How to Improve Any Swing Trading Strategy with Quantified, Short ...
How to Improve Any Swing Trading Strategy with Quantified, Short-Term Edges
Scott Andrews Co-Founder & CEO 12/11/2015
Copyright © 2015 InvestiQuant
1
About InvestiQuant • Member owned (20 clients are investors in IQ) • Hundreds of members that have subscribed for 2+ years • 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 12/11/2015
Copyright © 2015 InvestiQuant
2
Objective Review a few swing trading strategies / techniques
Review their historical back-tested results See how quantified edges can improve them
Learn why IQ Swing Edges are unique & value-added See a demo of IQ Swing Edges & Navigator
12/11/2015
Copyright © 2015 InvestiQuant
3
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.
12/11/2015
Copyright © 2015 InvestiQuant
4
Simple, Long-Only, Swing Strategy:
“5 Day Low - 5 Day High”
12/11/2015
Copyright © 2015 InvestiQuant
5
A Look at a Trade from Entry to Exit
12/11/2015
Copyright © 2015 InvestiQuant
6
Blue Line Shows Entry to Exit 5 Day Closing High Signal is Triggered Sell On The Close
5 1
4
2 3
12/11/2015
Copyright © 2015 InvestiQuant
7
12/11/2015
Copyright © 2015 InvestiQuant
8
Here are the historical back-tested results:
12/11/2015
Copyright © 2015 InvestiQuant
9
What if we combine this “5 Day Low – High” strategy with a quantified, short-term edge to … improve trade selection & exit timing? 12/11/2015
Copyright © 2015 InvestiQuant
10
12/11/2015
Copyright © 2015 InvestiQuant
11
Fewer trades, fewer days exposed to the market, more total profits, & smaller losses. 12/11/2015
Copyright © 2015 InvestiQuant
12
5 Day Low-High
12/11/2015
Copyright © 2015 InvestiQuant
5 Day Low-High w/Quant Edge
13
Comparison With / Without 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. 12/11/2015
Copyright © 2015 InvestiQuant
14
Another Example…
Simple, Long-Only Strategy: “Seasonal 24th”
12/11/2015
Copyright © 2015 InvestiQuant
15
Rules: 1. Today is the first trading day AFTER the 24th of the month 2. Buy SPY at the open Tomorrow. 3. Exit at the close of the 1st trading day of the next month
Today
Buy Open
Sell Close 12/11/2015
Copyright © 2015 InvestiQuant
16
12/11/2015
Copyright © 2015 InvestiQuant
17
Results
12/11/2015
Copyright © 2015 InvestiQuant
18
What if we combine this “Seasonal 24th” strategy with a quantified, short-term edge to…
improve entry and exit timing? 12/11/2015
Copyright © 2015 InvestiQuant
19
Seasonal 24th System with Quantified Edge
12/11/2015
Copyright © 2015 InvestiQuant
20
Seasonal 24th
Seasonal 24th w/Quant Edge
High Water Mark
High Water Mark without Swing Edges
12/11/2015
Copyright © 2015 InvestiQuant
21
Seasonal 24th System with Quantified Edge
12/11/2015
Copyright © 2015 InvestiQuant
22
IQ Swing Edges Provide a Quantified Edge Trade Metric
Seasonal 24th Without IQ Swing Edges
With IQ Swing Edges
Difference
% Improvement
# of Trades
106
104
-2
+2%
# Days Invested
463
364
- 99
+21%
Net Profit
$25,610
$38,005
+$13,767
+48%
Average Trade
$241
$365
+$124
+51%
Max Intraday Drawdown
$21,117
$9,749
$11,368
+54%
Less exposure, much less drawdown, and substantially better profits. 12/11/2015
Copyright © 2015 InvestiQuant
23
You can also use quantified, short-term edges to confirm technical trades…
12/11/2015
Copyright © 2015 InvestiQuant
24
Confirming Technical Trades with a Quant Edge
?
12/11/2015
Copyright © 2015 InvestiQuant
25
Confirming Technical Trades with IQ Swing Edges
12/11/2015
Copyright © 2015 InvestiQuant
26
Confirming Technical Trades with IQ Swing Edges Technical setup with IQ Swing Edges Confirming led to a 5% gain in 3 days
Technical setup with IQ Swing Edges confirming led to a 5% gain in 3 days 12/11/2015
Copyright © 2015 InvestiQuant
27
What exactly is a
“Quantified, Short-Term Edge?”
