Friday, August 21, 2009

Double 3s and the IWM

This is a continuation of my earlier post on the Double 3s for the Qs.
In this case I've applied the system to the IWM for our demonstration backtest period..
.....A little aside here.....
About 10 years ago when I first got into systems trading INTC use to be the poster child for technical alignment. (also see CSS Analytics). TradeStation used INTC heavily to promote the "reliability' of their systems and to demonstrate how easy is was to make money using simple algorithms. Times have changed. And I personally find IWM to be a superior index for testing trading concepts in lieu of the DIA, SPY , Qs and any individual stocks. So, the next logical question is.."Why not just trade the IWM?"
The answer is that the Qs offer certain features that I prefer and I actually find it easier to make money with the Qs than the IWM. That doesn't mean I ignore the IWM. In fact, I watch it with the same 2 minute scrutiny that I watch the Qs and I'll explain why and in future posts.
For the time being, an application of the Double 3s yields a respectable equity curve. I've used a 6 period fixed bar exit BUT, and this is a big but, there is no "MarketPosition=0" in the code so the system will stop and reverse if a contrary signal fires ahead of the 6 day fixed exit. The net result is that the average number of bars for winners is only 2. The other net result is that this is a very active system with 201 days in 29 months, or about 1 trade every 6.5 days.
As mentioned in the original 3x3 post one thing I look for is the max consecutive losers both long and short, and this system generates some acceptable returns.
The max intraday drawdown is twice as stiff for the longs and the shorts, possibly reflected the short bias for most of the test period and the tendency of the market to drop faster than it rises.
The trade breakdown shown below shows that a simple stop loss of $200 could improve net return and cull out the losing outliers.
Keep in mind that this version of the double 3s is a work in progress and just part of a larger trading concept that I've been exploring since May of 2008, that is, using a small basket of systems to trade a small basket of ETFs.
And while the post may generate as many questions and answers. . . to me that's what its all about.


Tom said...

hey bzb, what's the $ amount per trade on the system? thanks!

bzbtrader said...

All system reports are based on 100share positions, unless noted otherwise. This is found lon the Perfromance Report under "Max # Contracts Held" =100.