Back to the future with h3
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Transcript of Back to the future with h3
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Macro/Micro Wave StrategyJay A. Leavitt, PhD
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Looking Back on Previously Tried IdeasBack Testing to Explore & Evaluate New Ideas
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A New Idea for Trading in the Future
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Employing the Hull to Determine1. What to Trade2. Entry Criteria3. Exit Criteria
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SPX Hull Timer
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BullishTrade Stocks in Rising Markets [concept]
SPY ActiveBull Put Spread 2 Strikes Wide
Short Strike 75% POS
BearishTrade Bonds in Falling Markets [concept]
TLT ActiveBull Put Spread 2 Strikes Wide
Short Strike 75% POS
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Hull[25]
BullishProfit Exit >= Credit/2
Loss Exit <= Risk/4
BearishProfit Exit >= Credit/2
Loss Exit <= Risk/8
Entry Not Allowed
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Hull Micro Wave
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Limit of 25% of Equity at Risk per Trade
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The SPX Hull Timer keeps trades on the right side of the market
Bear Micro Waves keep you out of the market when it’s against you
Stops
When the SPX Hull Timer changes it is a Stop
When the Micro Waves turn bearish it is NOT a Stop
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The 75% POS of the short strike puts the odds in your favor
The exit at 50% of credit improves these odds and raises the daily return/trade
When the Micro Wave is bearish the per trade exit is only 3.125% of equity
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Average Days in Trade
9.80
Average Days in Losing Trade
8.44
Percent of Winning Trades
79.55%
Maximum Draw Down
-10.84%
Compound Rate of Return
23.96%
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Wave reversals lasting 3 or fewer bars
Two typesBull Bear Bull
5 occurrences
These are of no consequence
Bear Bull Bear
2 occurrences
2nd resulted in the largest Draw Dowm
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Until June ‘12 the Compound Rate of Return was ~35%/year with a Maximum Draw Down of -7.62%
The market was unusually choppy 7/3/12 – 6/20/13
Need to re-evaluate Stops relative to Whip Saws
TOS Thinkback only uses Close data. Intraday data could produce different results
This Macro/Micro Wave strategy is an ideal strategy for investors with no desire to day trade