12/11/2015
Copyright © 2015 InvestiQuant
28
A Quantified, Short-Term Edge is … … Confirmation that your trade signal is firing in a direction that has proven to be probable & profitable during similar market conditions historically. 12/11/2015
Copyright © 2015 InvestiQuant
29
But HOW?
12/11/2015
Copyright © 2015 InvestiQuant
30
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”
InvestiQuant uses strategy-specific “ensembles” (groups of systems) to identify & verify short-term edges. 12/11/2015
Copyright © 2015 InvestiQuant
31
Who would you trust to invest $10,000?
OR
One opinion or the average of many opinions? 12/11/2015
Copyright © 2015 InvestiQuant
32
Proven Swing Trading Concepts Acceleration
Momentum Seasonality
12/11/2015
Copyright © 2015 InvestiQuant
33
Acceleration 1.
12/11/2015
Acceleration: How FAST is the market moving and from where?
Copyright © 2015 InvestiQuant
34
Momentum 2.
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?
12/11/2015
Copyright © 2015 InvestiQuant
35
Seasonality 3.
Seasonality: What long & short-term CALENDAR forces are in play, and how has the market performed during similar periods in the past?
12/11/2015
Copyright © 2015 InvestiQuant
36
Each of these individual swing trading concepts can be statistically measured and quantified.
What if you combined them to create a single ‘edge’? 12/11/2015
Copyright © 2015 InvestiQuant
37
Introducing… IQ Swing Edges Historical odds of a 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 12/11/2015
Copyright © 2015 InvestiQuant
38
Example of IQ Swing Edge
12/11/2015
Copyright © 2015 InvestiQuant
39
How Else Can IQ Swing Edges Be Used? 1.
Improve your swing trade selection
2.
Improve your swing trade timing
3. Better manage other trades 4.
12/11/2015
As a standalone ‘signal’
Copyright © 2015 InvestiQuant
40
11-30-15 •
4:00pm EDT InvestiQuant’s Overnight Edges service had a buy signal (ES) anticipating a gap up for the next day with a 10 point ($500) target.
•
6:00pm EDT Swing Edges came out for the day with an even stronger edge than the Overnight Edge data.
•
This led Rob (IQ Co-founder) to only take partial profits at his 10 point target and let the rest ride based on the Swing Edge numbers.
•
12-1-15 The Swing Edge numbers came out and were weaker so Rob closed the trade locking in an additional 10 points for a total of 20 points ($1,000). Making more than enough for a 1 lot trader to pay for the year.
12/11/2015
Copyright © 2015 InvestiQuant
41
How Else Can IQ Swing Edges Be Used? 1.
Improve your swing trade selection
2.
Improve your swing trade timing
3.
Better manage other trades
4. As a standalone ‘signal’ 12/11/2015
Copyright © 2015 InvestiQuant
42
SPY: January, 2007 – September, 2015
Growth: Days in market: Max drawdown:
12/11/2015
+ 44% 3,160 - 52%
Copyright © 2015 InvestiQuant
43
Market Timing the SPY with IQ Swing Edges
Growth: Days in market: Max drawdown:
12/11/2015
+ 90.1% 548 - 7%
Copyright © 2015 InvestiQuant
44
Buy and Hold
12/11/2015
Copyright © 2015 InvestiQuant
Market Timing w/Swing Edges
45
You would have lost money ‘going long’ when the IQ Swing Guides were not supportive during the past 9 Bullish years 12/11/2015
Copyright © 2015 InvestiQuant
46
Summary Quantified, short-term edges can improve existing swing trading strategies: Better trade selection Better entry timing Better exit timing
Quantified edges made with ensembles (combinations of systems) provide more consistent forecasting information IQ Swing Edges can also be used on their own as ‘signals’
12/11/2015
Copyright © 2015 InvestiQuant
47
Subscription Info & Special Offer Monthly subscription: $47mth or annual subscription: $395/yr (save $169 per yr)
Subscribe by Tuesday, Dec 15 and: 1. Receive a free trial of the InvestiQuant Swing Navigator (Rob’s daily
analysis) through Dec 23. 2. Your 1st month will be extended through Jan 30!
