A Simple Rules Based Swing Trading Strategy
A Simple Rules Based Swing Trading Strategy
Scott Andrews Co-Founder & CEO
11/12/2015
Copyright © 2015 InvestiQuant
**Download slides: InvestiQuant.com/markettraders**
1
Download a copy of the slides & more educational info: www.investiquant.com/markettraders
11/12/2015
Copyright © 2015 InvestiQuant
**Download slides: InvestiQuant.com/markettraders**
2
Disclaimer It should not be assumed that the methods, techniques, or indicators presented here will be profitable or that they will not result in losses. Past results are not necessarily indicative of future results. There is a high degree of risk in trading. Hypothetical or simulated performance results have certain inherent limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not actually been executed, the results may have under- or over-compensated for the impact, if any, of certain market factors such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown.
11/12/2015
Copyright © 2015 InvestiQuant
**Download slides: InvestiQuant.com/markettraders**
3
About InvestiQuant • Merger of Master The Gap & Overnight Edges • Member owned (20 clients are investors in IQ) • Founders have over 25 years of full time trading & research experience • Collaborating with Center for Quantitative Modeling
We are passionate about providing proven, quantified edges to traders & active investors 11/12/2015
Copyright © 2015 InvestiQuant
**Download slides: InvestiQuant.com/markettraders**
4
Objective Learn a Simple Rules Based Trading Strategy Learn Exact Entry Points Learn Exact Exit Points See Historical Back-tested Results for the Strategy Learn How to Improve the Strategy with Quantitative Data
11/12/2015
Copyright © 2015 InvestiQuant
**Download slides: InvestiQuant.com/markettraders**
5
The Entry and Exit is Based on Closing Prices
11/12/2015
Copyright © 2015 InvestiQuant
**Download slides: InvestiQuant.com/markettraders**
6
Entry Rule:
Buy The 5 Day Closing Low Look at today’s closing price in relation to the previous 4 trading days. If today’s closing price is the lowest closing price in the group of 5 days, enter LONG at today’s closing price.
11/12/2015
Copyright © 2015 InvestiQuant
**Download slides: InvestiQuant.com/markettraders**
7
Let’s walk through an example Day 1
11/12/2015
Copyright © 2015 InvestiQuant
**Download slides: InvestiQuant.com/markettraders**
8
Day 2
2 Day Closing Low 11/12/2015
Copyright © 2015 InvestiQuant
**Download slides: InvestiQuant.com/markettraders**
9
Day 3
3 Day Closing Low 11/12/2015
Copyright © 2015 InvestiQuant
**Download slides: InvestiQuant.com/markettraders**
10
Day 4
4 Day Closing Low 11/12/2015
Copyright © 2015 InvestiQuant
**Download slides: InvestiQuant.com/markettraders**
11
Day 5
5 Day Closing Low: Enter at Closing Price 11/12/2015
Copyright © 2015 InvestiQuant
**Download slides: InvestiQuant.com/markettraders**
12
Entry Techniques 1. Market On Close order at the 5 Day Closing Low 2. Place an After Hours order equal to the Closing Price 3. Place a Limit order for the following day at the signaled 5 Day Closing Low (note: this is the method used for the back-test)
11/12/2015
Copyright © 2015 InvestiQuant
**Download slides: InvestiQuant.com/markettraders**
13
Entry
Limit order the next session
11/12/2015
Copyright © 2015 InvestiQuant
**Download slides: InvestiQuant.com/markettraders**
14
Exit Rule: Sell The 5 Day Closing High Look at today’s close in relation to the previous 4 trading days. If today’s closing price is the highest closing price of the past 5 days, exit at the closing price.
