[…]and AmiBroker to run my scans. Step 3: Review new trades to make sure nothing looks odd, push button to create basket file for orders, place the orders in InteravtiveBrokers. Time to do 2 minutes. Step 4: Before going to sleep, try and remember if went down to my office that evening. If I can’t remember going down, then make sure orders were placed. For 248 days of the year this works just great. But last night was a different night then normal. I had done steps 1 & 2. I then went to a birthday party. Then after […]
[…]impossible to make systems uncorrelated-unless you just directly hedge what you have with for example puts.” Keep calm. Be safe. Stay healthy. Backtesting platform used: AmiBroker. Data provider: Norgate Data (referral link) Good quant trading, Fill in for free […]
[…]but now we would be making a mere 1%. My theory is that mean reversion is in hibernation waiting to come back; or said another way, mean reversion is simply mean reverting. I think that when too many people trade mean reversion, the space gets crowded and we see fewer winning trades and smaller returns. However, this has always been conjecture never backed up with numbers. Are we really seeing fewer trades? Smaller returns? Time to do the research and see what the numbers tell us. The Test Testing Universe: Top 1,000 stocks by dollar-volume with closing price greater than […]
[…]am not sure I would have used them. No story that I could make about why this should work made me comfortable. And we must be comfortable with the reasons we are trading our strategies. Backtesting platform used: AmiBroker. Data provider: Norgate Data (referral link) Good quant […]
[…]too many regimes because some may not have very many trading days. Once you have your regime, for example using 200-day MA, then you must decide what to do in each regime. For a bull market, this is when the strategy trades normally. For a bear market, the strategy can go 100% in cash, or reduce position size by 50% or trade different values for your filters such that your rules are more stringent. Ranking of signals When the strategy has more signals than it can trade, how do you rank them? For mean reversion, the two best rankings […]
[…]mean reversion strategy I am trading. I modified it so it could trade during all market conditions and for a CAR of around 20%. One thing I did not like about this variation was the low drawdown, which I will come back to later. Equity Monte Carlo Traditional Method (Method 1) One popular way of evaluating a strategy is through using Monte Carlo on the daily equity data. AmiBroker provides this functionality for free whenever you do a backtest. What this method does is each day randomly pick one of the daily returns from the entire backtest, with replacement. It […]
[…]for a longer hold strategy? The test We will start with a basic test. In future posts, we will expand and refine on the rules. Date range from 1/1/2004 to 12/31/2013. Buy Rules Stock has 21 day moving average dollar-volume greater than (10,20) million over the last 3 months Close is greater than $5 Six month return is greater than 10% Close is greater than the 200 day moving average The SPX close is above the 200 day moving average The stock’s 100 day historical volatility(HV100) is between (20,30) (30,45)(45+) for the last 5 five days Sell Rules 15% trailing […]
[…]a larger size of your portfolio which magnifies your losses. This is the opposite of a long trade. For example, if one shorts $10,000 of XYZ. It goes up 20% the first day, this means you lost $2000. The next day it goes up 25%, which means you lost an additional $3000, for a total loss of $5000. Now take a long position that does the same. The first day it loses 20% and then the next day it loses 25%. After the first day you are down $2000 and after the second day you are down a total of […]
[…]the daily VIX values are divided into five equal sized buckets. From this, we have five ranges to compare against to for our test of entering a stock when RSI2 < 5 and exiting when RSI2 > 70. Good mean reversion returns tend to happen when the VIX is greater than 26.9. Now we will look at the VIX over the years and the average %p/l of oversold stocks. Weak correlation exists to higher VIX leading to higher returns but it is not very strong. I don’t see the VIX being a strong predictor to mean reversion returns. Hold […]
