Tuesday, September 01, 2009

Qs Month End Tickler

And now, . . .for something completely different. Many traders have a suspicion that just buying the last day of the month and holding for x number of days could be a successful short term trading strategy.
There have been a number of approaches to test to theory and here's one applied to the Qs using a simple moving average entry filter.
The first comment to come back to me will probably suggest using the exponential MA in lieu of the simple, and at first glance that seems like a logical odds enhancer. Unfortunately, that's not the case. The SMA provides considerably better results than the XMA.
Personally, I like the odds here. Max intraday drawdown is quite low on a 100 share position and the MAX consecutive losers, both long and short, is only 1!.
I've only backtesting for 28 months and within that time frame the system has generated 18 signals. There are a number of alternative entry filters that might be considered and I'll leave that to my ever-inquisitive readers. Ditto on the exits. It may make sense to apply a little trailing stop, but this simple system has some clear possibilities for short term exposure with good odds for a respectable payoff.

TS2000i code is shown below with the optimized inputs for the Qs. If you're considering using this in conjunction with other ETFs, indices, etc. I highly recommend re-optimizing for those positions as the underlying beta will likely effect the MA settings.

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