| StockFetcher Forums · Filter Exchange · TRADING DIVERGENCES ON THE S&P 500 | << 1 2 3 4 5 ... 33 >>Post Follow-up |
| Kevin_in_GA 4,599 posts msg #108174 - Ignore Kevin_in_GA modified |
9/25/2012 11:24:15 PM Lately I have been playing around with Stratasearch and just letting it run massive numbers of indicator combinations on the SPX. After over 600,000 different combinations of entries and exits I began to notice some common repetitive patterns in the best performing combinations. 1. The entries were almost always based on divergences between price and an indicator. The divergences usually occurred over a 6-12 day time period, and always had the price stable or rising while the indicator continued to drop in value. This seems counter-intuitive, since that is called a "negative divergence" and is often associated with a short-term price reversal rather than a gain. 2. The exits were always connected to a 10-15 day high in the close, which did not parallel a similar high in the momentum. This makes sense, since you are getting out after a short run up in price. Very consistently I saw this exit, and actually began to set up my optimizations with the exit fixed, rather than the entry. The specific SF code for this exit is set{exit1, count(close reached a new 10 day high,1)} set{exit2, count(ROC(15,1) is below ROC(15,1) 10 day high,1)} set{exit, exit1 * exit2} I decided to set this as a common exit, and then run optimizations on a variety of indicator divergences. The results were quite good, usually with win percentages in the high 80's to low 90's, short hold times of 6-7 days, and very respectable annual returns and Sharpe ratios. Given this is for the S&P 500 index, it just makes sense to share this with the SF community - to be used as you see fit (general timing, leveraged ETFs, options, etc). All I will provide is the codes ... the rest is up to you. Here are my "Top 10" divergence filters, along with the statistical analyses from 1/2/2007 until 9/14/2012. I am providing the Monte Carlo results here since they tend to be more reflective of how a system will work going forward. During this period most of the filters traded about 100-120 times each, with many triggering on the same dates. ++++++++++++++++++++++++++++++ Stratasearch code (diverge(cmf(14), mov(close, 3, simple), 2, 7) = -1)
Performance from 1/2/2007 to 9/14/2012 Number of Trades = 134 MC Av. Annual Return = 31.95% MC Av. Trade Return = 0.79% MC Av. Drawdown = 11.75% MC Av. Percent Profitable = 88.81% Annualized Sharpe Ratio = 1.505 ++++++++++++++++++++++++++++++ Stratasearch code (diverge(smi(3, 6, 6), mov(close, 3, simple), 7, 11) = -1)
Performance from 1/2/2007 to 9/14/2012 Number of Trades = 105 MC Av. Annual Return = 34.38% MC Av. Trade Return = 1.05% MC Av. Drawdown = 6.59% MC Av. Percent Profitable = 91.43% Annualized Sharpe Ratio = 1.734 ++++++++++++++++++++++++++++++ Stratasearch Code (diverge(wlr(14), mov(close, 3, simple), 1, 12) = -1)
Performance from 1/2/2007 to 9/14/2012 Number of Trades = 123 MC Av. Annual Return = 37.86% MC Av. Trade Return = 0.95% MC Av. Drawdown = 8.23% MC Av. Percent Profitable = 85.37% Annualized Sharpe Ratio = 1.494 ++++++++++++++++++++++++++++++ Stratasearch code (diverge(pdi(10), mov(close, 3, simple), 10, 8) = -1)
Performance from 1/2/2007 to 9/14/2012 Number of Trades = 86 MC Av. Annual Return = 29.60% MC Av. Trade Return = 1.17% MC Av. Drawdown = 7.27% MC Av. Percent Profitable = 86.05% Annualized Sharpe Ratio = 1.555 ++++++++++++++++++++++++++++++ Stratasearch code (diverge(aroonu(6), mov(close, 3, simple), 4, 4) = -1)
Performance from 1/2/2007 to 9/14/2012 Number of Trades = 113 MC Av. Annual Return = 34.21% MC Av. Trade Return = 0.97% MC Av. Drawdown = 7.80% MC Av. Percent Profitable = 87.62% Sharpe Ratio = 1.532 ++++++++++++++++++++++++++++++ Stratasearch code (diverge(lrs(close,8), mov(close, 3, simple), 10, 10) = -1)
Performance from 1/2/2007 to 9/14/2012 Number of Trades = 126 MC Av. Annual Return = 29.33% MC Av. Trade Return = 0.79% MC Av. Drawdown = 8.38% MC Av. Percent Profitable = 91.27% Sharpe Ratio = 1.381 ++++++++++++++++++++++++++++++ Stratasearch code (diverge(qst(12), mov(close, 3, simple), 2, 12) = -1)
Performance from 1/2/2007 to 9/14/2012 Number of Trades = 133 MC Av. Annual Return = 33.24% MC Av. Trade Return = 0.81% MC Av. Drawdown = 7.89% MC Av. Percent Profitable = 87.97% Annualized Sharpe Ratio = 1.605 ++++++++++++++++++++++++++++++ Stratasearch code (diverge(rsi(10), mov(close, 3, simple), 3, 12) = -1)
Performance from 1/2/2007 to 9/14/2012 Number of Trades = 93 MC Av. Annual Return = 35.47% MC Av. Trade Return = 1.21% MC Av. Drawdown = 7.88% MC Av. Percent Profitable = 87.10% Annualized Sharpe Ratio = 1.553 ++++++++++++++++++++++++++++++ Stratasearch Code (diverge(rmi(8, 2), mov(close, 3, simple), 1, 12) = -1)
Performance from 1/2/2007 to 9/14/2012 Number of Trades = 105 MC Av. Annual Return = 31.19% MC Av. Trade Return = 0.99% MC Av. Drawdown = 8.46% MC Av. Percent Profitable = 87.62% Sharpe Ratio = 1.490 ++++++++++++++++++++++++++++++ Stratasearch code (diverge(stochd(3, 2, 5, simple), mov(close, 3, simple), 2, 11) = -1)
