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Performance Of Our Automated Trading Models

Fiala Petr
Published: 24.6.2014 | Last modification: 24.6.2014 19:43  | Comments: none
I have calculated results of our trading and investing models for U.S. stocks and ETFs. We have three main models. 6S model is suitable for long-term investors, swing models are suitable for more aggressive traders. One model uses as trading vehicle leveraged ETFs, second one trades U.S stocks that went through our absolute strenght filter 6S.

All the results cover only period of one year, however you can run these tests yourself on our website www.algotrading.cz. There are trading simulators on this website that enable setting up  a time frame for the calculation. You can see how our models worked during "bad times".

6S model - for long-term investors

This model is focused on the strongest U.S. stocks. Final selection is made of 200 large caps and 400 mid and small caps. These 600 candidates came already through the first filtering from the point of fundamental parameters as P/E, earnings, ROA, ROE, profit margins etc. How it works: Model 6S waits for situation when S&P 500 index drops. This model buys only during market corrections. When a BUY signal is generated then a special filter finds 8 strongest stocks from both groups - four large caps and  four mid&small caps. Minimum investment horizon is 140 days, however average holding period is about 10 months. Every BUY signal is applied only on 1/6 of the initial investment, therefore it is pretty careful and defensive attitude.

Results: These results have been calculated for a longer period as there were just three BUY signals in the last year. However there were 10 BUY signals from 2012/01/01 and it is sufficient to show the performance of this model.

Graph: You can see the equity curve for this model along with ETF SPY ( Buy&Hold strategy). Straight lines of equity show periods when 6S model has been in cash.



Performance of 6S model: Results for our model 6S are in the middle of the table. You can compare these results with ETF SPY ( right column). There were 80 stocks bought in 10 tranches, total return = 58,6%/2.5 years, that is 23.6% /year, 86.3% winning trades, profit factor  =14.3., maximum drawdown = 5.84% ( compared with 9.6% for S&P 500). There is a possibility on the www.algotrading.cz to run the test and then export all trades. Thus you can find out how these trades look like.


 
 

ETF SWING Model

This second model is seeking opportunities among leveraged ETFs traded on U.S. exchanges ( TNA, FAS, SSO, ERX, TQQQ). Some elements of security and risk management are built in the model. However it is better to stop trading this model during longer periods of market declines. However despite this recommendation our model is very robust. During bad period from February 2011 to the end of September 2011 when SPY ended up with a loss of -12% our model was positive +4%. Similar performance was in bad year of 2008 when our model ended up with 12% profit, while SPY took a loss of -39%.

Chart: Equity chart  for the period of January - June 2014. Swing model is UP +20.4%. One year performance has been 40% ( 2013/07/01- 2014/06/24)



Table: Results of the swing model in 2014- total profit is 20.4%, 28 trades, win ratio 82.8%, profit factor 14.5. On the contrary SPY is +5.95% ( buy&hold) as of 2014/06/24.






Intraday 6 S swing ( IS6S model)

This model is the most volatile one among our models, however it has the best performance during strong periods. It is in fact BUY DIPS strategy running on the strongest stocks that fit criteria of the daily 6S model. This swing model is also run by daily 6S model from the point of some important SELL signals and thus is relatively safe if we take into account superior performance during  periods of growth ( reward to risk ratio is high). This model created profit  194% within the last 2.5 years without reinvesting of profits  (2012/01/01-2014/06/24) .


Chart: This model is +16% in 2014 ( as of 2014/06/24), 28 trades, win ratio 71.4%, profit factor 1.55. It is better than 6.1% for SPY. One year performance is +51% with 64 trades, 71.9% winning trades, profit factor 2.23 and maximum equity drawdown -9.73% ( 2013/07/01-2014/06/24).




Table: Results of the IS6S swing model in 2014 ( as of 2014/06/24)




We are prepared to run real time portfolios within a few weeks. Right now there is no hurry as  stock indexes are at all time high for already a long time, prices of the main indices are permanently two standard deviations above 200-week moving averages and the whole situation seems to be pretty bubbly.


Petr Fiala



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