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MR Swing

MR Swing. Quantitative system for mean-reversion and swing trading in market regimes Dave Abrams Senior Quant CSS Analytics Scott Walker C0-Author. Peak Inside the Black Box. Portfolio Asset Allocation of ETFs modeled after endowments

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MR Swing

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  1. MR Swing Quantitative system for mean-reversion and swing trading in market regimes Dave Abrams Senior Quant CSS Analytics Scott Walker C0-Author

  2. Peak Inside the Black Box • Portfolio Asset Allocation of ETFs modeled after endowments • Portfolio market timing technique that reduces drawdowns • Innovative trading system • How the system performs within the portfolio • Correlation of each component • Design principles of a robust system (with no optimization), various money mgt • Actually see % drawdown marked to market daily • Hard to find math, and trading entry/exit techniques

  3. Portfolio Summary Results08/01/2000 to 12/31/2009

  4. Strategy Summary Results02/01/2000 to 02/12/2010

  5. Design Principles • Market Regime Switching • Non Symmetrical Trading Algorithms • Volatility Adaptive Metrics • Robustness to Regime Whipsaws

  6. Quantifying the Edge Daily Follow Through -16.20% CAGR, -1.01 Sharpe, 87.30% MaxDD Mean Reversion 15.42% CAGR, 0.78 Sharpe, 26.13% MaxDD

  7. Mean Reversion in Market Regimes

  8. Quantitative Trading System • Default Parameter Settings: • AVOID optimization: (no parameter optimization) • Long Timeframe: 10 years • Many Trades: ~400 trades • Out of Sample Tests: QQQQ, EEM, EWM, VTI, @ES, @NQ

  9. Quantifying Market Regimes • 200 day moving average channel • Hysteresis (control theory, thermostat, cell mitosis, ..)

  10. Market RegimesTrend Channel SPY 2005 to 2010

  11. Mean Reversion - Trading the Bear • DVO oscillator used for short-term mean reversion trading in bear markets • Buy when DVO < 40%, short when DVO > 70%

  12. Swing Trading the Bull • Discretionary Swing Trading: Elder’s Triple Screen • Weekly chart MACD up trend • Daily chart pull back • Trailing buy stop high • Quantitative Swing Trading • Market Regime switching • Non symmetrical trading algorithm • Volatility adaptive metrics • Robustness to regime whipsaws

  13. Swing Trading Entries • Buy when Value Chart < -7.50

  14. Swing Trading Exits • Sell or short when SVAPO closed above top band • Volume and Price Oscillator (SVAPO) • Smoothed short term Heiken-Ashi price trend • Volume delta at each bar • Volume trend (linear regression slope) • TEMA = triple exponential moving average • SVAPO = TEMA( summation volume delta’s up vs. down days)

  15. MR Swing Results

  16. MR Swing ETFs

  17. Managed Futures

  18. Ivy Portfolio • Portfolio of non-correlated ETFs • United States equity market (S&P 500) • Morgan Stanley Capital International EAFE Index (MSCI EAFE) • Goldman Sachs Commodity Index (GSCI) • National Association of Real Estate Investment Trusts Index (NAREIT) • United States government 10-year Treasury bonds

  19. Ivy Portfolio Timed • Equally weighted assets • Each asset fully invested or cash (30-day T-Bill) • 10 month simple moving average trend filter

  20. Ivy Portfolio + MR Swing (20%)

  21. Low Correlation of Assets

  22. MR Swing Summary

  23. CSS Analytics • Innovative Trading Systems and Indicators • MR Swing • Core ETF Rotation • Institutional Stock/ETF Scoring • Learning systems that adapt to markets over time • We build custom solutions unique to your needs

  24. Thanks You Dave Abrams Senior Quant CSS Analytics abrams@cssanalytics.com www.cssanalytics.com www.dvindicators.com

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