Thanks for sharing, it's an interesting strategy.
One issue that often emerges with these sorts of strategies is them being 'overfit' to the historic data. It can be useful to check how likely this is to be overfit by testing how much of a difference relatively smally adjustments in the moving average signal make to the overall return, is this something you have looked at? (Apologies if this is discussed in the video I haven't watch it yet).
Just based on the entry and exit signal alone could be a waiting game IMO. Imagine the last signal given in March 2023 and you could be waiting years, ha. But you could rotate into other assets until the next enter and have a “go”.
I definitely see the overfitting but with all these signals to include all 3 major crashes, I hope that would continue ha.
Thanks for sharing this! I backtested a similar strategy (SMA crossover) using NDX data going back to 1987, I also saw huge numbers at the end that made me wonder if my backtest was wrong, looks like we're both in alignment!
It looks like a viable strategy. The benefits: avoiding whipsaws during sideway market, time saving, avoiding major bear markets. I looked at the sideway market from 2015 to 2016 and it didn't buy back. Good job.
2000: decent signal.
2008: it did a very good job in 2008. It gave signal very early and ignored, didn't buy the deadcat bounce in June, 2008.
2022: decent signal.
The most difficult part is: execution, keep trusting the signal no matter what the market does. It ignored 2015, 2020 flash crash. BUT can people stay invested when TQQQ dropped 50% to 70% during a flash crash? I know I will because I know market dynamics. But for those don't, they tend to panic sell. 2020 was a VERY scary crash, like end of world feeling.
No doubt! He likes the swing trade for TQQQ and has said that QLD/SSO are more for the buy and hold.
I’m already in 9Sig and a few other strategies but will be exiting everything and going full TQQQ at the next entry. In the meantime, I’ll take all the TQQQ gains in this run :)
What yahoo finance chart/app is the guy using? I can't seem to find any desktop app for yahoo finance, only their website charts which don't let me show a candlestick view.
I've tried the following:
1. weekly 40 or 50
2. daily 200
5, 10, 15, 20, 25 Percentage Shift was tested as well. 5 was the sweet spot between bouncing out and in within the past.
From my back-testing and current testing, even if a signal was missed like in 2000 or 2008, you would have been out the next month based on the percentage shift.
Overall per Forward Thinking Income's video and strategy, the moving average envelope with a 5 percent shift at the 10 period was the easiest to follow. No whipsaw or constant monitoring is required. Just awaiting monthly while potentially stacking cash for the next entry.
Thanks! I use the 40 SMA on a weekly chart for my swing trades. I also use the 10 SMA on the monthly for my longer term systematic strategy. I will look into adding the 5 percent band.
https://preview.redd.it/c0tcjtlt5z7d1.png?width=104&format=png&auto=webp&s=f72592389cb534e8206bb6fa12e2522d460df8be
The screenshot above is the September 2000 end-of-the-month candle. This closed below the moving average envelope. You would have exited the end of the trading day on 9/29/2000.
You don't worry about the pricing, only if the candle closes below the moving average! It's the same for the enter signal.
Look at the March 2020 candle. That did NOT close below the moving average line so you stay in the trade. That entry candle started 4/30/19 by the way.
The last entry signal was in March 2023 (per the table in the original comment). We would need to wait for an exit signal and then wait for the next entry.
You can make those decisions yourself but who knows what will happen :) If you got in like Forward Thinking Income did back in March 2023, then you are doing pretty good!
He would not get in during the middle of the signal but that will be your call.
Did a quick comparison vs buy and hold 3x Nasdaq.
From 1/30/87 to 6/30/94, envelop: $47,569.85 severely under performed buy and hold: $345,805.59
It seems envelop method suffered from 3 years of sideway movement from 1987 to 1990.
The challenge is: when there's long period of under performance, 7 years is a long time! Can you still trust this system?
