[…]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? ETF Universe We will be using this list of country ETFs. iShares MSCI Israel Capped (EIS) WisdomTree India Earnings (EPI) iShares MSCI Australia (EWA) iShares MSCI Canada […]
[…]we will using the Select Sector SPDR ETFs. They have a long history. The list is Consumer Discretionary (XLY) Consumer Staples (XLP) Energy (XLE) Financials (XLF) Health Care (XLV) Industrials (XLI) Materials (XLB) Technology (XLK) Utilities (XLU) Testing will be from 2005 to 2014. Baseline Our baseline will be buy and hold on the SPY. My typical goal when trading ETFs is to beat CAGR of Buy & Hold by 50% but with significantly less drawdowns. Under 25% would be good and under 20% would be great. Simple Rotation Test The first test is a simple momentum method. Rotation Rules […]
[…]Toy, because this post is definitely chasing a shiny toy. I was reading the August 2019 Technical Analysis of Stocks & Commodities issue and came across the article “Swing Trading 10-Point Breakouts.” The basic concept was looking for stocks basing under a multiple of $10, then buy when it closes about that multiple. For example, the stock is trading at $29.50. Then closes at $30.25, buy it. I am thinking there is no way this can work. My curiosity got the better of me and I was off chasing the Shiny New Toy. The Rules First let me be up […]
[…]the time that a strategy is underwater. I highly suggest you watch it. I wanted to perform my own analysis on how often a buy and hold strategy on the S&P500 index is making new equity highs. Then, I wanted to compare the results to a new strategy I am working on for my trading. From previous experience, this number is a lot lower than people expect. Percent Trading Days Making New Equity Highs A trading strategy is at a previous equity high, a new equity high or in a drawdown. Our metric will be % trading days making new […]
[…]in the rest results versus equal position sizing. I was talking to a trading friend about the research and how I was surprised at how there was not any difference in the results. He suggested creating an index using this method. Now, this sounded like an idea with good potential. And even better it should be easy to test since I had the code written already. Or Not What I thought would be a few minutes to test this turned out to be a couple of hours. It turns out dealing with the 100 or 500 positions and making sure […]
[…]Universe These tests will use the Select Sector SPDR ETFs. The list is Consumer Discretionary (XLY) Consumer Staples (XLP) Energy (XLE) Financials (XLF) Health Care (XLV) Industrials (XLI) Materials (XLB) Technology (XLK) Utilities (XLU) Testing will be from 2005 to 3/31/2015. Dual Momentum Baseline From the last post, the dual momentum gave the best results which will be our baseline. For the rules go see that post at ETF Sector Rotation Idea1: Rank by multiple ROCs The first idea submitted by multiple readers is to use multiple look back periods for Rate of Change. Rules Rank the ETFs by the […]
[…]to three potential variations that one could consider trading. This post will explore Sensitivity Analysis (also known as: Parameter Sensitivity) to help guide us on what to expect from each variation. Definition This is my definition on Parameter Sensitivity. This is not the formal definition. Any strategy has various inputs that one may have optimized on. The idea is to vary a set of these inputs in “small” amounts to determine how much the strategy results change. Does changing a parameter slightly have a large change in the results? The focus should be on the statistics that one used to […]
In my last blog post, Using Historical Volatility for Parameter Adjustment, I tested using historical volatility to determine trade rules. While reading the July 2022 Technical Analysis of Stocks & Commodities, I came across an article, “Is It Too Volatile To Trade?” by Perry Kaufman. I always like his work so I was interested to see what he had to say. He uses standard deviation from the median historical volatility to decide if a stock is too volatile. He points out that even though returns may be positive during volatile times, it comes with higher risk. From my own research, […]
[…]were not very good, so I gave up on it. I did not do test entering on the open or on further intraday pullback or exiting on the bounce. If I had, I would have started my mean reversion trading several years earlier, which would have added several more years of large edges trading. Oh well, I was just a beginner researcher then. Recently I got curious about waiting for confirmation before entering a trade. Now that I know more about entries and exits, would it give good results. How would these results compare to waiting for further intraday pullback […]
