Missing the best or worst market days

This morning I saw the chart on Ritholz.com of what happens when you miss the best X days of the market. I see a variation of this chart often and is used to argue why someone should not try and time the market. One concept I like to do is to invert. Meaning try the opposite idea and see what you get. What I rarely see is the chart if you missed the worst X days. Given it is a rainy Sunday morning here in Seattle and I had nothing better to do, I wanted to see that chart.

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Backtesting a Dividend Strategy

I was recently at a NWTTA presentation about the “S&P 500 Dividend Aristocrats” and how to trade these stocks. The strategy was part quantitative and part discretionary. It was popular talk with lots of good questions. People always seem interested in dividend stocks but for me they are just another stock with another reason to go up or down. I don’t like to dismiss ideas without testing. The strategy relies on fundamental data that I do not have access to but I have dividend data from Norgate Data. Would that be enough to create a strategy worth trading?

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StockCharts Technical Rank (SCTR) Rotation Strategy

My post last week on the analysis of SCTR produced lots of emails and comments with great ideas. One idea that I liked was a simple rotation strategy using SCTR. I mentioned in the post that maybe using SCTR as ranking method would produce different results.

Normally I don’t post this quickly but I wanted to share these new results because they give a different view of SCTR.

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StockCharts Technical Rank (SCTR) Indicator Analysis

Overall the last few months, I’ve had several consulting client’s strategy use SCTR for either a ranking or a filter. I finally got curious about the predictive ability of SCTR. How good is? I could find no information on how each of the ranking buckets did X days later on StockCharts.com. Maybe these results are hidden behind the paywall which I do not have access to.

I developed PowerRatings for TradingMarkets.com and understand how hard it is to make a ranking indicator that works. Is SCTR an indicator I should be using for medium to longer term strategies? What will the numbers to us?

9/19/2018: Make sure and read my follow up post, StockCharts Technical Rank (SCTR) Rotation Strategy, where the results are very different.

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Pre-inclusion Bias: How to create a false strategy

In the previous post I described a simple rule to double the returns of a mean reversion strategy. In this post, I show how pre-inclusion bias can take a losing strategy and make it a winning one.

Recently I had reader send me the rules for a stock trend following strategy. He knew these are the strategies I have been researching lately. The rules were few and I had time, so I coded it up.

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RSI2 Strategy: Double returns with a simple rule change

While playing around with a 2 period RSI (Relative Strength Index) mean reversion strategy, I came up with a very simple rule change with a much larger impact on the results than expected. I doubled the compounded annual growth rate and cut the maximum drawdown in half. That never happens.

In my optimization runs the best CAR went from lows 10’s to the low 20’s with this rule change.

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Buy The Fear, Sell The Greed

The last few months, I have been busy doing research for Larry Connors’ new book, Buy The Fear, Sell The Greed. As always, it is fun and challenging to research for a book.

The book has seven strategies, trading both ETFs and stocks, with full rules and results. They are:

• RSI Power Zones: Long ETF strategy
• Crash: Short Stock strategy
• Vol Panics: Short VXX strategy
• VXX Trend Following: Short VXX strategy with over two month holds
• Trading New Highs: Long Stock strategy
• TPS: Long ETF strategy. Short ETF strategy
• Terror Gaps: Long ETF strategy.

My favorite strategy is Crash because it is very similar to the short strategy I trade now. Those trades are hard to take. For each strategy there are good example trades and explanations of what the market was doing then.

Get the first chapter by clicking here.

The book is coming soon to Amazon.

Good quant trading,

Norgate Data Review

I am frequently asked what data provider I use and recommend for stocks. I have been using Norgate Data for four years and recommend them to anyone looking for data. This review will focus on US Stocks and AmiBroker integration which is what I use daily. Norgate Data has data for the Australian and US markets, forex and futures data. They integrate with AmiBroker and RightEdge.

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RSI2 (Relative Strength Index) Indicator Analysis

From my time with working with Larry Connors, I have become known for using the 2-Period RSI (RSI2) (Relative Strength Index) in my trading. I have written lots of blog posts that use it and I often use it in my personal strategies. One thing I like to do with indicators that I use frequently is a thorough analysis of them. Often, I find characteristics that I did not expect. Do you know about the RSI2 smile?

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Trading the Equity Curve – More Ideas

A couple posts ago, I looked at Trading the Equity Curve and found interesting results but nothing that made me decide this works for me. Using the equity curve to decide when to stop trading a strategy just sounds like it should work. But for me it is always about testing. I cannot count how often I thought an idea would help the results only to see them dramatically hurt them. Remember test everything!

I have been thinking about other methods to use to trade the curve. I also wondered maybe it is the strategies I tested against that caused less than stellar results. I am working on a SP500 weekly mean reversions strategy with an average hold of three months.  Maybe new methods of trading the curve or the different strategy will give better results.

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