11/12/2015
Copyright © 2015 InvestiQuant
**Download slides: InvestiQuant.com/markettraders**
15
Let’s walk through the exit of our example
3 Day Closing High
11/12/2015
Copyright © 2015 InvestiQuant
**Download slides: InvestiQuant.com/markettraders**
16
Walk Forward 1 Day and We Get a 5 Day Closing High - Exit at the Close
11/12/2015
Copyright © 2015 InvestiQuant
**Download slides: InvestiQuant.com/markettraders**
17
A Look at the Trade from Entry to Exit
11/12/2015
Copyright © 2015 InvestiQuant
**Download slides: InvestiQuant.com/markettraders**
18
Blue Line Shows Entry to Exit
11/12/2015
Copyright © 2015 InvestiQuant
**Download slides: InvestiQuant.com/markettraders**
19
Let’s Look at Some More Examples Win Loss
11/12/2015
Copyright © 2015 InvestiQuant
**Download slides: InvestiQuant.com/markettraders**
20
Win
11/12/2015
Win
Copyright © 2015 InvestiQuant
Loss
**Download slides: InvestiQuant.com/markettraders**
21
Quiz: Which Candle is the Entry?
11/12/2015
Copyright © 2015 InvestiQuant
**Download slides: InvestiQuant.com/markettraders**
22
Answer:
11/12/2015
Copyright © 2015 InvestiQuant
**Download slides: InvestiQuant.com/markettraders**
23
Which Candle is the Exit?
11/12/2015
Copyright © 2015 InvestiQuant
**Download slides: InvestiQuant.com/markettraders**
24
Answer:
11/12/2015
Copyright © 2015 InvestiQuant
**Download slides: InvestiQuant.com/markettraders**
25
Now That You Understand the Rules Let’s Look at the Results
11/12/2015
Copyright © 2015 InvestiQuant
**Download slides: InvestiQuant.com/markettraders**
26
11/12/2015
Copyright © 2015 InvestiQuant
**Download slides: InvestiQuant.com/markettraders**
27
How could you make this good strategy… a GREAT strategy?
11/12/2015
Copyright © 2015 InvestiQuant
**Download slides: InvestiQuant.com/markettraders**
28
Ensemble Forecasting “There is a well-recognized phenomenon that combining forecasts derived from different methods using different sources of information, can improve forecast accuracy. This approach is sometimes called ‘ensemble forecasting’.’’ - Mike Gilleland, SAS, Excerpt from “Lessons from Forecasting the Stock Market”
11/12/2015
Copyright © 2015 InvestiQuant
**Download slides: InvestiQuant.com/markettraders**
29
IQ Swing Trading Concepts Acceleration: How fast is the market moving and from where? Momentum: How persistent has the move been over the last few days and weeks, how strong is the movement, and where is it trading in relation to the long-term trend? Seasonality: What long & short-term seasonal forces are in play, and how has the market performed during similar periods in the past?
11/12/2015
Copyright © 2015 InvestiQuant
**Download slides: InvestiQuant.com/markettraders**
30
Overview to IQ Swing Edges (“Guides”) Show historical odds of a symbol/market closing up/down in 3 days Average of 9 total systems - 3 different methodologies (Acceleration, Momentum, Seasonality) - 3 different time frames for each methodology (1 day, 3 day, & 5 day)
Snapshot of similar market conditions over prior 10 years Validated back to 1971 Back-tested across many symbols and markets Identify when a clear, short-term, directional bias exists based on robust historical analysis 11/12/2015
Copyright © 2015 InvestiQuant
**Download slides: InvestiQuant.com/markettraders**
31
Example of IQ Swing Guide
11/12/2015
Copyright © 2015 InvestiQuant
**Download slides: InvestiQuant.com/markettraders**
32
What if we combine this 5 Day Low - High timing strategy with IQ Swing Edges data? 11/12/2015
Copyright © 2015 InvestiQuant
**Download slides: InvestiQuant.com/markettraders**
33
11/12/2015
Fewer trades, fewer days exposed to the market, more total profits, & smaller losses. **Download slides: InvestiQuant.com/markettraders**
34
11/12/2015
Copyright © 2015 InvestiQuant
**Download slides: InvestiQuant.com/markettraders**
35
IQ Swing Edges Provide a Quantified Edge Trade Metric
Without IQ Swing Edges
With IQ Swing Edges
Difference
% Improvement
# of Trades
144
119
- 25
+17%
# Days Invested
851
449
- 402
+47%
Net Profit
$51,061
$57,882
+$6,821
+13%
Average Loss Size
-$2,583
-$1,470
-$1,113
+43%
Max Drawdown
~$20,000
~$14,000
- $6,000
+30%
Average Trade
$365
$486
+$131
+36%
Fewer trades, fewer days exposed to the market, more total profits, & smaller losses. 11/12/2015
Copyright © 2015 InvestiQuant
**Download slides: InvestiQuant.com/markettraders**
36
Let’s look at another way to use InvestiQuant Swing Edges data:
A stand alone strategy.
