Quantified Strategies

ADX Trading Strategy (Average Directional Movement Index Indicator) – Statistics, Facts And Historical Backtests! There are many ways to use the ADX in trading strategies. Our research and backtests indicate the ADX indicator is somewhat useful on its own but adds great value used alongside other indicators when you build trading strategies. In this post, we look at how the Average Directional Movement performs alongside other indicators, and we test some ADX trading strategies. We start with a crossover strategy based on the positive and negative directional indicators: * If the DI+ crosses over the DI-, go long. * If the DI+ crosses below DI-, exit the position. The equity curve ends up as shown below on the S&P 500 (no commissions and slippage). Can the strategy be improved or made different? If you have any suggestions, please comment 👇 #tradingstrategies #ADXStrategy #TechnicalAnalysis #TradingIndicators #StockMarketStrategy #DirectionalMovement #BacktestingResults

200 Day Moving Average Trading Strategy – (backtest and indicator) The main advantages of the 200-day moving average are simplicity, riding the trend, and playing defense. However, without a recession and falling prices, you are unlikely to beat buy-and-hold because of the many whipsaws. As with most things in life, the 200-day moving average comes with both pros and cons. The 200-day moving average strategy is no silver bullet. We backtest the following trading rules: Buy when the close of the S&P 500 crosses above the 200-day average, Sell when it closes below the average. This is a crossover system. It can't get any simpler than that! Here is the return (log chart shown below) of investing 100 000 in 1960 and reinvesting and compounding until today. Want to learn more about the strategy? Check comment 👇 #tradingstrategies #MovingAverage #TradingStrategy #StockMarketAnalysis #TechnicalIndicators #SMA200 #Backtesting

Monthly Momentum Strategy (ETF Sector Rotation Strategy In EEM, SPY, And TLT) In this short post, we give an example of a very easy and simple ETF rotation strategy among SPY (S&P 500), TLT (Treasury bonds), and EEM (MSCI Emerging Markets) that has worked pretty well over the last two decades. It has beaten “buy and hold” with lower drawdowns. That was until 2022, which was a very bad year for the strategy. We backtest the following trading rules: It's based on monthly quotes in the ETFs SPY, EEM, and TLT. Every month rank them based on last month's performance and go long the best performing ETF. Hold for one month and repeat (or continue being long the same instrument). Without slippage and taxes the equity curves look like as shown below. Want to learn more about the strategy? Check comment 👇 #TradingStrategies #StockMarket #MomentumTrading #ETFInvesting #FinancialMarkets #TechnicalAnalysis

Monthly Momentum in S&P 500 and Treasury Bonds (Bond Rotation Strategy in SPY and TLT) The SPY and TLT rotation trading strategy might work well because TLT often works as a safe haven when the stock market is weak. Below you find the logic and code for this simple SPY and TLT momentum/rotation strategy. The drawdown is low but the total return is better than “buy and hold”. We backtest the following trading rules: It’s based on monthly quotes in the ETFs SPY and TLT. Every month rank both based on last month’s performance/momentum. Go long the one with the best performance the prior month. Hold for one month and repeat (or continue being long the same instrument). The rules are simple. Obviously, this strategy is best performed in a tax-deferred account, but without slippage and taxes, the equity curves look like as shown below from 2003 until today. Want to learn more about the strategy? Check comment 👇 #tradingstrategies #MomentumStrategy #ETFTrading #StockMarket #BondMarket #InvestmentStrategy #Backtesting

All-Time High Trading Strategy For Stocks (Frequency) The S&P 500 spent less than a tenth of its time at all-time highs since 1950. The average number of all-time highs per year is almost 21. But despite this, it has produced decent returns for investors. We backtest the following trading rules: We buy the S&P 500 when it is less than 5% away from its all-time high We sell when it falls more than 5% from its all-time high We backtested the strategy in the S&P 500. The data is daily and not adjusted for dividends. The equity curve of the strategy is shown below. Want to learn more about the strategy? Check comment 👇 #tradingstrategies #TradingStrategy #StockMarket #TechnicalAnalysis #MarketTrends #Investing #Backtesting

