Deconstructing the Double 7s
TradingMarkets describes the Double 7s as one of their “more effective ETF trading strategies…” As one would expect of a simple trading strategy published in a popular book, the Double 7s strategy has been discussed on various sites and in the blogosphere.
Other than Kirk Dolan’s report of his modifications, I have not found any other modifications or reports of any specific metrics generated by this strategy, beyond the few results reported in Short Term Trading Strategies….
Therefore, the Double 7s seems ripe for some deconstruction, to discover the system internals. Depending on what I find under the hood, I might then run some tests and add some tweaks in order to reconstruct an improved variation.
The Method:
Deconstruction will consist of running the exact strategy, as published in several places, in both Tradestation and AmiBroker to compare the current results with results as they were when the system was published. Running the strategy on two separate platforms and over two separate data vendors will ensure a robust comparison.
I will examine the system metrics in detail, to determine the strengths and weaknesses.
Finally, assuming the strategy is able to be improved upon, I will rebuild the strategy and then apply it over a large portfolio of ETFs, adding commissions and money management rules.
It should be instructive, and will hopefully be an enjoyable endeavor for the readers of this blog.
Wood,
That should be an interesting series. From what I know of this one, it has done well for the past several years at getting you in on a dip in a bull market (or even in sideways chop). Will be particularly interesting to see what it does in a bear market.
This should be good Wood. I did a bunch of work on this as well when it came out, and will be interested to see what you come up with.
Lazy, if I recall correctly part of the rule set is that the ETFs need to be above the 200 dma to take the trade.
Lazy, me too, re: bear market, but as Mikey states, the rules will have to be altered for that.
I hope to get another post up for this tonight, but I’m neck deep in some code right now for another system, and it is frustrating the crap outta me.
looking forward to it
I guess you missed my spin on the Double 7s on Friday:
http://bzbtrader.blogspot.com/2009/05/qs-double-7s-update.html
BZB, lol…great minds, etc. Sorry I missed that!
That is very cool. I’ll include links to your spin on the 7s in the upcoming posts.