Friday, February 06, 2009

More QQQQ 3 Finger Setups

Here are the results for yesterday's Qs 3 finger reverse (short only) system using the same settings (54,16,12,10) but with pyramiding turned off. This change reduces the capital requirements considerably at the sacrifice of more than 50% of the net gain. Comparing yesterday's breakdown with this one, an alternate strategy would simply be to double your initial entry position size, which would yield comparable results to a pyramid approach.

Below, on the opposite side of the coin is the 3 finger lead (3FL)system, included in the BZB Dirty Dozen and reflecting long only trades. The test results of the system for the Qs are clearly less impressive than the 3 finger reverse, probably reflecting the overall downtrend of the market during the test period and the resultant lack of upside trade opportunities during this time frame. This suspicion is confirmed by the optimized 3FL backtest, which yields settings of (30,8,10,8). The look back period has been compressed from 54 days for the short side only 3 finger reverse trades to a 30 day look back in order to capture profitable trades.
Above is the test study with pyramiding turned off, below is the study with pyramiding turned on. Once again, an alternate risk management approach is simply to double initial entry position size to capture more gains in lieu of trading the pyramiding model which requires more capital.


Margin of Safety said...

Mate, I always enjoy reading your post and also started using your strategy. Sometime I feel index etf move is very small % comparing with sector ETFs or individual stocks. Any reason why you only trade QQQQ?

bzbtrader said...

I favor the Qs because of the options breadth and penny spreads, plus I've watched them for years and kinda understand how they move. I also trade MSFT, GE, IWM, XLE and XLF sometimes, depending on what's going on with the markets at any given time. The Qs however, are my workhorse, as they respond so well to the pivots and NYAD.
Hope that helps.