Ok, here it is. THE HOLY GRAIL. My work is done. I can retire. It doesn't get much better than this. You're only in the market 6 or 8 days a month, so your exposure to low flying Black Swans in minimal. And, you don't need a stop. And, you don't even need a computer. . .a calender will work just fine.
The trade concept is based on carry over momentum at the end of month and was inspired by an article by Thom Hartle in this month's (Sept) ACTIVE TRADER magazine in which he explored tactics to optimize returns of the best performing ETFs at the EOM. Being the tweaker I am, I completely ignored his extensive statistical analysis and simply added a conditional MA support/resistance confirmation for the trigger. . . which improves performance dramatically.
Simple is as simple does for me, and being basically lazy, I just want to play this thing on my beloved IWM and Qs.
Feel free to run it on other ETFs and indices and post the results to the comments.
The system simply buys on the 28th day of the month if the close is above the 15 DSMA and sells 6 days later. . .OR the system sells short on the 26th day of the month if the DSMA is above 13 and then sells 8 days later.
I've highlighted the "above" criterion because this is where the twisted logic of the market comes in. You'd expect that to read "below", reflecting the prospect of selling weakness, but it doesn't work out that way. If you change the signal from > to < you still get 100% success, but leave $1000 on the table. Here's a case where selling strength works best for the Shorts.
Inputs: Len1(15), Len2(6), Len3(13), Len4(8);
If DayofMonth(Date)= 28 and Close > Average(Close,Len1)
Then Buy This Bar at Close;
If BarsSinceEntry = Len2
Then Exitlong This Bar at Close;
If DayofMonth(Date)= 26 and Close > Average(Close,Len3)
Then Sell This Bar at Close;
If BarsSinceEntry = Len4
Then ExitShort This Bar at Close;