[…]High in the last 21 days divided by the lowest Low of the last 21 days is greater than 1.04 The r-squared value of the last 4 days is greater than .6 The 4-day standard deviation of closes is greater than the 16-day standard deviation of closes time .3 126-day return of SPX is greater than zero Rank stocks from lowest 100-day historical volatility to highest. Buy on the next open. Rule (B) is looking for a sell-off. Rule (C) is looking for stocks that have a large enough trading range in the last 21 days Rule (D) is looking […]
[…]developing any strategy, you need to have goals or targets for that strategy. The metrics I focus on are Compounded Annual Return (CAR), top five maximum draw downs, top five maximum draw lengths, smoothness of equity curve and fit with my other strategies. For CAR, I look for returns between 20 and 35% per year. This is mostly influenced by my trading universe. For drawdowns, I am not looking for really low numbers. I avoid strategies with drawdowns under 20% because I believe that they are setting a false expectation. These strategies typically have low drawdowns because they got lucky […]
[…]information about it on my site here. Method 1: Best CAR The most obvious method is to simply sort by one my metrics and pick the first variation that meets my criteria. For novice researchers, this is what they gravitate to. The numbers great. A CAR way above my threshold and a MDD way below it. What could be wrong with this? Variations near the top are likely there because of luck. Small changes in the parameters may have large change in the results. The next post will be on this topic. Method 2: Avoiding top and low Ulcer Index […]
[…]produces 2520 variations. I ran an optimization over the first time period. I then sorted the data by Compound Annual Return and divided it into deciles. The CAR of the SPY during this period is 1.70%. An interesting thing is wide the range is. Part of this is explained because some of the variations produce very low exposure. Comparing to 2013 to 2015 Next, I ran the same optimization over the second time period. For each decile of the first time period, I looked at each variation to see what the rank was in the second time period along with […]
[…]spreadsheet The spreadsheet includes yearly breakdown of returns, other portfolio sizes and the Monte Carlo runs. Fill in the form to get it. Final thoughts Remember, the original S&P500 index is capitalization weighted. Imagine instead of being capitalization weighted the index was equal weight and those results were worse than capitalization weighted. We would then call ‘capitalization weighting’ smart beta because it beats the index. There is nothing special with any weighting scheme other than being different. One can make arguments about why one is better than the other but it is arbitrary. And here is the rub with […]
[…]lower the better. Sharpe Ratio (SR): The ratio is the average return earned in excess of the risk-free rate per unit of volatility or total risk. The higher the better. Yes, several of these metrics are correlated. For example, MDD & UI. But in my testing winning in one metric does not guarantee winning in the other similar metric. When comparing two methods, each metric will be compared and if it exceeds by 15% then it gets one point. Why 15%? At 10% difference, I consider this noise. At 20%, I believe it is better. So I split the difference. […]
[…]part of the first class with no credit card needed. Four hours of professional instruction plus bonuses for $329. If you like the first part, email me and I will send you a PayPal invoice. Please note: this is an advanced course! You should already have familiarity with the AFL language and flow control structures (if, iif, for), understand array variables and operations, and know how to run standard back tests, optimizations, and explorations. If you don’t yet have those skills, please consider taking the AmiBroker and Backtesting 101 and/or Intermediate AmiBroker and Backtesting 201 courses first. […]
[…]part of the first class with no credit card needed. Four hours of professional instruction plus bonuses for $349. If you like the first part, email me and I will send you a PayPal invoice. Please note: this is an advanced course! You should already have familiarity with the AFL language and flow control structures (if, iif, for), understand array variables and operations, and know how to run standard back tests, optimizations, and explorations. If you don’t yet have those skills, please consider taking the AmiBroker and Backtesting 101 and/or Intermediate AmiBroker and Backtesting 201 courses first. […]
[…]of worse nine day periods. The current down period has had no 1% or more down days. I wondered how common is that. For the 3,189 down periods the average number of days with 1% or more down is 1.86. Again this period is below average with zero. Looking at the top 788, there has only been 2 times were there were no 1% or more down days. And the average for this top 788 is 3.2 days with 1% or more losses. Again, these nine down days seem tame in comparison. As everyone is speculating, the markets are nervous […]
[…]liquid stocks. To read more go to The Q500US and Q1500US. Entry and exit are done on a particular one-minute bar, starting with the 9:32am bar. That is what I will using. Running a backtest is slow compared to AmiBroker. One test takes about 30 minutes vs. about 20 seconds in AmiBroker. Because of this, I was limited on the ideas I could test. The Base Test Since most questions about earnings have come from mean reversion traders, that is what I will be testing. Dates: 1/1/2007 to 12/31/2013 Buy Rules Stock is member of the Quantopian 500. The 2 […]
