DUST Daily Trading Strategy

This trading strategy is for stock symbol DUST the Direxion Daily Gold Miners Bear 3X ETF. It is the complementary stock to NUGT which I analyzed last week. Its not hard to find strategies which would have exploited the intense volatility of this kind of security, if you have access to an optimizing backtester. The strategy presented here gave good returns and reward-risk. Most of the returns were in the period Feb 2013 to Nov 2013, in which period $10K would have turned into $750,000. By Nov 2014, the investment compounded would have been worth $5m and since then until now (Mar 2015) it would have turned into $13m (list of trades). It will be interesting to see if the growth continues. I wouldn't expect it to, given the inconsistent performance, but you never know. In contrast, buy and hold lost 20% over the same period.

The strategy itself can be read off from the table below, its a daily trading strategy which means that you would have had to attend to it on a daily basis. It would have taken a few minutes a day to work out the signals and enter the orders. Note that you would have to short the stock if you were long and a sell signal showed up. Using NUGT as the shorting vehicle would have given different results.

Just a reminder; don't expect to implement this kind of algorithm and get similar results. I'll be tracking it on paper and give updates, so watch this space.

This strategy was corrected 1/1/16 to account for an error in the short-side returns.

 

 

Update 1/1/16

This strategy did OK after publication. For the period 3/24/15 to 12/29/15 the equity and stats are shown below:

 

DUST-D Equity 1-1-16

DUST-D Table 1-1-16

The optimum buy and sell points for this period would have been 4.13% and 8.45% (returning $66,246).

Update 6/23/2016

 

Since the original posting in March 2016, this strategy has returned 183% annual return, but in an extremely choppy fashion:

DUST-D Update 6-23-16 TimeDUST-D Update 6-23-16 Table

The optimum buy point over this period was 4.12%, with a sell point of 8.32%. The results for this optimization are shown in the table below. Its odd how the optimum buy point was almost exactly twice that of the original optimization, not the first time I have seen this happen.

DUST-D Update 6-23-16 Table Opt

DUST-D Update 6-23-16 Time Opt

Update 10/20/2016

 

Performance has deteriorated somewhat:

DUST Trading Strategy (Daily) Update 10-20-2016

DUST Trading Strategy (Daily) Update 10-20-2016

 

 

 

 

Posted in Daily, Uncategorized.

3 Comments

  1. Update 5/26/2015

    Since this was published (3/23/15) up until 5/22/15 (45 trading days), the strategy has added 9.45% (+68% annualized), while the underlying stock has lost 22.28% (-76% annualized). There have been 9 trades, of which 4 were profitable.

    Andrew

    • Slightly. Since 6/23/16 the algorithm has added 2.15% (43% annualized). DUST has lost 22.5% (-98% annualized) in the same period according to SignalSolver. There were 7 round trip trades, only the first 2 were profitable. Remember backtests can’t be used to predict the future.

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