Subscribe by December 15 and Trade Smarter. 12/11/2015
Copyright © 2015 InvestiQuant
48
View IQ Swing Edges & Navigator…
12/11/2015
Copyright © 2015 InvestiQuant
49
How to Order IQ Swing Edges
1 2 3 12/11/2015
Copyright © 2015 InvestiQuant
50
Scott Andrews Co-Founder & CEO 12/11/2015
Copyright © 2015 InvestiQuant
1
About InvestiQuant • Member owned (20 clients are investors in IQ) • Hundreds of members that have subscribed for 2+ years • 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 12/11/2015
Copyright © 2015 InvestiQuant
2
Objective Review a few swing trading strategies / techniques
Review their historical back-tested results See how quantified edges can improve them
Learn why IQ Swing Edges are unique & value-added See a demo of IQ Swing Edges & Navigator
12/11/2015
Copyright © 2015 InvestiQuant
3
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.
12/11/2015
Copyright © 2015 InvestiQuant
4
Simple, Long-Only, Swing Strategy:
“5 Day Low - 5 Day High”
12/11/2015
Copyright © 2015 InvestiQuant
5
A Look at a Trade from Entry to Exit
12/11/2015
Copyright © 2015 InvestiQuant
6
Blue Line Shows Entry to Exit 5 Day Closing High Signal is Triggered Sell On The Close
5 1
4
2 3
12/11/2015
Copyright © 2015 InvestiQuant
7
12/11/2015
Copyright © 2015 InvestiQuant
8
Here are the historical back-tested results:
12/11/2015
Copyright © 2015 InvestiQuant
9
What if we combine this “5 Day Low – High” strategy with a quantified, short-term edge to … improve trade selection & exit timing? 12/11/2015
Copyright © 2015 InvestiQuant
10
12/11/2015
Copyright © 2015 InvestiQuant
11
Fewer trades, fewer days exposed to the market, more total profits, & smaller losses. 12/11/2015
Copyright © 2015 InvestiQuant
12
5 Day Low-High
12/11/2015
Copyright © 2015 InvestiQuant
5 Day Low-High w/Quant Edge
13
Comparison With / Without 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. 12/11/2015
Copyright © 2015 InvestiQuant
14
Another Example…
Simple, Long-Only Strategy: “Seasonal 24th”
12/11/2015
Copyright © 2015 InvestiQuant
15
Rules: 1. Today is the first trading day AFTER the 24th of the month 2. Buy SPY at the open Tomorrow. 3. Exit at the close of the 1st trading day of the next month
Today
Buy Open
Sell Close 12/11/2015
Copyright © 2015 InvestiQuant
16
12/11/2015
Copyright © 2015 InvestiQuant
17
Results
12/11/2015
Copyright © 2015 InvestiQuant
18
What if we combine this “Seasonal 24th” strategy with a quantified, short-term edge to…
improve entry and exit timing? 12/11/2015
Copyright © 2015 InvestiQuant
19
Seasonal 24th System with Quantified Edge
12/11/2015
Copyright © 2015 InvestiQuant
20
Seasonal 24th
Seasonal 24th w/Quant Edge
High Water Mark
High Water Mark without Swing Edges
12/11/2015
Copyright © 2015 InvestiQuant
21
Seasonal 24th System with Quantified Edge
12/11/2015
Copyright © 2015 InvestiQuant
22
IQ Swing Edges Provide a Quantified Edge Trade Metric
Seasonal 24th Without IQ Swing Edges
With IQ Swing Edges
Difference
% Improvement
# of Trades
106
104
-2
+2%
# Days Invested
463
364
- 99
+21%
Net Profit
$25,610
$38,005
+$13,767
+48%
Average Trade
$241
$365
+$124
+51%
Max Intraday Drawdown
$21,117
$9,749
$11,368
+54%
Less exposure, much less drawdown, and substantially better profits. 12/11/2015
Copyright © 2015 InvestiQuant
23
You can also use quantified, short-term edges to confirm technical trades…
12/11/2015
Copyright © 2015 InvestiQuant
24
Confirming Technical Trades with a Quant Edge
?
12/11/2015
Copyright © 2015 InvestiQuant
25
Confirming Technical Trades with IQ Swing Edges
12/11/2015
Copyright © 2015 InvestiQuant
26
Confirming Technical Trades with IQ Swing Edges Technical setup with IQ Swing Edges Confirming led to a 5% gain in 3 days
Technical setup with IQ Swing Edges confirming led to a 5% gain in 3 days 12/11/2015
Copyright © 2015 InvestiQuant
27
What exactly is a
“Quantified, Short-Term Edge?”
