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Feed back on Trading Startegy
I have been working for a few weeks on a new trading strategy.
The strategy is based on monthly closing of QQQ.
It is based mostly on a bok I read, their strategy uses monthly closes of SPY's and ATR.
I added some signals: crossing of lower BB 12,3 , combination of WRSI, Full Stochastics and MACD, and $NAA200R crossing from below.
Entries=All entries were based on monthly closing price
1-$NAA200R crossing the 20 line from below
2-QQQ closing above mid BB.
3- 3 Oscillators signaling by crossing their oversold band from below
Exits & shorting=All exits were based on monthly closing price, ending short trades was a times based on stop losses being hit, subsequent reversal into a long trade was based on monthly closing price.
IGNORE ALL EXIT SIGNALS IF ATR FLAT OR DOWN, EXIT ONLY IF ATR IS UP
1-QQQ closing below mid BB
2-3 oscillators crossing oversold line from above, shorts always with stop loss(not waiting until months end.
I backtested the strategy from 2002 to 12/201startin with an original 100$ investment, I did it multiple times.
The math was very tricky. I got at different results, but they were all good, ranging from the 100$ becoming 500$ to 1100$.
The best results were with the strategy described above (prior strategies did not have stop losses for short trades,
I backtested in real time (I started at the end of 2002 and added 1 week at a time so I would not know what came ahead.
The results were:
100$ in 11/2002 became 1145$ in 12/2018(trading long and short.
There were 10 total trades: 7 winning and 3 losers.All 5 long trades were winners, of the 5 short trades 2 were winners and 3 were losers.
Investin on QQQ's in 11/2002 and holing until 12/2018 100$ became 530$
Long trades only 100$ became 889$
Best long trade 87.59% 11/2002-12/2007
Short trades only 100$ became 129$, most short trades were loses less than 15%, but some of the successful ones were massive ( 2007-008).
Best short trade 37.97% from 12/2007-04/2009
As you can imagne this being a trend following strategy gave great results in bulls & bears, but not great in sideways markets.
I have never developed a technical trading strategy before, I would greatly appreciate feedback.
Thanks in advance
I do have questions and a comment.
Did you determine the signals - like the indicator crossovers - occurred by visual inspection of the chart, or did you run a scan of the criteria for each month end closing price?
If you used visual inspection, were the crossovers all co-incident in the same month, or had some crossovers occurred in recent prior months?
When you say, exit only when ATR is up, does "up" mean that ATR ticked up for that month, or ATR subjectively looks like it is trending up?
What I'm getting at is, could there have been some unconscious subjectivity in selecting entries and exits? If you ran scans to determine signals, that should be reliable, but visual inspection would raise the question of interpretation in real time - when money is on the line, would you make the same interpretation?
Another question comes to mind about curve-fitting. Were the indicator choices and their parameters chosen after looking at ALL the data? If so, it may be that the choices are valid only for the period studied, and may not work in the future. One way to test that, if you have access to the data, would be to run the system again against older data, say 1970-1990, or 1950-1970.
Also a comment about holding periods. It seems trades are very infrequent. As a practical matter, if you have important money on this system, would you have the confidence to hold through periods of under-performance or drawdowns? (I don't see that you mentioned drawdowns in your statistics - i.e., length of time you would have been holding a loss, and what per cent.)
Great work. Thanks for sharing!