Dual Momentum Trading Strategy (Gary Antonacci) – Video, Rules, Setup, Backtest Analysis The dual momentum trading strategy by Gary Antonacci is a method of investing that selects only assets that have outperformed their peers over a given time and also making positive returns. It is based on the idea that an asset with a superior relative momentum and a positive absolute momentum would continue to perform until another outperforms it. Thus, it is a sort of trend strategy. Let’s make a backtest of Antonacci’s dual momentum strategy. The trading rules are like this: * Did S&P 500 outperform US Treasury Bills over the last 12 months? * If the answer is no, then buy US Treasury Bills. * If the answer is yes, did S&P 500 outperform the world index (ex. USA) over the last 12 months? * If S&P 500 outperformed the world index, then buy S&P 500. * If S&P 500 underperformed the world index, then buy the world index (global stocks). For the backtest above, we used the following ETFs: SPY for S&P 500, EFA for global stocks (world index ex. USA), and AGG for Treasury Bills (not an optimal proxy, but serves our purpose). Dividends are included and reinvested. The equity curve of the strategy looks like the image shown below. Want to learn more about the strategy? Check comment 👇 #TradingStrategies #StockMarket #TechnicalAnalysis #InvestmentStrategy #FinancialMarkets #MarketTrends

S&P 500 Momentum Strategy – As Simple As It Gets (Rules, Setup and Backtest Results) A momentum strategy for the S&P 500 works. We use monthly bars and a simple moving average strategy crossover system. We backtest the following trading rules: * When the close of the current month crosses above the 12-month simple moving average, we go long. * When the close of the current month crosses below the 12-month simple moving average, we sell (and stay in cash until we get a buy signal). This is it – two simple rules. You can also enter at the open of the following month after a signal. Want to learn more about the strategy? Check comment 👇 #tradingstrategies #MomentumTrading #SP500 #StockMarket #TradingStrategy #Investment #Backtesting

Lumber/Gold Ratio Trading Strategy For Stocks And Bonds (Rules, Backtest, Performance) In May 2015, Micheal A. Gayed published a paper called Lumber: Worth Its Weight in Gold Offense and Defense in Active Portfolio Management (free download at SSRN). We used that paper to make a profitable lumber/gold ratio trading strategy for stocks and bonds. Gayed explained it like this: Lumber futures are often overlooked as a leading indicator of economic growth, but they may be just as important as industrial metals like copper. We changed Gayed’s trading rules, and we did the following: * Make a lumber/gold ratio; * When the ratio is higher than the month before, we go long S&P 500 (SPY); * When the ratio is lower than the month earlier, we go long bonds (TLT). When we coded the trading rules in Amibroker, we got the equity curve shown below. Want to learn more about the strategy? Check comment 👇 #tradingstrategies #TradingStrategy #Gold #SP500 #Bonds #MarketAnalysis #Backtesting

Rotation Strategy In S&P 500 And Gold (SPY & GLD) When the S&P 500 and gold ratio is above its moving average, ie. when stocks are performing better than gold, we are long S&P 500 the coming month. When the ratio falls below the moving average we switch to gold. Pretty simple, but as it turns out, it works pretty well. We backtested the following the following trading rules: If the SP 500 and gold ratio (SP 500 divided by the gold price) is above its 20-month simple moving average, we are long the SP 500 from the close of the month until next month's close. If at next month's close the SP 500 and gold ratio is below its moving average, we sell the SP 500 and buy gold for the next month. Rinse and repeat at the close of every month. We tested from 1985 until July 2020. Below is the equity chart showing the strategy compared to buy and hold for both the S&P 500 and the gold price. Want to learn more about the strategy? Check comment 👇 #tradingstrategies #TradingStrategy #SP500 #Gold #MarketRotation #InvestmentStrategy #Backtesting

Weekly Rotating System Between S&P 500 And Utilities (SPY And XLU) The strategy consists of a weekly rotation system between the SPY and XLU based on the past performance of each one. It has outperformed the market since 1926, but the best years seem to have been before the paper was published. We backtest the following trading rules: * When the S&P 500 is outperforming utilities over the last 4 weeks, buy SPY. * When the S&P 500 is underperforming utilities over the last 4 weeks, buy XLU. * Re-evaluate/rebalance weekly. We backtested it from 1999, and the data is adjusted for dividends and splits. The equity curve looks like the image shown below. Can the strategy be improved or made different? If you have any suggestions, please comment 👇 #tradingstrategies #TradingStrategy #StockMarket #SP500 #Utilities #PortfolioManagement #Backtesting