Long Only Dow System >85% win rate

[FetteredChinos]

Morning all.. Its a new month, so time for another strategy..

Here are the results of the Antarctic Jury...

Since January 2000.

Points: 5370
Trades: 73
Wins: 64
Win %: 87.7%
Pts Per Trade: 74 (before spreads/rollover charges)

Entry Rules:

Wait until the 24th of each trading month, as the window for trading longs is from the 24th to the end of each month...

When we are in this window, we look for a Down Day (of any percentage).

We the go long as close as possible to the close of this down day.

Exit Rules:

Use a stop of approximately 6-7% of the Index Value...(very rarely gets hit)

or,

Exit on the first profitable close after the first day, else after 6 days..


Example:

A Long trigger was given on the 28th November @ 10,890. Normally we would look to exit on the 30th if it was profitable. However, on the 30th we closed at 10,805, so (85) points in the hole..so we hold on. The next day closed at 10,912, so we closed out for a profit of 22 points, less spread.

If we hadnt had a profitable close 6 trading days later (eg by 6th December) we would close anyway, as the seasonal bias is no longer stacked so heavily in our favour.

This strategy appeared to have a bit of a problem in the late 60's and 70's, but apart from then, going back all the way to 1928, it seems to be a bit of a money spinner...

I know the R/R may not appeal to some on here, but the stops are really only there in case of catastrophic meltdown... and at 74 points per trade since the bear market began, its not to be sniffed at...plus it hasnt had a losing trade since June-04 lol also, by far the majority of trades exit within 3 days, so in theory you could trade with tighter stops.


FC

 

[wasp]

Just out of curiosity FC,

For your many systems, methods and ideas you've had, are there many that you have continued with or do they get left aside as you look for new strategies?

I've seen many of your posts and trades you've had (non strategy) in FX and Indicies which a large % look good.

Do you have more profitability from your non strategy trades or are they all from one of your collection?.

Wasp

 

[FetteredChinos]

i always monitor these strats, but i prefer a slightly more discretionary (yet still rule based) approach.

i have decided that FX doesnt suit mechanical strategies too well, as it is too news driven.... it spikes around news time (try getting a decent fill) and then consolidates for ages afterwards.. no mech system can IMHO exploit this...

more importantly, i am veering more towards seasonal, and time of month trades, as these have a larger win% than my other trades, and i think these will now take prime place in my trading arsenal, as opposed to my previous counter-trend trades, mainly because it means i dont have to spend so much time in front of this damn trading screen lol..

another interesting foible i noted, was on NFP days in the US.. whilst the US indices dont always play ball on this day (first friday of every month) the European indices usually finish up.... (some 62% of days) over the past 20 years or so...

 

[wasp]

Have you done any recent tests on older strategies to see how they have performed after your initial planning? Do any stand out?

I have looked at a few ideas for mechanical strats for FX but they tend to require a longer TF as, like you say, the consolidation periods after large movements plays havoc on shorter TF's. I don't really pay much attention to Indicies though.

Is the goal to find an automated strategy to eliminate screen time to a minimum or will there always be too much requirement for occasional discretion with the strategies?

 

[FetteredChinos]

the goal really is to find a once a week, set-and-forget strategy, so that i can divert more of my spare time to playing golf and snooker...plus also to reduce stress levels..

the problem with these strats, is that psychologically i need to have a high win %, in order to minimise the chances of having a losing month, as the sheer amount of time it would take to recover from that is rather disturbing..

therefore, im trying to find something quite simple, but with a >70% win rate that i can trade once a week..and be consistent over many years...

could take me a while to find this, but i have come close.. Its just the pesky bear market of 00-02 that worries me, in case we have another one of those very soon..

as for tests on other strats i have posted here... in hindsight the SIBKISS derived ones just arent worth the risk (returns have really tailed off), the swing trading FTSE ones are still going reasonably well, but again have the problem of large drawdowns, which i am not willing to tolerate.

FC

 

[trendie]

alternatively, FC, have you found any strategies that combine well to smooth out the equity curve.

ie; some ideas that may have nasty drawdowns can be made more palatable if combined with other parallel run ideas that make profits in those bad times ?

 

[wasp]

Are you sticking purely to DOW and FTSE or do you look at others too? ie. NIKKEI, HANGSENG etc?

 

[FetteredChinos]

works with Dax, CAC, Hang Seng, FTSE,Aussie Index, US Stocks (i have tested a few)

for some reason, the Nikkei doesnt want to play ball. but it has gone largely sideways for years.

which explains the underperformance in a long-only system.

FC

 

[twiggytwo]

Dow A J

Morning all.. Its a new month, so time for another strategy..

Here are the results of the Antarctic Jury...

Since January 2000.

Points: 5370
Trades: 73
Wins: 64
Win %: 87.7%
Pts Per Trade: 74 (before spreads/rollover charges)

Entry Rules:

Wait until the 24th of each trading month, as the window for trading longs is from the 24th to the end of each month...

When we are in this window, we look for a Down Day (of any percentage).

We the go long as close as possible to the close of this down day.

Exit Rules:

Use a stop of approximately 6-7% of the Index Value...(very rarely gets hit)

or,

Exit on the first profitable close after the first day, else after 6 days..


Example:

A Long trigger was given on the 28th November @ 10,890. Normally we would look to exit on the 30th if it was profitable. However, on the 30th we closed at 10,805, so (85) points in the hole..so we hold on. The next day closed at 10,912, so we closed out for a profit of 22 points, less spread.

If we hadnt had a profitable close 6 trading days later (eg by 6th December) we would close anyway, as the seasonal bias is no longer stacked so heavily in our favour.

