PLEASE NOTE: For the month of July 2009, Rich tested ideas from two different articles.
For AIQ, he tested the Double 7's Strategy from the January 2009 article, "Three Rules, One Easy Way to Trade ETFs."
For Traders Studio, he tested Trailing Resistance and Support Stops
Original article by Larry Connors & David Penn
AIQ Code by Richard Denning
The AIQ code for Larry Connors and David Penn’s article from the January 2009 issue, “Three Rules, One Easy Way to Trade ETFs”, aka the Double 7’s Strategy, is shown below. The authors suggest a simple system to trade ETFs. The rules of the system are:
1) Buy at the close when today’s close is above the 200-day moving average and
2) Today’s close is the lowest close in the last seven days.
3) Exit when today’s close is the highest close in the last seven days.
I ran a Portfolio Manager test on four ETFs, SPY, QQQQ, MDY, and IWM for the period form 12/31/98 to 5/12/09. The strategy is long only so shorting ETFs was not tested.
The results are shown in Figure 1 which compares the equity curve for the portfolio of ETFs versus the S&P 500 index (SPX). The strategy showed an average annual return of 6.7% with a maximum drawdown of 14.05% and easily outperformed the SPX over the test period.
Caption for Figure 1:
Figure 1: Equity curve for the Double 7’s Strategy trading a portfolio of ETFs consisting of SPY,QQQQ,MDY, and IWM for the period 12/31/98 to 5/12/09 compared to the S&P 500 Index.
AIQ EDS Code for Trailing Resistance and Support Stops:
Original article by Sylvain Vervoort
Traders Studio Code by Richard Denning
The TradersStudio code for the trailing resistance & support stop trading system and also the date specific version along with the indicator code and the related functions in the article, “Trailing Resistance &nd Support Stops” by Sylvain Vervoort, is shown below. In my May & June 2009 Traders’ Tips, I modified the trading system by adding market timing and also traded both the long and short sides. This system, if traded both long and short, would be always in, but since I added a market timing filter based on a general market trend following filter, it will only trade long when the market trend is up and short when the market trend is down. The coded version that I have supplied has the options of trading either long only, short only or both long and short and also has the option to apply a market trend filter using the S&P 500 index (SPX) to determine whether to trade long or short. I decided to stick with the author’s list of stocks for the tests.
I did not follow the author’s asymmetrical approach which used a different method for the resistance equation versus the support equation. My version of the trailing support and resistance stop is completely symmetrical so the long side uses the same parameters as the short side and are both based on the trailing pivot concept.
In Figure 1, I show the resulting equity curve using a pivot-strength parameter of 2 as suggested by the author. I ran an optimization and found a better range for the pivot-strength parameter to be from 4 to 6. In Figure 2, I show the resulting equity curve using the pivot-strength parameter of 5. This setting resulted in a smoother equity curve and a higher final net profit.
Captions for Figures:
Figure 1: Equity curve using a pivot-strength parameter of 2, market timing and trading both long and short for the years 1/16/00 to 5/8/09.
Figure 2: Equity curve using a pivot-strength parameter of 5, market timing and trading both long and short for the years 1/16/00 to 5/8/09.
Traders Studio Code for Trailing Resistance and Support Stops:
Trailing R_S Stops .zip