FNGU Trading using SignalSolver Sentiment

FNGU trading using SignalSolver Sentiment

Using multiple algorithms to drive trading strategy

Original Post July 27 2021

Sentiment

Sentiment usually refers to an analyst opinion on whether a financial instrument will increase in value (bullish sentiment), or decrease (bearish sentiment). However, in this FNGU trading strategy using SignalSolver sentiment we are combining the opinion of multiple backtest algorithms to derive sentiment.

Methodology

Shown above is the simulated result of trading FNGU using SignalSolver Sentiment. The sentiment is the blue area chart in the background. The equity curve for the strategy is shown in yellow, buy-hold equity in white. Sentiment is calculated each day after the close of business by assessing what percentage of the top 10 SignalSolver backtest algorithms are bullish. The top 10 are selected by sorting the 139 algorithms each day according to performance. The buy and sell thresholds are fixed at 50% (red line) with bullish being above the threshold. A trade is executed at the next open whenever sentiment crosses this threshold, so the trade price is always out-of-sample from the backtest period which is fixed at 250 trading days. The simulation then walks forward to the next day, repetitively. Algorithms are flushed and refreshed every 3 months and re-parameterized at the end of each month

Performance

Trading on sentiment (L&S column above) performed around nine times better in this simulation than buy-hold in terms of reward/risk, with annualized return (CAGR) being around 6 times better for Long/Short trading of the signals and trading long only being about 5 times as good. In all cases, drawdown was lower for the sentiment trading than for buy-hold.

Below is shown the threshold surface for the equal buy/sell thresholds showing that annualized return (CAGR) is sensitive to threshold changes but profitable over a wide range. 50% is close to the optimum, which is at 41% through 49% ($580,959 return).

FNGU threshold surface for equal thresholds

FNGU threshold surface for equal thresholds

 

 

 

Click here to see the SignalSolver settings for this strategy: FNGU 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.