[…]years. I can confidently attest to Cesar’s technical competence as well as his unique ability to combine his technical competence with relevant and timely market applications that translate directly into improving the bottom line P&L for traders and professional investment managers. Having access to Cesar’s knowledge and extensive trading experience will likely help just about anyone looking to profit from the markets, from beginners to seasoned-pros alike and I look forward to seeing Cesar’s work benefit more and more traders as it has been successfully doing for years.” Shijun Liu – Parker Investment Mgmt, Menlo Park, CA “I have […]
[…]with more than 50 trades and have a CAR greater than 20. This gives 155 variations which to compare. Comparing the CAR and MDD we can see that on average difference is very small. This is great to see and gives me confidence that using the synthetic data in this case is OK. But remember we are using the SPY & VIX to trigger trades. What if we are using the VXX & XIV to trigger trades? Just another Volatility SPY strategy Someone sent me a link to this strategy. I am always looking for something new test and figured […]
[…]as this is, it does not make it into the top 5 for CAR. But notice that very low drawdown as compared to the original ones. So much lower that it has the best Sharpe Ratio. ATR% Using ATR another common theme. ATR% is ATR/Close. This is another way of looking at volatility Given this is another measure of volatility, I was surprised at how poorly this did. ROC/ATR% This is N-day ROC divided by the n-day ATR%. Using CAR as our metric does not produce interesting results. But two of these have Sharpe Ratios in the top 5. […]
[…]be on CAR, Maximum Drawdown and the average of the 5 worst drawdowns. Moving Average on SPX A very common market timing method is applying a moving average to the SPX. My favorite being the 200 day and another popular length being the 100 day. The available spreadsheet has results for more moving average lengths. The new additional setup rule is: Close of SPX is greater than the 200 day of the moving average of SPX closes. Moving Average Results We can see the benefits and cons of adding a market timing filter. We had a drastic reduction in MDD […]
[…]I hear from traders is that they “don’t trade biotechnology or pharmaceutical stocks.” I completely understand. These stocks tend to be very volatile and news driven. But does removing these stocks really reduce your drawdowns? What happens to your Compounded Growth Rate? Time to see what the research shows us. The data I am using Norgate Data which has Industry Classification Benchmark (ICB) for most stocks. One bias to this test is that the classification is only for the last day of the stock. If a stock changed classification through its history, this would not be caught. I am not […]
[…]is how the initial research in the article was done. The method of testing all trades is quite common but I rarely do it this way. It is not my preferred way of testing an idea like this which I will cover on why in the next blog post. Setup Rules Stock is a member or was a member of the Russell 3000 The Dollar Volume of the stock is greater than $500,000 Close is above $1 Close is above the 200-day moving average The 2-period RSI is below 5 Place limit orders 4% below close for the next day. […]
[…]the results, read Maximum Loss Stops: Do you really need them? Added on 8/15/2014: In the comment thread below, a couple of people questioned the results. I had a researcher friend of mine code up the rules as stated on this post. His results matched mine exactly. This gives me complete confidence that the results are correct. Good Quant Trading, Fill in for free […]
[…]interesting result is that avoiding the top ranked and buying 2, 3, 4 also produced results comparable to 4,5,6. This gave better MDD and Sharpe Ratio. Different Ranking Length The spreadsheet has results for different ranking lengths of 1, 2, 3, 4, 6 months, different numbers of positions 2, 3, 4, and different rank starts. Ranking by 3-month return gives us the following. Now rank 1,2,3 gives the best overall results but notice that they are closer together. And if we rank by 6-month return. They get even narrower. This tells me that the shorter ranking is making a difference. […]
[…]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 stock is its INV_HV/TOTAL_IHV Example Three stocks in our EXPE, MSFT, NFLX. We will be using 100-day Historical Volatility Step 1 – […]
[…]the programming basics that you will need.Do I need a data source? Yes, you will. It can be Yahoo.com or any other.Can I have no experience using AmiBroker? I assume that you have basic knowledge of using AmiBroker. I show areas of AmiBroker that are important for backtesting. I do not cover all aspects of AmiBroker because it is much too complex of a program to do that. I am glad though to answer any questions you have on areas I do not cover.Can I get details on the strategy? The strategy is meant as a general exercise not as […]