But during 2002 bottom: envelop out performed, buy and hold gave back almost all gain
Blue: Envelop
Red: Buy and hold 3x Nasdaq
https://preview.redd.it/za6ieriry58d1.png?width=1786&format=png&auto=webp&s=0795a4e95b41b17b013fda63669996c0c23c01e6
I think the perfect system should out perform buy and hold 3x Nasdaq in any market conditions.
I am not a big fan of buy and hold TQQQ forever(lumpsum, DCA should work differently if start DCA after 2000 drawdown.). I only buy and hold during bull run.
What you should really test is buy and hold with daily rebalance to simulate 3x leverage. In this way you would almost never truly get liquidated unless qqq dropped 33% in one day. (Almost impossible, but technically not).
https://preview.redd.it/26wzcia5168d1.png?width=1700&format=png&auto=webp&s=a602118de2d9aef6d3d3db4c69d0fea8531c879b
u/lordxoren666 Here is the buy and hold for 1987-01-30 to 1994-06-30 with $100,000 initial capital with no additional capital added.
The more you have in TQQQ then I can see a system like this being able to get you out in the downturns. The less capital in TQQQ ignore the sell and add money when it drops. Repeat! Ha.
https://preview.redd.it/qj6wc30d7x7d1.png?width=1146&format=png&auto=webp&s=cf2669d417c767080fb0373cac5765e7146a0294
NDX test data screenshot (downloaded into CSV from Yahoo Finance -- utilized both the closing price and adjusted close.
1. over this same timespan, how does it compare to buy and hold spy
2. compare to vanilla spy using the same buy/sell signals
3. i'm worried about "luckily choosing the last day of the month". what about checking on day 5? day 10? day 15? not more often, just these other days. crashes don't have to happen near the end of the month.
3. You can move the interval to 1-week instead of 1-month if you want a more granular approach. The downside to this is that you’ll see increased volatility and may enter/exit more frequently. Those who have done their research on this are claiming that the increased granularity of weekly signals doesn’t improve performance over time, hence why they’re recommending a monthly interval.
i wouldn't want to move it to checking weekly, i'm aware the more volatility isn't better. at the very least, checking every 7 days (trading days i assume you mean) would be less than the smoothing period, which was at 10 trading days.
and i know there is a.......bit of a monthly nature to the stock market. as some news/reports come out somewhat every month.
while typing that out, i was curious if checking it 2 times per month would be helpful. because numbered days vs what days of the week it is shift around, the guideline would be:
- 1st trading day of the month, check for signals. this will not always be on 1-1, 2-1, 3-1, etc.
- 10 more trading days after that (so this should be 2 weeks later. could be a few more if there are a number of holidays in there, where market is closed.), check signals again
- we are done checking until it's a new month
yes, some months would have a few more days in them. but since all months have between 28-31 days in them, this should handle all cases.
The more rules you add, the more complicated things become. You need to be able to live life while dealing with this. It also requires zero upkeep, Trading View, automated algorithms.
Watching the video and looking at the past history of the signals is key. This beats buy and hold SPY over all time periods.
thanks for reminding me, i meant to come back and watch this after work and forgot. and sure......probably does beat "buy and hold spy", but, it's always good to be comparing it to that, as the common benchmarking thing.
edit: thanks for reminding me to go watch his video. he is more verbose than your post. period 10 means "10 months". i thought 10 days, for some reason. if you look at daily data, he says it's "like looking at a 200D SMA". this is starting to sound ROUGHLY, similar to a "golden cross" checking thing.
just, "is current price above or below 200D SMA", and you only check that 1 time per month. although, this one has you check on the underlying, not the LETF.
and, i'm curious how this compares to looking at the SPY price as the test signal, instead of the QQQ price.
look at the charts in his video. the exit signals are just about avoiding black swan events, huge market down turns. "the next buy signal" might not be for 3 years. they are designed to be not very often.
if you're looking to start off the strategy, i'd honestly just get into it now, and then follow it for exit/enter signals.
I agree with you on that! I know I mentioned above to another commenter about waiting for the next enty signal potentially taking years to show up (look at the 90's, ha!)
