Weekly Breakout Strategy For QQQ ETF

[quanttraderx]

A simple breakout system to trade the QQQ ETF that uses only one indicator.

Trade Plan:
Instruments – QQQ.
Trading style – Long momentum.
Time-frame – Weekly.
Entry – Simple breakout.
Exits – Initial stop loss and trailing stop.

Trading Rules:
Legend:
DCUp := Donchian Channels upper band (Length 3).
DCLow := Donchian Channels lower band (Length 4).
IntStp := Initial Stop Loss set at 4% below entry price.

Entry Rules:
1. Place a buy stop at the DCUp Price.
2. If buy stop is filled, place the IntStp.
3. However, if orders are not filled, cancel orders at close of the Friday's trading session.

Exit Rules:
1. At the close of Friday's trading session, if the DCLow is above the IntStp, than adjust stop loss to the DCLow price.
2. However, If IntStp is above the DCLow, then use the IntStp.

Back Test Results:
Starting Capital - $10,000
Slippage and Commissions - $10 per side
Compound Returns - No
Test History -12/01/1990 to 18/09/2020

 

[tech/a]

Hi Quant
lots to comment on but lack in time

the clear obvious is the very low sharp ratio
really need over 2
651 days of Flat hard to deal with
not a lot of difference to QQQ itself so
I can’t seen an edge.

 

[quanttraderx]

Thanks for your feed back.

Yes, it's not the best system out there but an alternative strategy to a buy and hold.
It's edge comes from lower draw downs during bear markets compared to buy and hold.
Being a long only system the flat periods can be quite long.

The strategy frame work can be a starting point which can improved but having multiple exit rules.

I trade a refined version of this strategy on multiple instruments.

 

[tech/a]

Do you have anything with a + 2 sharp ratio ?

 

[quanttraderx]

No, I don't.

Most system around 1.

 

[tech/a]

Just had a quick look for something on Shape ratios that
would be helpful

found this saves me a heap of time

Your Sharpe Ratio Is Low For The Same Reasons You're Bad At Golf

Many individual investors aren't familiar with Sharpe ratios. However, the Sharpe ratio is a useful and intuitive tool to measure portfolio performance.

seekingalpha.com

 

[Warr87]

nice link tech. personally my strategies are usually around 0.4-0.6. Considering the returns are still good (my MAP strat is 46% CAR with 0.6sharpe), I've never paid too much attention to sharpe. Even with some other things I am testing at the moment have 0.7sharpe at most but far outstriping the buy/hold comparison.

 

[qldfrog]

never cared much but quick look and get 0.3 lowest others 0.98 to 1 on the systems traded
Thanks for the link, quite instructive @tech/a

 

[CNHTractor]

Do you have anything with a + 2 sharp ratio ?

Looking through my systems, they are all trading around the 0.5 mark. WTH!

 

[tech/a]

The point is that pretty well everyone can design a system with a low Sharp
it’s those rare systems that deliver better.
Techtrader had .57
Flipper closer to 1
Bollinger band system similar.

See the systems are all longer term and these sort of Sharp Ratios
are to be expected.
when trading far more frequently you can develop systems with much
better ratios.
Add short and long for even more frequency
Now your talking.

 

[CNHTractor]

Sharpe Ratio of trades - Measure of risk adjusted return of investment. Above 1.0 is good, more than 2.0 is very good. More information http://www.stanford.edu/~wfsharpe/art/sr/sr.htm . Calculation: first average percentage return and standard deviation of returns is calculated. Then these two figures are annualized by multipling them by ratio (NumberOfBarsPerYear)/(AvgNumberOfBarsPerTrade). Then the risk free rate of return is subtracted (currently hard-coded 5) from annualized average return and then divided by annualized standard deviation of returns.

Given that the risk free rate of return is no where near 5, then i guess the Sharpe ratio showing on Amibroker backtest reports are not accurate.

Interesting topic

 

[Warr87]

i was curious so did a quick search. i know sortino ratio is considered a better measure. i also came across the Ulcer Index which i see in my BT results but never really understood. that may be a better measure of risk (apparently below 5 is good safety risk, above 5 is riskier)

 

[Warr87]

Given that the risk free rate of return is no where near 5, then i guess the Sharpe ratio showing on Amibroker backtest reports are not accurate.

Interesting topic

i adjusted my risk free rate in settings (to 2% to be generous) and it only went from 0.61 to 0.65

 

[tech/a]

i was curious so did a quick search. i know sortino ratio is considered a better measure. i also came across the Ulcer Index which i see in my BT results but never really understood. that may be a better measure of risk (apparently below 5 is good safety risk, above 5 is riskier)

yes i certainly agree that there are far better ways to measure performance

 

[Newt]

i was curious so did a quick search. i know sortino ratio is considered a better measure. i also came across the Ulcer Index which i see in my BT results but never really understood. that may be a better measure of risk (apparently below 5 is good safety risk, above 5 is riskier)

Yes, Ulcer index is effectively looking only at downside (DD) volatility, while Sharpe is Standard deviation of all price moves (up and downside volatility). Probably benefit in looking at both.

Everyone likes upside CAR, but systems with less DD risk definitely less psychologically challenging to trade longer term.

 

[imaxhighsky]

yes i certainly agree that there are far better ways to measure performance

Could you please tell us which metric is better than Sharpe ? (using Amibroker).

thanks in advance !

 

[tech/a]

Could you please tell us which metric is better than Sharpe ? (using Amibroker).

thanks in advance !

Not familiar with everything Amibroker can do as I dont use it for systems tests.

I use outside sources who dont use Amibroker .
But Sharpe is a good all round ratio --- sort of one fits all.
There are 100s of different ratio measures.

But first thing you need to find out is what it is that you wish to measure in your data set.

Sortino Ratio maybe something of interest same as Sharpe but only counts Downside when calculating Variance
Good to compare as Sharpe looks at upside and Down side volatility and Sortino only down side. Like everything
has its limitations. CAGR basic but good.

 

[KevinBB]

ok, what am I missing here?

Yes, it's not the best system out there but an alternative strategy to a buy and hold.

(my highlighting - KH)

Has anyone compared this to buy and hold, i.e. open a position on the first long breakout, hold, and then exit that same position on the last trade date?

I confess that I don't know how this back testing system works (is it Amibroker?), but it seems to me that buy and hold is far superior strategy, roughly 10x superior.

KH