12/11/2015
Copyright © 2015 InvestiQuant
28
A Quantified, Short-Term Edge is … … Confirmation that your trade signal is firing in a direction that has proven to be probable & profitable during similar market conditions historically. 12/11/2015
Copyright © 2015 InvestiQuant
29
But HOW?
12/11/2015
Copyright © 2015 InvestiQuant
30
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”
InvestiQuant uses strategy-specific “ensembles” (groups of systems) to identify & verify short-term edges. 12/11/2015
Copyright © 2015 InvestiQuant
31
Who would you trust to invest $10,000?
OR
One opinion or the average of many opinions? 12/11/2015
Copyright © 2015 InvestiQuant
32
Proven Swing Trading Concepts Acceleration
Momentum Seasonality
12/11/2015
Copyright © 2015 InvestiQuant
33
Acceleration 1.
12/11/2015
Acceleration: How FAST is the market moving and from where?
Copyright © 2015 InvestiQuant
34
Momentum 2.
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?
12/11/2015
Copyright © 2015 InvestiQuant
35
Seasonality 3.
Seasonality: What long & short-term CALENDAR forces are in play, and how has the market performed during similar periods in the past?
12/11/2015
Copyright © 2015 InvestiQuant
36
Each of these individual swing trading concepts can be statistically measured and quantified.
What if you combined them to create a single ‘edge’? 12/11/2015
Copyright © 2015 InvestiQuant
37
Introducing… IQ Swing Edges Historical odds of a 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 12/11/2015
Copyright © 2015 InvestiQuant
38
Example of IQ Swing Edge
12/11/2015
Copyright © 2015 InvestiQuant
39
How Else Can IQ Swing Edges Be Used? 1.
Improve your swing trade selection
2.
Improve your swing trade timing
3. Better manage other trades 4.
12/11/2015
As a standalone ‘signal’
Copyright © 2015 InvestiQuant
40
11-30-15 •
4:00pm EDT InvestiQuant’s Overnight Edges service had a buy signal (ES) anticipating a gap up for the next day with a 10 point ($500) target.
•
6:00pm EDT Swing Edges came out for the day with an even stronger edge than the Overnight Edge data.
•
This led Rob (IQ Co-founder) to only take partial profits at his 10 point target and let the rest ride based on the Swing Edge numbers.
•
12-1-15 The Swing Edge numbers came out and were weaker so Rob closed the trade locking in an additional 10 points for a total of 20 points ($1,000). Making more than enough for a 1 lot trader to pay for the year.
12/11/2015
Copyright © 2015 InvestiQuant
41
How Else Can IQ Swing Edges Be Used? 1.
Improve your swing trade selection
2.
Improve your swing trade timing
3.
Better manage other trades
4. As a standalone ‘signal’ 12/11/2015
Copyright © 2015 InvestiQuant
42
SPY: January, 2007 – September, 2015
Growth: Days in market: Max drawdown:
12/11/2015
+ 44% 3,160 - 52%
Copyright © 2015 InvestiQuant
43
Market Timing the SPY with IQ Swing Edges
Growth: Days in market: Max drawdown:
12/11/2015
+ 90.1% 548 - 7%
Copyright © 2015 InvestiQuant
44
Buy and Hold
12/11/2015
Copyright © 2015 InvestiQuant
Market Timing w/Swing Edges
45
You would have lost money ‘going long’ when the IQ Swing Guides were not supportive during the past 9 Bullish years 12/11/2015
Copyright © 2015 InvestiQuant
46
Summary Quantified, short-term edges can improve existing swing trading strategies: Better trade selection Better entry timing Better exit timing
Quantified edges made with ensembles (combinations of systems) provide more consistent forecasting information IQ Swing Edges can also be used on their own as ‘signals’
12/11/2015
Copyright © 2015 InvestiQuant
47
Subscription Info & Special Offer Monthly subscription: $47mth or annual subscription: $395/yr (save $169 per yr)
Subscribe by Tuesday, Dec 15 and: 1. Receive a free trial of the InvestiQuant Swing Navigator (Rob’s daily
analysis) through Dec 23. 2. Your 1st month will be extended through Jan 30!
Subscribe by December 15 and Trade Smarter. 12/11/2015
Copyright © 2015 InvestiQuant
48
View IQ Swing Edges & Navigator…
12/11/2015
Copyright © 2015 InvestiQuant
49
How to Order IQ Swing Edges
1 2 3 12/11/2015
Copyright © 2015 InvestiQuant
50
