While IÂ explained in the previous post my intentionsÂ to track this system on iBC, I did not explain very much about the system itself.
The System Highlights:
Entry is secret but is not based on volume or RSI.
Exit rule is very simple: If RSI(2) closes above 80, sell at the next open.
ThisÂ system has been backtested only as far back as Jan 1, 2008. Since the system trades only diETFs (double and inverse ETFs), and many of these diETFs are less than 2 years old, it is impossible to test back much more than 2 years. This should cause concern. However, I have tested this system on the SPY, DIA, and QQQQs, on all available data, and it is profitable. Still, that does not mean that the system will work the same on the diETFs.Â I am working on this system with another trader, who may or may not choose to remain nameless, and he will probably have tested this system back across all available data for the diETFs, within a week or so.
Here are the statistics, since January 1, 2008:
|There were 80 total stocks entered. Of those, 80 or 100.00% were complete and or 0.00% were open.|
|Of the 80 completed trades, 49 trades or 61.25%resulted in a net gain.|
|Your average net change for completed trades was: 2.60%.|
|The average draw down of your approach was: -3.25%.|
|The average max profit of your approach was: 5.88%|
|The Reward/Risk ratio for this approach is: 2.63|
|Annualized Return on Investment (ROI): 268.02%, the ROI of ^IXIC was: -28.53%.|
|Stop Loss was triggered 31 times or 38.75% of the time.An exit trigger was executed 49 times or 61.25% of the time.An exit trigger was executed 49 times or 61.25% of the time.|
Remember, this system will hold a maximum of 4 diETFs, and will take only 2 new entries per day. Therefore, more trades were generated during the time period tested, but these trades were not taken due to the aforementioned rules. For example, If 4 diETFs are signalled for entry, the system will onlyÂ take the 2 with the greatest volume.
This method of 2 new per day with 4 max positions is a variable that mayÂ need adjustment in the future. More testing needs to be done on this variable.
Spreadsheet and Trade Accounting:
I want to explain this spreadsheet. I’ve set it up to make it easy to figure out position-sizing, so orders can be set in the evening before bed. All I do is enter the close amount and the sheet figures my 4% risk/stop, and size.
- “Close” = the value on the day the signal is generated. Used for purposes of position-sizing.
- “4% Risk” = the dollar amount per share risked with a 4% stop
- “Stop” = stop market price to be entered when entry order is placed
- “Size” = number of shares
- “Entry” = actual entry price
- “RealRisk” = this calculation takes into account any opening gap above the previous close. Since the stop level is derived from the previous close, any opening gap will increase the actual risk.
- “Cost” = cost with $14 inÂ commissions, to equal a round trip.
- “% Return” = the Return on Investment in each trade
- “Run % Ret” = sum of the % Return of all trades
- “Run P/L” = a running total of the profits and lossesd
Once more trades are made, the system will generate more interesting statistics, and an equity curve will be plotted.
Gain of 3.79%, Not Bad for the First Day
No EntryÂ Signals for Tomorrow