Category Archives for Strategies

Sharpe Ratio – the right answer to the wrong question?


Sharpe was the right answer First, let’s start with what Sharpe does well. There are two things it does well: Cross-asset unified measure: we all know that the most important component in alpha generation is asset allocation. Now, the difficulty is to have a single measure of risk-adjusted measure of alpha. This is where Sharpe […]

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Avoiding Stock Market Crashes with the Hi-Lo Index of the S&P500

This daily indicator is calculated as the ratio of the number of S&P500 stocks that have reached new 3-month-highs minus those that have reached new 3-month-lows, divided 500. Exiting and entering the stock market according the indicator’s signals would have avoided major drawdowns of the market during the backtest period from Jan-2000 to Aug-2015. Switching according to the signals […]

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Dual Momentum – The Famous 5 Portfolio

This article describes a Dual Momentum study over a multi-asset ETFs basket with a new attempt to improve this well-known investing style. Dual Momentum strategies rely on two different very simple filters: absolute momentum and relative momentum. Absolute momentum (rule 1) is a trend following filter used to switch any selected assets that have a […]

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The Simplest System You’ll Ever Find for the S&P E-mini


Warren Buffet has been quoted many times as saying, “If I don’t understand it, I don’t invest in it, no matter how attractive it may appear.” I love that quote for a number of reasons, but I think it’s a great advice for system traders as well. We (myself included) have a tendency to get […]

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Improving The Simple Gap Strategy Part 5

In the last article of the series, Improving The Simple Gap Strategy Part 4, I continued my attempt to improve the Simple Gap strategy by testing dynamic stops and targets. As it turned out these did not seem to offer much benefit. In this article I’m going to take what we have learned over the past couple of […]

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Improving The Simple Gap Strategy Part 4

In the last article of this series, Improving The Simple Gap Strategy Part 3, I tested a price-based filter on the in-sample data. This filter was based upon the price action of the previous trading day. During this test we discovered that if the previous trading day was a down-day we could open a Simple Gap trade today. […]

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Improving The Simple Gap Strategy Part 3

In the last article in this series, Improving The Simple Gap Strategy Part 2, I tested two filters on the OOS sample data. The first filter was a day-of-week (DOW) filter which did not produce decent results.  The second filter, Gap Size, did show promising results. Reviewing my notes from years ago, I also discovered that the size […]

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A Different Kind of System…

So I’ve got this great new system I wanted to share: it wins 57% of the time with a great sample size of 915 trades, only risks a meager $100 a trade, has a max drawdown of $700, has made money 9 out of the past 10 years, has a nice steady equity curve, and […]

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Improving the Simple ETF Rotational Trading Model

In last week’s article called, “Backtesting A Basic ETF Rotation System in Excel – Free Download“, Dan presented a simple rotational trading model which anyone could implement given a little knowledge in Excel. What I love about trading models like this is the simplicity. So often simplicity trumps complication. Simple systems often have one important characteristic. […]

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Backtesting A Basic ETF Rotation System in Excel – Free Download

Some Background: Let’s face it, technology has made it possible to access a wide range of tools for developing, backtesting, and optimizing systems. However, a simple (but powerful) tool like Excel is a great way to validate a trading system. In this example we’re going to be keeping things really simple and backtesting a monthly […]

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