This strategy appeared to have a bit of a problem in the late 60's and 70's, but apart from then, going back all the way to 1928, it seems to be a bit of a money spinner...

I know the R/R may not appeal to some on here, but the stops are really only there in case of catastrophic meltdown... and at 74 points per trade since the bear market began, its not to be sniffed at...plus it hasnt had a losing trade since June-04 lol also, by far the majority of trades exit within 3 days, so in theory you could trade with tighter stops.


FC

Hi FC, Your post is of interest to me as I trade the Dow , I am long at present since 4th Jan Futures close of 10,924.
If you have the time, look back at a possible 9 to 13 days as the exit time for your strategy as this is the period I use at present, unless I get stopped out or close with an exit signal from my Indicator. I will look further at your very interesting strategy . Many Thanks for your post
regards

 

[dc2000]

Hi FC
you have my attention a once a week or a monthly Set and Forget strat sounds good to me

Although I cant play golf to save my life, seems they have this rule about getting it in the hole, if the aim was to hit everything on the fairway trees water sand etc then I would be world class.

 

[pchees]

Hi

Over the same period, how many points did it make on the FTSE, Hang Seng, DAX etc?

Regards


pchees

 

[FetteredChinos]

ok, from Jan-00 to present

FTSE:- 2275 pts, 73 trade 66 wins (90%!)
Hang Seng:- 2853 pts, 74 trades, 63 wins (85%)
CAC: 1726pts, 69 trades, 55 wins (80%)
DAX: 2134pts, 74 trades, 59 wins (80%)
SP500: 6130pts, 72 trades, 63 wins (88%)
NIKKEI: 524pts, 76 trades, 57 wins (75%)
All Ords(Oz): 573pts, 70 trades, 56 wins (80%)


please note, that the equity curves on all but the US Indices/FTSE are a bit too wonky to trade, but the exact same parameters are used on all of them.

also, keep well clear of trying this on the NQ100...for obvious reasons lol..

FC

 

[leovirgo]

ok, from Jan-00 to present

FTSE:- 2275 pts, 73 trade 66 wins (90%!)
Hang Seng:- 2853 pts, 74 trades, 63 wins (85%)
CAC: 1726pts, 69 trades, 55 wins (80%)
DAX: 2134pts, 74 trades, 59 wins (80%)
SP500: 6130pts, 72 trades, 63 wins (88%)
NIKKEI: 524pts, 76 trades, 57 wins (75%)
All Ords(Oz): 573pts, 70 trades, 56 wins (80%)


please note, that the equity curves on all but the US Indices/FTSE are a bit too wonky to trade, but the exact same parameters are used on all of them.

also, keep well clear of trying this on the NQ100...for obvious reasons lol..

FC

Hi FC

Very impressive figs. Are they long only 24/6 trades?

LVG

 

[pchees]

Hi FC

Thanks for the extra figures.

You mentioned that you close the trade at the end of the first profitable day after the trade is placed. What would happen if you waited an extra day and then closed?

I am wandering if you can capture some more points in the trade if you let it run an extra day. I once read an article that markets run in 3 day cycles i.e. they go in 1 direction for 3 days on average before switching.

Also if the window for trading longs is from the 24th of every month, then is there a window for trading shorts at any time of the month, and could you apply the system in reverse during this period?


Regards


pchees

 

[FetteredChinos]

good questions..

you could let the trade run an extra day, but in fact the increase in points is only marginal. plus also you have the issue of carry costs when holding a long cash position, or the time erosion of a futures position.

either way, i didnt feel the reward justified the risk.

as for a time for shorts, i believe the best time for that is generally mid month..indeed i am curently looking into a new system based around Non-Farm Payrolls and regular moves after that...

hope this helps, and inspires people to try new ideas..

FC

 

[Slapshot]

Cheers FC, it has certainly given me an angle on a few ideas I had floating around the old grey matter.

Keep these bad boys coming!

Incidentaly, are you still short on the Dow?

Cheers
Slaps

 

[FetteredChinos]

yup sure am..

'til friday close....

 

[moneyfac]

hope this helps, and inspires people to try new ideas..

FC

Certainly does. Just starting back into this game and have a few ideas that were based on time of the month based chart directions. Business today is so month driven, with three main strategy periods that I believe that the markets may well be like that too. If anything, I believe they may be trending more into that direction. Most of my trading books talk about human psychology and it is that that I think we are exploiting here.

 

[pchees]

Hi FC


From my trusty copy of the StockTraders Almanac (my favourite book on the stock market by far), I guess it would be fair to say that this system will do well in the October to March time frame as the DOW tends to rise during this period.

As you have stated elsewhere there is a lot of power in seasonal trading.

I will spend some time over the next few weeks to try and compile other factors into the seasonal trends and see if the figures can't be improved.


Thanks


pchees

 

[dpfuller]

Hi FC,

this is fascinating, the backtest results look very encouraging. Simplicity is certainly the key and if the system is mechanical with no discretionary elements this should be a winner over time.

The stop of 6-7% is rarely hit as you say and in the majority of trades doesn't come anywhere close to being hit.

Getting an entry point as close as possible to the close of the down day could be an issue if spreadbetting, there are several ways you could enter the trade:

- Enter after hours on the initial down day, possibly improving on the close level if sentiment remains down
- Leave a limit order to buy 5-10 pts below the close, this wouldalso mitigate the spread.
- Enter on the day after the initial down, although this could result in not being able to enter at the desired level.

I like the idea of leaving alimit order in place after the close of the initial down day and setting this at a few points below the close to reduce the impact of the spread. Anyone have any thoughts on the mechanics of entry using spreadbetting if following this strategy?

FC - thanks again for sharing this. You've certainly given us some food for thought.

David