Tuesday, August 04, 2009

LAZY B Trading the Qs

Michael Stokes had an interesting post the other day regarding the use of a 5-10-20 EMA crossover timing model to follow the Nasdaq trend (long only).
Being the inveterate tinkerer that I am, I utilized a similar concept using the cross and confirmation of linear regression slopes to see how well they tracked the Qs trend.
Turns out they track it pretty well.
I use somewhat different settings for the long and the short side because the short side tends to be more volatile and hence reflects a shorter time frame to complete.
There's not a lot of trades here. . . 6 in 4 years and the time in the trades is off the scale for my normal comfort level. . . 110 days for the longs, 200 days for the shorts but, what's truly amazing to me is the piddling drawdown that this system incurs considering the length of the exposure.

Equity curve shown above, reflecting the relative gain in each of the trades.
Not a loser in the bunch.
Not sure I'm ready to bet the farm on this simple timing model, but certainly worthy of further exploration for smaller time frames and the application of various filters to increase trade frequency and, hopefully, net return.
Below is the TradeStation 2000i code.
TS users with versions 8.3 and above know the BUY/SELL and EXIT command language requires minor modification to run properly.


Toptick said...

Hi: I might be misunderstanding the code, but it looks like it depends on both of the faster LR slopes crossing above or below the slower (longer ) LR slope value _on the same day_, even though they both may be above or below the slower LR a number of times between trades. Is that what you intended?

MS clarified his 5-10-20 as going long when the both faster averages moved above the slower and going flat when they both went below.

Depending on the both to cross on the same day seems like it introduces a lot of noise compared to the underlying idea of trend recognition.


bzbtrader said...

Good observation! I'll show the chart of the trades and the accompanying LR signals in another blog post within a day or so.
Thanks for the critique.

old crow said...

On SSPro load SmMA8 -2, EMA8 -3 and SmMA 15 on 1 minute charts, Look real careful at the crosses
for living in the under 3 minute world for the scalp guys, Schwab Boyz at Expo were talking of possible autotrade setup later
like TStation and ESignal as software program develops//crow

bzbtrader said...

Old Crow,
NICE SETUP! I use a 3,7,14 SMA setup on the 1,2,5,10 minute but this looks it might even be cleaner. Of course I'll have to tweak it for the Qs, but your sharing is greatly appreciated. I use lead the local SoCal Schwab active trader group, but the demise of Cybertrader lost quite a few members and others have scattered to Vegas and parts North. Interested to hear more about any East Coast group.