11/12/2015
Copyright © 2015 InvestiQuant
**Download slides: InvestiQuant.com/markettraders**
37
SPY: January, 2007 – September, 2015
Growth: Days in market: Max drawdown:
11/12/2015
+ 44% 3,160 - 52%
Copyright © 2015 InvestiQuant
**Download slides: InvestiQuant.com/markettraders**
38
Market Timing the SPY with IQ Swing Edges
11/12/2015
Copyright © 2015 InvestiQuant
**Download slides: InvestiQuant.com/markettraders**
39
Summary The 5 Day Low-High Swing strategy is a simple and effective timing technique. Ensembles (combinations of edges) provide more consistent forecasting information than any individual component and can improve timing strategies. IQ Swing Edges can be used on their own, or as complement to improve other methods.
11/12/2015
Copyright © 2015 InvestiQuant
**Download slides: InvestiQuant.com/markettraders**
40
Special Offer Save $75 off of first year’s ‘annual’ subscription using coupon code “ markettraders ” by Wednesday, Nov 18. Save $100 (additional $25) if you sign up by midnight ET tonight. As part of offer, you may cancel your Annual Subscription anytime during the first 30 days & receive a FULL refund.
www.investiquant.com/markettraders 11/12/2015
Copyright © 2015 InvestiQuant
**Download slides: InvestiQuant.com/markettraders**
41
How to Order IQ Swing Edges
1
2 3
Enter markettraders 11/12/2015
Copyright © 2015 InvestiQuant
Save $75 off of first year ‘annual’ subscription using coupon code by Wednesday, Nov 18. Save additional $25 if you sign up midnight ET tonight. **Download slides: InvestiQuant.com/markettraders**
42
Scott Andrews Co-Founder & CEO
11/12/2015
Copyright © 2015 InvestiQuant
**Download slides: InvestiQuant.com/markettraders**
1
Download a copy of the slides & more educational info: www.investiquant.com/markettraders
11/12/2015
Copyright © 2015 InvestiQuant
**Download slides: InvestiQuant.com/markettraders**
2
Disclaimer It should not be assumed that the methods, techniques, or indicators presented here will be profitable or that they will not result in losses. Past results are not necessarily indicative of future results. There is a high degree of risk in trading. Hypothetical or simulated performance results have certain inherent limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not actually been executed, the results may have under- or over-compensated for the impact, if any, of certain market factors such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown.
11/12/2015
Copyright © 2015 InvestiQuant
**Download slides: InvestiQuant.com/markettraders**
3
About InvestiQuant • Merger of Master The Gap & Overnight Edges • Member owned (20 clients are investors in IQ) • Founders have over 25 years of full time trading & research experience • Collaborating with Center for Quantitative Modeling
We are passionate about providing proven, quantified edges to traders & active investors 11/12/2015
Copyright © 2015 InvestiQuant
**Download slides: InvestiQuant.com/markettraders**
4
Objective Learn a Simple Rules Based Trading Strategy Learn Exact Entry Points Learn Exact Exit Points See Historical Back-tested Results for the Strategy Learn How to Improve the Strategy with Quantitative Data
11/12/2015
Copyright © 2015 InvestiQuant
**Download slides: InvestiQuant.com/markettraders**
5
The Entry and Exit is Based on Closing Prices
11/12/2015
Copyright © 2015 InvestiQuant
**Download slides: InvestiQuant.com/markettraders**
6
Entry Rule:
Buy The 5 Day Closing Low Look at today’s closing price in relation to the previous 4 trading days. If today’s closing price is the lowest closing price in the group of 5 days, enter LONG at today’s closing price.