Performance from 1/2/2007 to 9/14/2012 Number of Trades = 126 MC Av. Annual Return = 35.06% MC Av. Trade Return = 0.88% MC Av. Drawdown = 6.88% MC Av. Percent Profitable = 91.29% Sharpe Ratio = 1.594 All of the results were generated using the "buy at the open on the day after the signal is given". Same with the close. Looking at what they are saying about today's action, I already jumped into SPY near the close today. Enjoy, Kevin |
| Rock Sexton 111 posts msg #108176 - Ignore Rock Sexton |
9/26/2012 12:06:08 AM Love divergence trading. There is nothing else IMO. |
| bman99 6 posts msg #108181 - Ignore bman99 |
9/26/2012 12:55:32 PM Kevin, It looks good but I am not sure how to interpret the filter results. In most of the filters you have two fields that toggle between values 0 and 1. For example in the first filter, the one field is called cmf14div. The second field is called EXIT. How do you interpret the filter results and use these two field's values? For example, Do you buy when first field is 1 and then wait until the exits field hits 1 to sell? Good work. Thank you! |
| Kevin_in_GA 4,599 posts msg #108183 - Ignore Kevin_in_GA |
9/26/2012 1:25:05 PM For example, do you buy when first field is 1 and then wait until the exits field hits 1 to sell? Yes. If you look at the chart, you'll see that both the entries and exits for each filter are graphed at the bottom. Enter when the divergence signal is triggered (either end of day or at the open next day) and sell when the exit triggers. |
| Eman93 4,750 posts msg #108190 - Ignore Eman93 |
9/26/2012 10:21:43 PM my basic money flow divergence .(.same filter as the rsi i have posted in the past.) when you get an extreme amount (+100) of hits it could signal a bottom. From what I have experienced the MFI gives better results. First thing to remember is that there is a big difference between a bounce and a trend reversal. But most reversals happen with a divergence in play. Kevin you could also try combining RSI and MFI and see what you get. Remember with this screen you need to "eyeball" each chart to see if price made a new swing low.. if it didn't its not a divergence. |
| Kevin_in_GA 4,599 posts msg #108215 - Ignore Kevin_in_GA |
9/28/2012 3:54:53 PM Not sure that I could get much better stats than what these are aready showing. By combining the RSI and MFI (or any other set of indicators) you will reduce the total number of trades. Given the high win percentage and positive expectancy seen in these I want to go the opposite direction and get as many more trades like these as possible. To me this is a low-risk way to go long the S&P 500 using SPY, SSO, or even options for the bravest/most foolhardy. Not all of the trades are big - in fact most of the gains are less than 1% - but you have got to respect the consistency of these through what was an extremely challenging period for most investors. |
| mahkoh 1,065 posts msg #108216 - Ignore mahkoh |
9/28/2012 5:04:14 PM Kevin, what does MC avg drawdown mean? I hope not average drawdown per trade? I did google it but before delving into extensive reading material I was hoping you might have a quick explanation. |
| Kevin_in_GA 4,599 posts msg #108217 - Ignore Kevin_in_GA |
9/28/2012 7:00:58 PM The Monte Carlo simulations (random combinations of all possible trades) tend to give you a better understanding of how a system might actually perform, since we can never actually select trades in real-time by volume descending, etc. Each of the MC stats is the average from 5000 iterations. In the case you ask, it is the average of the Maximum Drawdown encountered in each combination during the test period. So if it is something like 7-8%, compare that to the actually SPX drawdown seen in 2008 and you'll see that these systems steered you clear of a lot of trouble. |
| mahkoh 1,065 posts msg #108221 - Ignore mahkoh |
9/30/2012 3:42:52 PM Thanks for clearing that up. I assume the MC av annual return is compounded? Have you considered using a composite filter where you count all separate signals like with the Connors filters in the "high probability trading" thread? |
| Kevin_in_GA 4,599 posts msg #108223 - Ignore Kevin_in_GA |
9/30/2012 6:35:25 PM Yes to both. Note that in each filter I have adjusted variable names such that they can all be combined into a single filter if that's what folks want to do. To be honest the combined filter does not exceed any of the individual filters since all of the filters have very high win %'s. Here is where each one is in terms of in or out of a trade - the columns are date of trade, entry, current, gain/loss, system 09/10/2012 1437.9200 1440.6700 0.19% STOCHD Divergence #1 09/10/2012 1437.9200 1440.6700 0.19% SMI Divergence #1 09/10/2012 1437.9200 1440.6700 0.19% CMF Divergence #1 09/11/2012 1429.1300 1440.6700 0.81% QST Divergence #1 09/11/2012 1429.1300 1440.6700 0.81% RSI Divergence #1 09/11/2012 1429.1300 1440.6700 0.81% WLR(14) Divergence #1 09/21/2012 1460.3400 1440.6700 -1.35% AROON UP Divergence #1 09/24/2012 1459.7600 1440.6700 -1.31% LRS Divergence #1 09/26/2012 1441.6000 1440.6700 -0.06% RMI Divergence #1 09/26/2012 1441.6000 1440.6700 -0.06% PDI Divergence #1 Not lighting the world on fire, but the combined performance of these 10 filters over the last four months is 64 wins, 1 losing trade for an aggregate gain of 9.3%. YTD: Up 12.5%but you were only in a trade 49.8% of the time. |
| StockFetcher Forums · Filter Exchange · TRADING DIVERGENCES ON THE S&P 500 | << 1 2 3 4 5 ... 33 >>Post Follow-up |
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