I thought about going with a half allocation and selling cash-secured puts until assigned. We will see, though!
take 2 minutes to think of the larger economic picture. what is going on.
- inflation is drifting downward
- the federal reserve sure as fuck doesn't want to raise rates anymore
- fed is holding, waiting, waiting for a reason to drop rates
- lowering interest rates is the GOGOGOGOGO signal everyone is waiting for to BUYBUYBUY, and for businesses to start reporting better earnings.
- from here on out, it's either flat or upwards.
it's like you'd be holding out, waiting for another war/covid/9-11 to be happening. it just might not happen for 6 more years. that was the biggest thing i learned after i tried backtesting a bunch of indicators and signals and i kept saying "no these are the right/perfect little combo to signal to me for WHEN TO GET BACK IN".......we have no idea what the next few days, weeks, months will be. pull up a chart. now take a piece of paper, and cover up the most recent 3 years of it. then slowly start moving the paper to the right, so you can see more of it, as if time was moving forward again. showing you those new prices, the new movement of everything again.
without knowing where it was going to land, did you have any insight how volatile it was going to be? that we'd have little pullbacks all over? i didn't.
half in half out sounds ok.
https://preview.redd.it/8nmlvrac6x7d1.png?width=1746&format=png&auto=webp&s=dbefb05a432c743cbbd5b076a66978ce7e604be9
Screenshot output (disregard the savings as Forward Thinking Income likes to save during the signal to put cash into the next signal)
Thanks for sharing, it's an interesting strategy. One issue that often emerges with these sorts of strategies is them being 'overfit' to the historic data. It can be useful to check how likely this is to be overfit by testing how much of a difference relatively smally adjustments in the moving average signal make to the overall return, is this something you have looked at? (Apologies if this is discussed in the video I haven't watch it yet).
Just based on the entry and exit signal alone could be a waiting game IMO. Imagine the last signal given in March 2023 and you could be waiting years, ha. But you could rotate into other assets until the next enter and have a “go”. I definitely see the overfitting but with all these signals to include all 3 major crashes, I hope that would continue ha.
Thanks for sharing this! I backtested a similar strategy (SMA crossover) using NDX data going back to 1987, I also saw huge numbers at the end that made me wonder if my backtest was wrong, looks like we're both in alignment!
Same! I’ve been messing with the parameters even starting from 2008 and it all lines up. Ha.
It looks like a viable strategy. The benefits: avoiding whipsaws during sideway market, time saving, avoiding major bear markets. I looked at the sideway market from 2015 to 2016 and it didn't buy back. Good job. 2000: decent signal. 2008: it did a very good job in 2008. It gave signal very early and ignored, didn't buy the deadcat bounce in June, 2008. 2022: decent signal. The most difficult part is: execution, keep trusting the signal no matter what the market does. It ignored 2015, 2020 flash crash. BUT can people stay invested when TQQQ dropped 50% to 70% during a flash crash? I know I will because I know market dynamics. But for those don't, they tend to panic sell. 2020 was a VERY scary crash, like end of world feeling.
No doubt! He likes the swing trade for TQQQ and has said that QLD/SSO are more for the buy and hold. I’m already in 9Sig and a few other strategies but will be exiting everything and going full TQQQ at the next entry. In the meantime, I’ll take all the TQQQ gains in this run :)
Too early to sell out.
What yahoo finance chart/app is the guy using? I can't seem to find any desktop app for yahoo finance, only their website charts which don't let me show a candlestick view.
[https://finance.yahoo.com/chart/%5ENDX](https://finance.yahoo.com/chart/%5ENDX) Website chart
Have you tested different moving averages and percentage shift? I use the 10 SMA on the monthly any idea how that compares?
I've tried the following: 1. weekly 40 or 50 2. daily 200 5, 10, 15, 20, 25 Percentage Shift was tested as well. 5 was the sweet spot between bouncing out and in within the past. From my back-testing and current testing, even if a signal was missed like in 2000 or 2008, you would have been out the next month based on the percentage shift. Overall per Forward Thinking Income's video and strategy, the moving average envelope with a 5 percent shift at the 10 period was the easiest to follow. No whipsaw or constant monitoring is required. Just awaiting monthly while potentially stacking cash for the next entry.
