Big Moves On Mondays – Update
In 2013 I wrote an article about big moves on mondays. Here is a twist (and update) on this:
- Calculate a 25 day average of (h-l)/c
- Today is monday
- Close today must be at least lower than (from friday) 0.25 of average in number 1
- (c-l)/(h-l), the so called IBS, must be lower than 0.3
- If conditions in 2, 3 and 4 are met, go long on close
- Exit on fridays close
A simple strategy and here is the results for SPY from 2005 until now (in accumulated %):
91 fills in total, 61 winners and average of 1.07% per trade. Of course, all trades not including commission nor taxes. Pink line is result when conditions are complete opposite.
A remarkably well-timed article!
Yes, I hope more people are in 🙂
Great to see a post again! How about a recap-post of your previous trading results?
Hi, thanks. I mainly spend my time on long term investments now. Daytrading just to pay my bread and butter.
Oddmund,
Is your formula (h-l)/c correct?
That does not seem to make sense.
Thanks for checking.
It’s just to have a number for relative volatility.
Hi Oddmund,
Looking at SPY from Jan 2005 to Feb 2016, it rose in value approximately 99%. By comparison, this algorithm’s performance when trading SPY, only returns ~93% (excluding commission and tax). It seems this algo often under performs vs. the ETF or stock it is trading meaning the better move is often to just make long term investments on the target securities and then wait it out (especially when you do factor in taxes and commission).
In what cases is this algorithm better than just going long on your target?
Results from my own implementation: http://imgur.com/vzQk8xs
I don’t know how much does a risk free asset, like a government bond, pays in the US, but in Brazil, if this strategy works for Ibovespa (São Paulo Stock Exchange’s Index), it could make sense even if Ibovespa over performs the strategy. Because since you won’t be holding the security all the time (because of the conditions to enter the trade), when your money is in hand, it will be invested in such a bond, monetizing gains that you wouldn’t have if it was all invested in your long position on the security. So, your gains will be the strategy gains PLUS the gains you will have when NOT holding a long position on the security. At this moment, government bonds in Brazil pay 14.13% per year! Even if you consider inflation, Brazil has a real interest of 4-5% a year!
Yes, you are right, but drawdown is much bigger by holding. Commission should be very small, but of course taxes is another issue. It’s about risk, in my opinion. Because drawdown is so much lower, perhaps using gearing might be appropriate, but I’m not recommending anything.
Thanks for sharing, Oddmund.
I applied the rules on the S&P E-mini and Dow E-mini (since 2007).
The performance gets even better for IBS < 0.5
Hi,
I don’t understand point 2. Are you comparing closing price with (h-l)/c ?
so is it c < 0.25 [(h-l)/c]_{ma25 @ friday} ?
Assume 25 day average of (h-l)/c is 1%. Then SPY must fall 25% of that, ie 0.25%.
Concerning the post from Jay A.
Does this stragie really underperform? I don’t know. I’m still working on a backtest…
How do you made your backtest? Fixed number of shares? Or in % depending on your equity?
Maybe today or tomorrow I can finish a backtest. I’ll have a look to the loosing positions… Maybe there is some potential with adding a stop… maybe a huge range “panic stop” will be enough?…
Only some thoughts from my side 🙂
Hi, fixed number of shares.
Close today must be at least lower than (from friday) 0.25 of average in number 1
could not understand this sentence
is it close(Monday)< close(prev Friday) after that could not understand, could you convert
Hi,
If (H-L) average is 1.5%, then SPY must fall at least 0.25 of that, ie. 0.375% (from close friday to close monday).