Monday, May 9, 2016

MVP Prelim Studies....05.09.16

My initial MVP study models using the ATR and PCL as buy triggers are shown below using the M1 platform .  Just as a starting point for further research I've simply replaced the short term momentum and mean reversion filters with either an ATR or PCL threshold reversal.  The reaction is similar to that of a mean reversion filter....that is.. the signal looks for a 2 day pullback form a high threshold and then triggers.  I've made the threshold adjustable according to near term volatility so we get more signals than just the 11 that would be expected based solely on threshold level violations shown last week.
This is just one example of how we can use the ATR and PCL effectively to mitigate risk and raise returns above a buy and hold strategy. Later this week I'll profile a couple variations of this theme.
The best returns are likely to be achieved by trading short once a ATR or PCL threshold trigger is violated to the upside, but that's difficult to test using the M1 platform....for now..  
The PCL version performed somewhat better than the ATR in this study but in both cases the unstopped raw price pattern of SPY is much improved using either filter and the drawdown dips are significantly minimized as detailed on the 2 year MVP Equity chart (ATR study shown)...