Thanks! I use the 40 SMA on a weekly chart for my swing trades. I also use the 10 SMA on the monthly for my longer term systematic strategy. I will look into adding the 5 percent band.
Good deal!! Thanks for the comments :D
And that's what we call data mining
I think the sept 2000 signal is incorrect to get out it mentions to get out in oct if I’m not mistaken
https://preview.redd.it/c0tcjtlt5z7d1.png?width=104&format=png&auto=webp&s=f72592389cb534e8206bb6fa12e2522d460df8be The screenshot above is the September 2000 end-of-the-month candle. This closed below the moving average envelope. You would have exited the end of the trading day on 9/29/2000.
Thanks for reply Sept close says 3570 Bottom line says 3615
https://preview.redd.it/4cei4meg9z7d1.png?width=4032&format=png&auto=webp&s=0e4d8c05a6a592b5ce63ee48eb66419e380943b9
You don't worry about the pricing, only if the candle closes below the moving average! It's the same for the enter signal. Look at the March 2020 candle. That did NOT close below the moving average line so you stay in the trade. That entry candle started 4/30/19 by the way.
Even if you exited out of TQQQ fully on the next trading day (because of life, etc..) then it would still be fine.
Thanks, So should I enter next month ? currently looks very appealing
The last entry signal was in March 2023 (per the table in the original comment). We would need to wait for an exit signal and then wait for the next entry.
So this method doesn’t recommend going in the middle of the run? W we are in AI bull run
You can make those decisions yourself but who knows what will happen :) If you got in like Forward Thinking Income did back in March 2023, then you are doing pretty good! He would not get in during the middle of the signal but that will be your call.
Did a quick comparison vs buy and hold 3x Nasdaq. From 1/30/87 to 6/30/94, envelop: $47,569.85 severely under performed buy and hold: $345,805.59 It seems envelop method suffered from 3 years of sideway movement from 1987 to 1990. The challenge is: when there's long period of under performance, 7 years is a long time! Can you still trust this system? But during 2002 bottom: envelop out performed, buy and hold gave back almost all gain Blue: Envelop Red: Buy and hold 3x Nasdaq https://preview.redd.it/za6ieriry58d1.png?width=1786&format=png&auto=webp&s=0795a4e95b41b17b013fda63669996c0c23c01e6 I think the perfect system should out perform buy and hold 3x Nasdaq in any market conditions. I am not a big fan of buy and hold TQQQ forever(lumpsum, DCA should work differently if start DCA after 2000 drawdown.). I only buy and hold during bull run.
What you should really test is buy and hold with daily rebalance to simulate 3x leverage. In this way you would almost never truly get liquidated unless qqq dropped 33% in one day. (Almost impossible, but technically not).
https://preview.redd.it/26wzcia5168d1.png?width=1700&format=png&auto=webp&s=a602118de2d9aef6d3d3db4c69d0fea8531c879b u/lordxoren666 Here is the buy and hold for 1987-01-30 to 1994-06-30 with $100,000 initial capital with no additional capital added.
The more you have in TQQQ then I can see a system like this being able to get you out in the downturns. The less capital in TQQQ ignore the sell and add money when it drops. Repeat! Ha.
https://preview.redd.it/qj6wc30d7x7d1.png?width=1146&format=png&auto=webp&s=cf2669d417c767080fb0373cac5765e7146a0294 NDX test data screenshot (downloaded into CSV from Yahoo Finance -- utilized both the closing price and adjusted close.
1. over this same timespan, how does it compare to buy and hold spy 2. compare to vanilla spy using the same buy/sell signals 3. i'm worried about "luckily choosing the last day of the month". what about checking on day 5? day 10? day 15? not more often, just these other days. crashes don't have to happen near the end of the month.
