[…]trading universe and assuming these stocks were always in the index during your testing period. For example if one were testing back to 2004, GOOG did not enter the S&P500 index until early 2006 at a price of $390. But your testing could potentially trade GOOG during the huge rise from $100 to $300. The Rules I will not be sharing the rules but the general idea. Test is from 1/1/2007 to 6/30/2018. Buy Some trend following rules Stock price is between $1 and $20 Stock is member of the Russell 3000 Sell Trend is broken I made two […]
[…]issues a dividend, the price of the close on that day only is reduced by the dividend amount. For example, AT&T has a $.46 dividend per share and is trading around $34. If on the day dividend adjustment, had AT&T closed flat at $34 then the stock price would be adjusted to $33.56, looking like it closed down 1.3%. This apparent down close has repercussions on technical indicators by changing their values. Even something simple like how many down/up closes a stock has had or moving averages are changed by this. Some data providers, Norgate Data being one, allow one […]
[…]slightly reduce returns but has a big decrease in drawdowns and an increase in Sharpe Ratio. Time to test and see if that is true. Recently I wrote about a monthly rotation strategy. I will be using that as a base to compare against. Inverse Volatility Position Sizing Calculation As a measure of volatility I will be using historical volatility. Calculate the historical volatility for each stock to get HV Take the inverse of the HV to get INV_HV. This means INV_HV = 1/ HV Sum all the INV_HV for the stocks to get TOTAL_IHV Position size for a […]
[…]rebalances the portfolio so “% portfolio” is our target. The method allows the results to compound for the year. Now this is producing much more tame numbers. This still has the downside of the first method that your max % invested can get very high compared to what it started with. The 10% initial allocation had a max percent invested of 66%. What happens with more frequent rebalancing? Method 2: Semi-Annual Rebalance Now the portfolio rebalances to the target every 6 months. Again we have much tamer numbers and the “Max % Invested” is coming down towards our initial “% […]
[…]results, holding 1-8 ETFs and much more. Final Thoughts Thank you for all of you that posted ideas to test. Dong the research took longer than expected but it was worth it. As always if you have an idea, put it in the comments below. Backtesting platform used: AmiBroker. Data provider:Norgate Data (referral link) Good quant trading, Fill in for free […]
[…]platform used: AmiBroker. Data provider:Norgate Data (referral link) Good Quant Trading, Fill in for free […]
[…]and then use those rules to trade the leveraged ETF. People sometimes do this because they want to test farther back in time and then double the results to get the expected stats of trading the leveraged ETF. Using the base ETF to signal trades A valid method pf developing a leveraged ETF strategy is to use the base ETF to give signals to when to trade the leveraged ETF. When we get a buy signal on the SPY, we trade SSO instead. Now this is the case that people expect the results to double. As we can see the […]
[…]identical results which is always good especially since this is the WSJ. Research Details All the tests and data are from 1/1/2009 to 12/31/2010 using historical S&P500 constituent data. S&P500 Index Daily Returns The first step is looking at the daily returns for the S&P500 Index and putting them into return buckets. Is the market having less frequent large moves in one direction? Up Days The first thing that pops out is the steady drop of up days greater than 1.5%. Only 3 such days last year. Wow! Moves between .75% and 1.5% have been steady over the last 5 […]
[…]under the 200-day MA Close with a 10% plus loss My First Thoughts Whenever I get a strategy to test, one of my first thoughts are all the rules necessary. I have no idea how someone has come up with all the rules. Did they start with them all? Did they add them one by one? This strategy seems to have lots of entry rules. There are two ways I test whether all the rules are necessary. Method one, code up all the rules and then remove each rule one at a time to see how the removal changes from […]
[…]I know that this is not some earth-shattering test. But these simple ideas are always fun to test because they are quick and easy to do. And sometimes, they surprise you. The surprise was that the 50/50 method captured most of the gains and had a higher Sharpe Ratio. Now the maximum drawdown went up by quite a bit compared to trend following but it still is significantly less than buy and hold. I must think about how I can incorporate this concept into my dual momentum strategies. Would you trade 50/50 instead of buy and hold or trend following? […]