11/12/2015
Copyright © 2015 InvestiQuant
**Download slides: InvestiQuant.com/markettraders**
7
Let’s walk through an example Day 1
11/12/2015
Copyright © 2015 InvestiQuant
**Download slides: InvestiQuant.com/markettraders**
8
Day 2
2 Day Closing Low 11/12/2015
Copyright © 2015 InvestiQuant
**Download slides: InvestiQuant.com/markettraders**
9
Day 3
3 Day Closing Low 11/12/2015
Copyright © 2015 InvestiQuant
**Download slides: InvestiQuant.com/markettraders**
10
Day 4
4 Day Closing Low 11/12/2015
Copyright © 2015 InvestiQuant
**Download slides: InvestiQuant.com/markettraders**
11
Day 5
5 Day Closing Low: Enter at Closing Price 11/12/2015
Copyright © 2015 InvestiQuant
**Download slides: InvestiQuant.com/markettraders**
12
Entry Techniques 1. Market On Close order at the 5 Day Closing Low 2. Place an After Hours order equal to the Closing Price 3. Place a Limit order for the following day at the signaled 5 Day Closing Low (note: this is the method used for the back-test)
11/12/2015
Copyright © 2015 InvestiQuant
**Download slides: InvestiQuant.com/markettraders**
13
Entry
Limit order the next session
11/12/2015
Copyright © 2015 InvestiQuant
**Download slides: InvestiQuant.com/markettraders**
14
Exit Rule: Sell The 5 Day Closing High Look at today’s close in relation to the previous 4 trading days. If today’s closing price is the highest closing price of the past 5 days, exit at the closing price.
11/12/2015
Copyright © 2015 InvestiQuant
**Download slides: InvestiQuant.com/markettraders**
15
Let’s walk through the exit of our example
3 Day Closing High
11/12/2015
Copyright © 2015 InvestiQuant
**Download slides: InvestiQuant.com/markettraders**
16
Walk Forward 1 Day and We Get a 5 Day Closing High - Exit at the Close
11/12/2015
Copyright © 2015 InvestiQuant
**Download slides: InvestiQuant.com/markettraders**
17
A Look at the Trade from Entry to Exit
11/12/2015
Copyright © 2015 InvestiQuant
**Download slides: InvestiQuant.com/markettraders**
18
Blue Line Shows Entry to Exit
11/12/2015
Copyright © 2015 InvestiQuant
**Download slides: InvestiQuant.com/markettraders**
19
Let’s Look at Some More Examples Win Loss
11/12/2015
Copyright © 2015 InvestiQuant
**Download slides: InvestiQuant.com/markettraders**
20
Win
11/12/2015
Win
Copyright © 2015 InvestiQuant
Loss
**Download slides: InvestiQuant.com/markettraders**
21
Quiz: Which Candle is the Entry?
11/12/2015
Copyright © 2015 InvestiQuant
**Download slides: InvestiQuant.com/markettraders**
22
Answer:
11/12/2015
Copyright © 2015 InvestiQuant
**Download slides: InvestiQuant.com/markettraders**
23
Which Candle is the Exit?
11/12/2015
Copyright © 2015 InvestiQuant
**Download slides: InvestiQuant.com/markettraders**
24
Answer:
11/12/2015
Copyright © 2015 InvestiQuant
**Download slides: InvestiQuant.com/markettraders**
25
Now That You Understand the Rules Let’s Look at the Results
11/12/2015
Copyright © 2015 InvestiQuant
**Download slides: InvestiQuant.com/markettraders**
26
11/12/2015
Copyright © 2015 InvestiQuant
**Download slides: InvestiQuant.com/markettraders**
27
How could you make this good strategy… a GREAT strategy?
11/12/2015
Copyright © 2015 InvestiQuant
**Download slides: InvestiQuant.com/markettraders**
28
Ensemble Forecasting “There is a well-recognized phenomenon that combining forecasts derived from different methods using different sources of information, can improve forecast accuracy. This approach is sometimes called ‘ensemble forecasting’.’’ - Mike Gilleland, SAS, Excerpt from “Lessons from Forecasting the Stock Market”
11/12/2015
Copyright © 2015 InvestiQuant
**Download slides: InvestiQuant.com/markettraders**
29
IQ Swing Trading Concepts Acceleration: How fast is the market moving and from where? Momentum: How persistent has the move been over the last few days and weeks, how strong is the movement, and where is it trading in relation to the long-term trend? Seasonality: What long & short-term seasonal forces are in play, and how has the market performed during similar periods in the past?
