SOXL trading strategy using SignalSolver Sentiment

Another Sentiment driven trading strategy

Showing the equity curve for constant threshold

Showing the equity curve for constant threshold

Methodology

In the same vein as the previous few posts, this is another SOXL trading strategy using SignalSolver sentiment, this time we use a threshold of 70%. For a full explanation of the SignalSolver sentiment methodology and how to interpret the simulation results, please click here.

The 70% threshold showed up as the optimum mid May 2021, (below) so we will start our paper trading with that value. The constant threshold result is shown above, but this is a backtest not a walk-forward test as shown below. The equity curve is currently showing a good deal of drawdown at 21%. However let's see what happens with SOXL since it shows nice structure on the threshold surface. Is it breaking down? or will it pick up and perform well like it has in the past.

The equity curve for simulation using adaptive thresholds

SOXL trading equity curve for simulation using adaptive thresholds

Performance

Performance of the simulation

Performance of the simulation

Trading on sentiment (L&S column above) performed around 2 times better in this simulation than buy-hold in terms of reward/risk, with annualized return (CAGR) being around  1.6 times better for Long/Short trading of the signals and trading long only being, unsurprisingly, most of the gain. In all cases, drawdown was lower for the sentiment trading than for buy-hold. Its easy to forget that what you really want from a trading strategy is not necessarily to beat both long-hold and short-hold, which is quite hard to do for something with a high annualized return,  but simply keeping on the right side of profitability has a lot of merit. This strategy exceeded that goal so far.

Below is the threshold surface for the entire window of 7/16/20 through 8/12/21, showing a good structure, but with somewhat of a offset. Ideally I would like to see the structure centered on 50% which would mean that the backtests are more neutral in their sentiment reading, but this may correct in the future.

Partial threshold surface for the simulation, equal buy and sell thresholds

Partial threshold surface for the simulation--equal buy and sell thresholds

Click here to see the SignalSolver settings for this strategy: SOXL Sentiment Settings

We now move into the paper-trading phase for this project. Updates will be shown below.

Updates

Updates to this strategy and current sentiment can be found here.

Posted in Daily Signals.

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