In my previous post I introduced the main concept I use to simulate the portfolio of strategies. In this post I will illustrate the mechanics of this approach.We will use a simple portfolio of 3 strategies that are described in this blog: WTAA, MEOM and DVI strategies. We will use Amibroker 5 steps to get to the result.
An important element in my vision on running my personal trading business is to diversify across multiple strategies. So far I have been focusing on development, running, automating & monitoring individual trading strategies however I am turning my attention now to simulating the effect of running several strategies next to another.
Today’s post is a follow up of my previous post Looking at Correlation. In the first post I looked at correlation of the 7 ETFs that are used in the WTAA strategy that is one of the featured strategies of this blog. I provided Amibroker code to create a correlation table and code to create a correlation indicator.
In this post I will be exploring the correlation between the 3 strategies described in the blog: WTAA, MEOM and DVI strategy.
A post that has been on my to-do list for some time is analysis of the MSR indicator in a trading strategy. It is the follow up post of my implementation of the MSR indicator with my self-built Median() function in a dll for amibroker.
The analysis is built up in 4 steps:
1. Application of the MSR indicator to my broad universe of 25 ETF’s
2. Application of the MSR indicator a portfolio of the 25 ETF’s
3. Comparison of the MSR indicator as trend filter with other filters
The post is rounded up with the Amibroker code – QD –
This is a short follow up of yesterday’s post. A reader asked what it would look like to short the Short/Mid/Long term Bond ETFs at the end of the month. I have made a quick model to simulate this and here are the results. Not too fancy I am afraid. Changing the exit day day … Read more
Most of my systems tend to be market-timing strategies. That is, they enter the market and usually exit within a couple of days. This has the benefit of having limited exposure in the market and during non-trading periods the capital can be used for alternative strategies/investments. However, I have noticed that even when running several strategies, I am in cash a significant moment of the time.
My main worry is that during those periods, I do not generate a return on my capital. Yes, theoretically one could be getting some interest on their savings account, however as I need my cash to be ready-to-go-in at all times, I need to keep it at my IB account. And IB does not give interest on this account. So I started to play around with the thought of moving into a low risk asset class as an alternative to moving money into a savings account (which in reality I am not able to do – it takes two days to transfer money from IB to my Dutch savings account and another 2 days to get it back).
Having a preference for trading ETF’s, I ended up with the idea to go long in a fixed income ETF during the times that my strategy is in cash. The ETF’s that I have selected are SHY (iShares Lehman 1-3 Year Treas.Bond), IEF (iShares Lehman 7-10 Yr Treas. Bond) and TLT (iShares Barclays 20+ Yr Treas.Bond).
Inspired by the series on Tactical Asset Allocation by Michael Stokes, I have run some tests to include Gold (GLD) as an extra asset-class in the strategy. This brings the selected ETFs to a total of 7: EEM, EFA, GSG, IEF, SPY, VNQ, GLD. The code of the original model has not changed. Below is … Read more
The 3rd strategy that I will be tracking in this Blog is the DVI strategy as described and reviewed in post1 and post2. The strategy trades a universe of 26 ETF’s. The signals of this system are generated daily. At the moment my semi-auto setup does not yet allow for daily uploading to my blog. I … Read more
In the second post on the DVI system, I will explore some effects on portfolio trading this strategy. In the table below I have summarised the performance results of the various stages of the system as well as the top 3 performers of the DVI system as I left it in the earlier post.
I like this strategy as it has been constructed based on simple rules, it works across a broad set of different trading instruments and it has shown a decent performance in the period 1/1/2003 – 1/8 2010 without optimizing the parameters. So what would be my way to trade this strategy? Would I invest in the best performing instruments or in the top 3 or …? In trying to answer these questions, my view is that we are stepping into the domain of strategical asset allocation and portfolio management. In an earlier post I emptied my head on these subjects and decided to start trying out some stuff. So here goes my first experiment.
In the first post of the DVI series, we concluded with a simple system that performed pretty well in a 26 diverse ETF universe. In the past I have found more strategies with similar or performances, and then the real challenge (and fun) for me starts. How do we trade this strategy? To further pounder … Read more