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October 2012 Stocks and Commodities Traders Tips

A Seasonal Strategy With Leveraged ETFs

AIQ Version:

Original article by Gerald Gardner
AIQ Code by Richard Denning

The AIQ code for Gerald Gardner’s article , “A Seasonal Strategy With Leveraged ETFs”, is provided at the web site noted below.

To test the author’s seasonal system with the leveraged ETFs DBC & DDM, using AIQ’s Portfolio Manager, a trading simulation was run with the following capitalization and cost settings:

  • Maximum of 2 open positions
  • Size each position at 50 % of mark-to-market total capital
  • Take no more than 2 new positions per day
  • Compute the mark-to-market capital each day
  • Three cents per share was deducted for each round turn trade

In Figure 1, I show the resulting statistics and equity curve compared to the SPX index. For the period 9/1/2006 to 8/13/2012, the system returned an average internal rate of return of 13.7% with a maximum drawdown of 32% on 3/5/2009. These statistics differ from the author’s due to my test starting earlier and also I picked up three trades that the author did not show in his list of trades with returns of -15.4%, -8.0% and 1.0%. These differences may be due to differences in our data. In my test there were only 12 trades and I would like to see more trades before I would rely on this as a trading strategy. This is the problem with testing systems with ETFs as there is not enough data.

Figure 1 – Equity curve for my test system that uses the seasonal system for the period 9/1/2006 to 8/13/2012. Only the ETFs DBC and DDM were traded on each signal.

EDS Code:
Seasonal Lev ETFs.EDS
(right click and choose Save As)


Traders Studio Version :

Original article by Gerald Gardner
Traders Studio Code by Richard Denning

The TradersStudio code for Gerald Gardner’s article , “A Seasonal Strategy With Leveraged ETFs”, is provided at the web sites noted below. The following code files are provided in the download from the websites:

  • System: “SEAS_LEV_ETF” the author’s system for trading leveraged ETFs

Since the EFTs that were used by the author do not have enough history and only produce 12 trades using the whole data that is available, I decided to try using two futures contracts in place of the ETFs. I first tried the CR, the CRB index contract, and the DJ, Dow Jones index contract, together with a percent margin trade plan. This resulted in large draw-downs with relatively small percent of margin used. I then tried the CL, the crude oil contract, and the SP, S&P 500 index contract with the percent margin trade plan. I was able to use up to 30% margin with maximum drawdown of 50%. The log equity curve and the underwater equity curve are shown in Figure 1. The period 1984 to 1994 resulted in a net loss and also had the large 50% draw-downs. The period from 1994 to 2012, on the other hand, appears quite good with much smaller draw-downs of between 30% to 35% and an accelerating rate of return into 2012. The return by year is shown in Table 1. My test started with $500,000 of capital.

Figure 1 – Equity & underwater curves for CL & SP contracts from 1984 to 2012.
Table 1 – Returns by year for CL & SP contracts from 1984 to 2012.

Traders Studio Code:
Seasonal Lev
(right click and choose Save As)














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