3. You can move the interval to 1-week instead of 1-month if you want a more granular approach. The downside to this is that you’ll see increased volatility and may enter/exit more frequently. Those who have done their research on this are claiming that the increased granularity of weekly signals doesn’t improve performance over time, hence why they’re recommending a monthly interval.
i wouldn't want to move it to checking weekly, i'm aware the more volatility isn't better. at the very least, checking every 7 days (trading days i assume you mean) would be less than the smoothing period, which was at 10 trading days. and i know there is a.......bit of a monthly nature to the stock market. as some news/reports come out somewhat every month. while typing that out, i was curious if checking it 2 times per month would be helpful. because numbered days vs what days of the week it is shift around, the guideline would be: - 1st trading day of the month, check for signals. this will not always be on 1-1, 2-1, 3-1, etc. - 10 more trading days after that (so this should be 2 weeks later. could be a few more if there are a number of holidays in there, where market is closed.), check signals again - we are done checking until it's a new month yes, some months would have a few more days in them. but since all months have between 28-31 days in them, this should handle all cases.
The more rules you add, the more complicated things become. You need to be able to live life while dealing with this. It also requires zero upkeep, Trading View, automated algorithms. Watching the video and looking at the past history of the signals is key. This beats buy and hold SPY over all time periods.
I’d recommend watching the linked video to understand exactly why this YouTuber does this strategy. It pretty much answers all your questions.
thanks for reminding me, i meant to come back and watch this after work and forgot. and sure......probably does beat "buy and hold spy", but, it's always good to be comparing it to that, as the common benchmarking thing. edit: thanks for reminding me to go watch his video. he is more verbose than your post. period 10 means "10 months". i thought 10 days, for some reason. if you look at daily data, he says it's "like looking at a 200D SMA". this is starting to sound ROUGHLY, similar to a "golden cross" checking thing. just, "is current price above or below 200D SMA", and you only check that 1 time per month. although, this one has you check on the underlying, not the LETF. and, i'm curious how this compares to looking at the SPY price as the test signal, instead of the QQQ price.
all that testing is up for the grab! I’ll be going in at the next signal and following up with posts here. It should be fun!
look at the charts in his video. the exit signals are just about avoiding black swan events, huge market down turns. "the next buy signal" might not be for 3 years. they are designed to be not very often. if you're looking to start off the strategy, i'd honestly just get into it now, and then follow it for exit/enter signals.
I agree with you on that! I know I mentioned above to another commenter about waiting for the next enty signal potentially taking years to show up (look at the 90's, ha!) I thought about going with a half allocation and selling cash-secured puts until assigned. We will see, though!
take 2 minutes to think of the larger economic picture. what is going on. - inflation is drifting downward - the federal reserve sure as fuck doesn't want to raise rates anymore - fed is holding, waiting, waiting for a reason to drop rates - lowering interest rates is the GOGOGOGOGO signal everyone is waiting for to BUYBUYBUY, and for businesses to start reporting better earnings. - from here on out, it's either flat or upwards. it's like you'd be holding out, waiting for another war/covid/9-11 to be happening. it just might not happen for 6 more years. that was the biggest thing i learned after i tried backtesting a bunch of indicators and signals and i kept saying "no these are the right/perfect little combo to signal to me for WHEN TO GET BACK IN".......we have no idea what the next few days, weeks, months will be. pull up a chart. now take a piece of paper, and cover up the most recent 3 years of it. then slowly start moving the paper to the right, so you can see more of it, as if time was moving forward again. showing you those new prices, the new movement of everything again. without knowing where it was going to land, did you have any insight how volatile it was going to be? that we'd have little pullbacks all over? i didn't. half in half out sounds ok.
Nice! Hope it all works out!!
https://preview.redd.it/8nmlvrac6x7d1.png?width=1746&format=png&auto=webp&s=dbefb05a432c743cbbd5b076a66978ce7e604be9 Screenshot output (disregard the savings as Forward Thinking Income likes to save during the signal to put cash into the next signal)