Buy when SP500 makes new high and IBS is low strategy

Vonasi · Wed, 20 Jun 2018 11:37:07 +0000

A certain someone kindly shared a link with me and asked me if I would test it out and post my thoughts here. Below is my initial testing which along with the strategy I post here for further discussion. The link sent to me: http://jonathankinlay.com/2018/06/simple-momentum-strategy/ and the strategy details are here: http://www.quantifiedstrategies.com/buy-when-sp-500-makes-new-intraday-high/ Thank you to the original authors for publishing this idea. Basically it is an SP500 daily long only strategy that buys if the bars high is higher than the last five bars highest highs and the bars close is within the bottom 15% of the bars range. There is also some time criteria based on Chicago hours but for my initial test I chose to ignore this. That is something for when MTF is released I think! So the very simple strategy that I coded was this: defparam cumulateorders = false p = 5 x = 0.15 c1 = High > highest[p-1](high[1]) c2 = (close - low) / (high - low) < x IF c1 and c2 then BUY 5 contract at market endif if onmarket and close > high[1] then sell at market endif Not too bad, although there hasn’t really been any profit since the end of 2015 and performance was terrible prior to 2001. Sometimes you should expect to see this in a strategy as computer based trading only really started to take off around then. So as it is such a simple strategy analysis of the two main variables is very easy to do so next thing I thought that I would play with the entry level for the inner bar strength. Ignoring the very low values below 0.04 (4% of the bars range) as there is not much data so it can get a bit skewed – it is nice to see that by making our entry criteria tighter we reduce trade quantity but increase our return per trade. This proves that the inner bar strength as a condition is working as it should in this strategy. Next was to fix inner bar strength level at the authors original 0.15 (15%) and see what happens if you change the look back period for the high higher than p bars highs. I tested values from 2 (just looking at the last bar) through to 100. It seemed a good idea to graph the results in Excel to more easily visualise them. The percentage of wins and average gain per trade charts are a little bit lumpy and bumpy but not too bad. It seems that five is not a bad value but there may be some merit in reducing this to increase the number of trades and the overall total gain. So I decided to settle on the value with the most trades 2 and then see how changing the inner bar strength level looked in charts. Interestingly the win rate is pretty level across the range. Obviously the lower the IBS level the fewer the trades. There seems to be a good average gain per trade the lower the IBS level is set but once again under 5% has too little data to be useful for analysis. Between 15% and 19% has the largest overall gain so if we settle for 17% what do the results look like. The black line is an equity curve where 1 is deducted from the strategy profit whenever a position is held overnight. Worryingly it seems that since early 2013 overnight fees may just be sucking the life out of the strategy. Plenty more testing to be done and ideas to be tested. I did look at the same strategy on the DJI index and it worked well there with a look back period of around 15 bars. Please post here your thoughts, ideas and further tests and remember that this is not my strategy idea and I am not recommending anyone to trade this with real money just yet!

This topic has 19 replies, 4 voices, and was last updated 5 years ago by Vonasi.

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06/21/2018 at 1:50 PM #73919

Vonasi

Sometimes once I have what appears to be a working strategy I like to start removing things to see what true effect they are actually having. In this strategy I have three entry conditions:

c1 = High > highest[p-1](high[1]) c2 = (close - low) / (high - low) < x c3 = (my secret entry condition that no one has guessed yet!)

1
2
3

c1 = High > highest[p-1](high[1])
c2 = (close - low) / (high - low) < x
c3 = (my secret entry condition that no one has guessed yet!)

So one by one I take them away and run a test – here are the results:

c1 and c2 and c3 – our datum.

c1 and c2

c1 and c3

c2 and c3

c1 only

c2 only

c3 only

The results seem to confirm that each of the entry conditions on its own is a pretty good entry criteria. It might be interesting to try other combinations such as (c1 or c2) and c3 etc in the strategy.

So some new ideas to test now.

Also while doing this I had a thought about my counting of runs of bars without a close above the last high and whether that would make a good entry filter as well as a reason to exit. So I ran the strategy with one condition that said if the run of bars was below the average then buy and another if the run of bars was above the average then buy. Here are the equity curves:

Less than average:

Greater than average:

It seems that a below average run of bars with close above the last high might be a fairly good entry filter but I feel that four entry conditions in one strategy might be one entry condition too far and seriously limit the amount of trades. Still it is another idea to play with.

Vonasi
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06/21/2018 at 2:11 PM #73932

matsodont

So, give us a hint of that secret condition 😉

matsodont
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06/21/2018 at 2:16 PM #73934

Vonasi

matsodont wrote:

So, give us a hint of that secret condition

My hint is that if you take the code and start trying things then you might work it out.

Sometimes I like to hold back from giving away all my fish and instead let others try catching their own! 🙂

Maybe you will hit on something that is better than my idea and I can catch a fish too!

Vonasi
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06/24/2018 at 9:31 PM #74267

matsodont

Ok, fair enough.

Still haven’t found your condition but this is the closest I got…

Cheers!

matsodont
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06/24/2018 at 10:31 PM #74274

Vonasi

matsodont wrote:

Still haven’t found your condition but this is the closest I got…

Looks pretty damned close. Don’t forget that I added an exit if the there was a run of x bars above the average run of bars without a close above the last high which could be the difference?

Vonasi
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