NUGT Trading Strategy (Daily)

Original Post March 12th 2015

Please note, this post was corrected 1-3-16 to account for a short-side error in the original calculations. Apologies for this.

This NUGT trading strategy (Direxion Daily Gold Miners Bull 3X ETF) gave a theoretical $1.8 million profit for a $10K initial investment over 2.1 years. The trading strategy required once a day attention. Signals were triggered by rising prices on both the buy and sell side. The buy side reference was 1.0629 times the average of the previous day high, the previous day low and the current day open. You would need to calculate it every day after the open and then put in the buy and cover orders, if you were short. On a few occasions this meant buying at the open price, but usually there was time to get the stop orders in.

The sell side target was a bit simpler, 1.0536 times the previous days low. You could enter the sell and short limit orders after each close, if you were long.

There is a Bear version of this fund, the Direxion Daily Gold Miners Bear 3X ETF (DUST), however the results would have been different if you had used it for the short side.

Here is the list of trades.

 

Update 1-3-16

The algorithm peaked at the end of Aug 2015:

NUGT.D Equity 1-3-16

Update 10-20-2016

Since it peaked at the end of Aug 2015 the algorithm has not recovered:

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

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

PANW Trading Strategy (Daily Intervention)

This Palo Alto Networks PANW trading strategy would have given a 119% annualized return. Here, I chose to show only the long side of the algorithm because its more impressive than the short side (which only gave 27% annualized return). To appreciate the algorithm more, notice that the efficiency of the algorithm was close to 200%. Efficiency (as we define it) is the annualized return divided by the percentage of time you were in the market. Its the return you would have received if you had realized the same return all the time as you had got while you were in the market. The theory is that since you are not in the market all the time, you could have invested the money elsewhere.

Efficiency only applies to long or short style algorithms, since if you were running both long and short (L&S) you are in the market 100% and efficiency equals annualized return.

Updated 1-2-2016 to correct an error in the short-hold returns.

Update Aug 28th 2015:

PANW.D Update 8-28-15

Update 2-1-2016

Algorithm has had better return, efficiency and drawdown than Buy/Hold, but not consistently. Optimum buy point dropped to 1.25% (which would have given a return of $4,316)

PANW-D Update 1-2-16

 

 

 

Update 10-10-2016

Algorithm continues to have better return, efficiency and drawdown than Buy/Hold. Buy-hold lost 12% annualized, this strategy made 28.7% annualized. Efficiency (55%) is what the strategy would have made annualized, had the money been invested at the same rate while the strategy was out of the market.

PANW Trading Strategy Performance since publication as of Oct 10th 2016

PANW Trading Strategy Performance since publication as of Oct 10th 2016

Here is a view of the performance since original publication in March 2015:

PANW Trading Strategy, performance since initial publication, 60% gain vs 12.3% for buy-hold

PANW Trading Strategy, performance since initial publication, 60% gain vs 12.3% for buy-hold.

MSFT Trading Strategy (Daily)

Here is a strategy that worked on MSFT for the last 2 years. It gave returns around five times better than buy-hold, a total return of 360% vs. 70% for buy-hold. Drawdown was 10.6% vs. 17.9% for buy-hold. Backtest results are shown in the graphs below.

MSFT daily trading strategy

MSFT daily trading strategy, performance table and strategy details. Note that "user defined price" is the average of the high and low of previous day and the open of current day [ (h+l+o)/3 ]. A few observations; return and reward/risk was 5x better than buy-hold. Drawdown of 10.6% vs. 17.9% for buy-hold. Long side worked much better than short side.

MSFT daily strategy, graph showing how return varied with buy and sell point parameters for different time periods. The blue line shows the overall 2 year graphs, the others are for 6 month periods. All periods gave better returns than buy-hold. Note that buy point range is fairly restricted.

MSFT daily strategy, surface plot of return (z axis) as it changes with buy and sell point. The blue plateau is roughly the same return as buy-hold.

On Jan-5-2016 this post was corrected for a short-side return error, and a commission of $7 per trade was factored in.

Update Jan 5th 2016

This algorithm was not a stellar performer. Since publication it has been essentially flat, let down badly by the short-side performance

MSFD-D Table Update Jan-5-2016

To be fair, the long side performance was reasonable, but buy-hold was on a roll.

Optimum parameters for this period were different than the original posting, buy point -0.98%, sell point 10.33% for this result:

MSFD-D Table Update Jan-5-2016 Optima

Again, long-side was much more interesting than short-side performance.

Update Oct 19th 2016

This algorithm continues to perform badly

MSFT Trading Strategy (Daily) update Oct 19th 2016

MSFT Trading Strategy (Daily) update Oct 19th 2016