Weekend Trend Trader
Marc Schnitzler3 min read·Just now--
A long time ago Nick Radge published a strategy
In the introduction Nick writes:
Welcome to the Weekend Trend Trader strategy manual, designed to assist you trade and invest successfully. This is a simple, fully tested strategy that you only need to run once a week. It is ideal for people who work full time or those with busy schedules.
Radge, Nick. Weekend Trend Trader, Kindle, 2013
Nick states that this system is good for those who only have limited time. It should be enough to look at the portfolio once a week for 20 minutes. Signals are generated on Fridays close. The entry is executed on the following Monday.
What are the rules?
Entry:
- 10 week moving average of the index must be greater than last week
- 20 week ROC must be above 30
- Stock must close above a new 20 week high
Initial Stop:
- A 40% decline on a weekly close basis
Trailing Stop:
- If 10-week trend of the index remains up then continue to use a 40% decline on a weekly closing basis.
- If 10-week trend of the index turns down then use a 10% decline on a weekly close basis
Portfolio Construction:
- 20 equal positions
I am not going to simulate the portfolio construction part.
Nick suggests using liquid stocks. So I will look at those that are part of an index. This strategy trades on a weekly time frame.
Here are the test results using the S&P500 stocks sorted by return.
Not surprising to see a lot of tech companies in the top 10. But let me resort. Step 1: I want only results with an R-Cubed ≥ 0.5. Step 2: Sort by RAR%. (Wondering what these metrics are? See my story: “A better measure for risk and return”)
Nvidia stays #1. Now take out those with the massive drawdowns of over 30%. And remove those with an unacceptable robust sharpe ratio.
Leaves us with 6 companies. Trading only these six would have generated this equity curve:
It looks like this system had it’s best time from 2021 to 2022.
But I hear you! You wouldn’t have traded these stocks! How would you have known (for example) 2021 into which of the S&P500 stocks to put your money into? Absolutely valid. I will continue this story with a better backtesting strategy. Stay tuned :-)
I am surprised but there is only one other story on this strategy: “Simulation Results for Weekend Trend Trader on Brazilian Stocks”
I used Visidata to show the results.
Somebody else did a backtest on this strategy and provides code in Github. The result was not so promising.
You can find my code in my Github.
