Wednesday, May 13, 2009

Qs 3 Finger Update

This is an update to the previously posted Qs 3 finger lead system. (3FL).
The original system was posted back in Feb 09, when the market was in the beginning of a solid bear run. This time around we're looking at the system from the hindsight of an almost 3 month bull run. The total lookback period remains a floating 16 months.
As such, optimized input settings for the Qs are now 26,12,10,10, a variation from the initial inputs of 30,8,10,8, but still well within range as I optimize in increments of 2, not 1.
The system continues to generate a respectable equity curve with a very attractive consecutive winners:losers ratio -- 4:1 and a very tolerable maximum intraday drawdown.
Also, as with the original posting, testing various 3 finger components candidates still yields RIMM, AAPL and GOOG as the best fit for forecasting the Qs.
As with the original posting, pyramiding is not turned on. This is for the purpose of limiting capital exposure to a single position, as opposed to scaling in to a larger commitment.
I'm continuing to work on variations of the Qs 3FL including fractal versions using 2, 10 and 30 minute bars in order to increase trade frequency and, consequently, net gains.
Since I know someone is going to ask, below is the Qs 3FL with pyramiding turned on (think piling on or scaling in). The system maximizes at a 500 share position, not 100 as with the original.
Total number of trades is almost tripled and net returns are enhanced about 50%.
Performance metrics for the pyramiding version prove to be resilient and respectable (IMHO).

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