In the book, Short Term Trading Strategies that Work, which Larry Connors and I published in early 2008, we wrote about a simple strategy called “Double 7’s Strategy.” Through the years people often ask about this strategy. Does something that simple really work? How does it do in a portfolio? Does the concept work on stocks? Today, we will be answering these questions. The Original Rules Buy Close is above 200-day moving average Close is a 7 day low of closes Buy on Close Sell Close is a 7 day high of closes Sell on close A clarification on what […]
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[…]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 equity highs, % NEH. This is the number of days that the equity is at a new equity high divided by the […]
[…]we see a worse CAR and/OR MDD. I like the 15 day value with 2.9% of trades triggering it. Combined Stop Loss and Time Based Exit Looking at these combinations, I decided to trade the 50/15. This has a substantial drop in CAR. Also notice that the worst trade is substantially larger too. By not being in these long drawn out deep losers, I believe it will make the strategy easier to trade. Spreadsheet Fill the form below to get the spreadsheet with all the results and additional stats. See yearly breakdown and many more values for the stop and […]
[…]True Range stop or a time stop. We will explore those two stops and see how the volatility buckets compare. Individual Trade Quality Before we get to the tests, I need to explain a new metric I will be using. At Connors Research we use Individual Trade Quality, ITQ, when we were comparing results of non-portfolio tests, such as these tests. The simple way to understand ITQ is it analogous to Sharpe Ratio in a portfolio test. To get more details on ITQ see How to Measure the Individual Trade Quality of Your Strategy. Connors Research has adopted a measure […]
[…]are the results of using various values for the commission. Notice the last row with no commissions. A CAR of 28% compared to -8.47% with using a $.01/share. A huge difference. Your assumption on what to use for commissions would change whether you would consider trading this strategy or not. When your edge is only .35% for an avg. % profit/loss, what you assume for the commission will have a large impact on the results. This definitely surprised me on how much the numbers changed. Original Strategy How much does the original strategy change with different commission? Here are the […]
[…]group The Crew. It is not a normal mean reversion strategy but it has a very strong mean reversion component. Disappointment. It did not change the results at all. Even though I am not happy it did not improve the results, I am not too concerned about it because it is not a typical mean reversion strategy. I had completed testing a ‘typical’ mean reversion strategy for a client. Conceptually it shared a lot of the same ideas as my mean reversion strategy. I dropped the rules into the strategy. And again, no improvement in the results. AmiBroker Code ratio […]
[…]matches Buy and Hold but with only 69% exposure. The surprise was a maximum drawdown of only 24%. Drawdowns are usually larger for longer term strategies. The main reason for matching buy and hold is the market timing filter but there appears to be potential here. Variations To improve the results, we focus on two things. One, larger position sizes because I find 20 positions too many. Two, larger stops because we want to give the stocks some breathing room. This gives us some better numbers. So far, the rules have a small edge. The average hold is about […]
[…]deviation entry and exit? Maybe for a portfolio, there are better numbers to be using. Out of 40 combinations, 7 gave a good improvement in the MDD. I would want more. But I did find it interesting that all the best results are for the standard deviation entry of below zero. This is saying we want the current HV to be under the median. Spreadsheet Fill in the form below to get the spreadsheet with lots of additional information. See the results of all variations from the optimization run. This includes top drawdowns, trade statistics and more. Final Thoughts […]
[…]of 13.8%. What if we traded this as a portfolio? Unfortunately, the results are not very good. A compounded annual return of 5.1% and a maximum drawdown of 85%. Definitely not worth trading. Spreadsheet Fill in the form below to get the spreadsheet with lots of additional information. See the results of all variations from the optimization run. This includes top drawdowns, trade statistics and more. Final Thoughts As of the close on December 17, these were the worst 10 stocks in the S&P500 YTD: PENN, LVS, GPN, CTXS, ATVI, VTRS, MKTX, WYNN, IPGP, LW. There does seem to be […]