11/12/2015
Copyright © 2015 InvestiQuant
**Download slides: InvestiQuant.com/markettraders**
30
Overview to IQ Swing Edges (“Guides”) Show historical odds of a symbol/market closing up/down in 3 days Average of 9 total systems - 3 different methodologies (Acceleration, Momentum, Seasonality) - 3 different time frames for each methodology (1 day, 3 day, & 5 day)
Snapshot of similar market conditions over prior 10 years Validated back to 1971 Back-tested across many symbols and markets Identify when a clear, short-term, directional bias exists based on robust historical analysis 11/12/2015
Copyright © 2015 InvestiQuant
**Download slides: InvestiQuant.com/markettraders**
31
Example of IQ Swing Guide
11/12/2015
Copyright © 2015 InvestiQuant
**Download slides: InvestiQuant.com/markettraders**
32
What if we combine this 5 Day Low - High timing strategy with IQ Swing Edges data? 11/12/2015
Copyright © 2015 InvestiQuant
**Download slides: InvestiQuant.com/markettraders**
33
11/12/2015
Fewer trades, fewer days exposed to the market, more total profits, & smaller losses. **Download slides: InvestiQuant.com/markettraders**
34
11/12/2015
Copyright © 2015 InvestiQuant
**Download slides: InvestiQuant.com/markettraders**
35
IQ Swing Edges Provide a Quantified Edge Trade Metric
Without IQ Swing Edges
With IQ Swing Edges
Difference
% Improvement
# of Trades
144
119
- 25
+17%
# Days Invested
851
449
- 402
+47%
Net Profit
$51,061
$57,882
+$6,821
+13%
Average Loss Size
-$2,583
-$1,470
-$1,113
+43%
Max Drawdown
~$20,000
~$14,000
- $6,000
+30%
Average Trade
$365
$486
+$131
+36%
Fewer trades, fewer days exposed to the market, more total profits, & smaller losses. 11/12/2015
Copyright © 2015 InvestiQuant
**Download slides: InvestiQuant.com/markettraders**
36
Let’s look at another way to use InvestiQuant Swing Edges data:
A stand alone strategy.
11/12/2015
Copyright © 2015 InvestiQuant
**Download slides: InvestiQuant.com/markettraders**
37
SPY: January, 2007 – September, 2015
Growth: Days in market: Max drawdown:
11/12/2015
+ 44% 3,160 - 52%
Copyright © 2015 InvestiQuant
**Download slides: InvestiQuant.com/markettraders**
38
Market Timing the SPY with IQ Swing Edges
11/12/2015
Copyright © 2015 InvestiQuant
**Download slides: InvestiQuant.com/markettraders**
39
Summary The 5 Day Low-High Swing strategy is a simple and effective timing technique. Ensembles (combinations of edges) provide more consistent forecasting information than any individual component and can improve timing strategies. IQ Swing Edges can be used on their own, or as complement to improve other methods.
11/12/2015
Copyright © 2015 InvestiQuant
**Download slides: InvestiQuant.com/markettraders**
40
Special Offer Save $75 off of first year’s ‘annual’ subscription using coupon code “ markettraders ” by Wednesday, Nov 18. Save $100 (additional $25) if you sign up by midnight ET tonight. As part of offer, you may cancel your Annual Subscription anytime during the first 30 days & receive a FULL refund.
www.investiquant.com/markettraders 11/12/2015
Copyright © 2015 InvestiQuant
**Download slides: InvestiQuant.com/markettraders**
41
How to Order IQ Swing Edges
1
2 3
Enter markettraders 11/12/2015
Copyright © 2015 InvestiQuant
Save $75 off of first year ‘annual’ subscription using coupon code by Wednesday, Nov 18. Save additional $25 if you sign up midnight ET tonight. **Download slides: InvestiQuant.com/markettraders**
42
