and the next step was to compare it to my benchmark. My benchmark is using the 200-day moving average. But an additional rule removes a lot of the whipsaws that can happen.
After doing the comparison, the market timing indicator compared well. But then I realized I had not written a blog post about my additions. I touched on it in the Market Timing with a Canary, Gold, Copper, LQD, IEF and much more post.
For me, the goal of using the 200-day MA to trade the SPY is to get about the same CAR but with a significant reduction in MDD.
August 30, 2023
- in ETFs , Research by Cesar Alvarez
VIXY & SVXY Strategies
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.
UPDATE: These original results were published on October 26, 2016. Since then there have been lots of changes in the volatility ETFs/ETNs. Scroll down to Updated Results Through June 30, 2023 to see the updated results.
September 14, 2022
- in ETFs , Rotation by Cesar Alvarez
Three Factor ETF Rotation Strategy
I am drawn to ETF rotation strategies. What likely draws me to them is that in general, these are simple strategies that do not trade that often. My goal with these strategies is to match buy and hold with less drawdown.
What follows is a strategy I have known about for a while and tested but never written about.
Correction on January 18, 2023
This post was corrected on January 18, 2023, after an error was discovered in the code. What is rare, the results with the correct code are better.
The Concept
From a set of ETFs, select the one to three that have had the best short-term return, best mid-term-return with the least volatility.
June 23, 2022
- in ETFs , Market Timing , Research by Cesar Alvarez
Using Historical Volatility for Parameter Adjustment
The AllocateSmartly website often has interesting posts. Recently I was reading the article Trending Fast and Slow and thought about other ideas to test. The article is based on research on trading the SPX and depending on the current historical volatility one would either use a 12-month or a 1-month lookback to decide whether to enter or exit the trade. I had tried similar ideas before but not this one.
May 18, 2022
- in ETFs , Market Timing , Research by Cesar Alvarez
SPX and Gold Momentum Portfolio
Given the current rise in inflation, there has been a lot more interest in assets that do well during these times. Gold is one asset that is frequently brought up as an inflation hedge. I have also seen more lately about combining these two into a portfolio.
March 25, 2020
- in ETFs , Research , Stocks by Cesar Alvarez
Correlations go to One
There is a saying: “in bear markets correlations go to one.” I wanted to see how true that is for both stocks and a basket of ETFs. Now they don’t go to exactly one, not that I expected that, but they take some large steps towards one.
February 26, 2020
- in ETFs , Market Timing , Research by Cesar Alvarez
Market will be up 9.7% in 3 months!
When this sell-off indicator triggers, it is correct 100% of the time! On average the market is up only 2.6% in 3 months.
