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Test of long/short market filter based on cross of two Stochastics running 2x long SP500 (SSO) / 2x short SP500 (SDS).
Initial performance (Cagr +40%, Sharpe >1) seems interesting in some market times, but needs additional filters for stability and reduce high drawdowns. I post here if somebody is interested to further develop, drop me a line.
Inspired by http://www.stockfetcher.com/forums/Filter-Exchange/STOCHASTIC-CROSSOVER-SYSTEM-FOR-SDS-AND-SSO/107364 and http://indexswingtrader.blogspot.mx/2013/10/how-to-time-market-stochastics-rulez.html
"The Stochastic Crossover System is another trouv%uFFFD of Kevin McGrath. He developed this particular market filter using simple crossover/crossunder behaviors through several iterations on StrataSearch. The filter is designed for the daily SPX chart and generates buy/sell signals for SSO and SDS, two leveraged Exchange Traded Funds. Kevin finally added a 3% trailing stop to provide some form of hazard insurance.
The strategy is based on the crossings of a stochastics %D(5,1,5) with a stochastics %D(5,1,10):
- Go long when %D(5,1,5) crosses below %D(5,1,10).
- Go short when the reverse happens."
Included two options and optimization parameters:
1) Buy SSO / Buy SDS
2) Buy SSO / Short SSO
Trading financial instruments, including foreign exchange on margin, carries a high level of risk and is not suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in financial instruments or foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
