Over the past few weeks, the good folks at iBC have been busy backtesting different strategies using the overall PPT Hybrid Overbought/Oversold scores. We wanted to build a system that is easy to understand, without too many rules, one that is easy to follow along at home.
The results were nothing short of mind blowing. What if I told you that you could be up 70% for the year just trading $TNA based upon some numbers spit out by the godly PPT algorithm? Don’t believe me, click here for the data.
The system is easy to understand. When The overall hybrid score, located inside The PPT, closes oversold (ie. below 2.46), you will buy your first tranche ie. 1/3 position in $TNA. Upon reaching another oversold signal on a closing basis (<2.46), you load your 2nd tranche (another 1/3 $TNA). And, finally, if you get a third closing oversold signal before an overbought reading, you load your final tranche (1/3 $TNA, giving you a full position). Should you get a 4th signal, you must sit tight.
Once you have your position, you now wait for the Overbought signal to take place (>3.10). When the overbought reading is reached on a closing basis, you sell the whole position and immediately go short using the same 3 tier system. Rinse and repeat.
Here are some results from a few ETFs and select equities we tested, using the 3 tier system. Click here for results.
Note: The first row contains what your account value would have been should you have invested 100,000 to each position since the inception of The PPT.
Here is the breakdown of the $TNA trade since the inception of The PPT: Click here for data
how about some further stats. system drawdown? max trade drawdown? sharpe ratio?
you know, things that tell how much of a gut check you had to endure to make that 70%.
I’ll see if I can get trusty Woodshedder to run some of his famous backtests for you.
Ditto. Would like to see some additional details regarding risk.
Question regarding calcs: When the system flags overbought at > 3.10 on a closing basis and the backtest closes out the trade and goes short is that based on closing prices or swapping positions at the open on the next trading day?? Thanks
based on the closing price.
So, if I understand correctly, taking a Long position at 3.10 means that you are always in the market correct? Is there a “sweet spot” to capture the majority of the movement from Oversold to Overbought without having to be in the market all the time?
3.10 means you sell your long and go short. So yes, you are always in the market.
There may be a sweetspot, but will need to test it further. So far, this is what we have come up with.
cool exercise but do NOT run this system w real money, stdev of returns is way too large.
not sure why others are asking for additional stats, you can derive everything you need from what was posted in the GOOG spreadsheet.
What the fuck do you know?
This has been banking gorilla coin for me over three years.
Apparently more than you… math is math, probability is probability.
Best of luck!
Why not normalize the hybrid score? For example, percent rank the daily value against the past years worth of data. Net effect would be that the signal is more easily interpreted, and a bit more dynamic as well. Just a thought. I never understood the 1-5 scale…especially when it seems to perpetually oscillate back and forth between 2.5-3.5.
We are doing something like that for 2.0.
We need a 1-5 scale to grade all of the technical and fundamental factors. The Hybrid is a result of the underlying scores.
Is it crazy of me to think that putting this system “out” to the masses decreases its edge? I mean alot of people read this site.
It won’t be on this side of iBankCoin for long, just an intro. We will keep all info in The PPT and 12631.