Strategy Development

Home » Blog » Strategy Development

Video Tutorial: QuantTrader – A complete walk-through for new users

Continuing our effort to provide training and education for new users of our QuantTrader Software, here a new series of video tutorials. A complete walk-through of the main functionalities for building a Meta-Strategy Here the framework of the Hedged Dow Jones Meta-Strategy created during the process, and the detailed agenda of the 9 video clips: QuantTrader "under the hood" - Explained with practical examples In section 3.4 Setting up Strategy Algorithms and Parameters we explain the calculation of the "modified Sharpe Ratio", how to properly select the volatility attenuator and show the differences between the six ranking and allocation algorithms: Tutorial videos in detail: The videos are available as a YouTube Playlist, so you can follow the overall process or chose topics of your interest. The tutorial is targeted to first-time and beginning QuantTrader users, with detailed explanation on each single step so you can replicate the process while watching. Further tutorials for our more advanced QuantTrader users are in preparation. Tutorial Intro: Objective, Framework and Agenda 1. Starting QuantTrader & loading data 2. Setting up symbols and stock-lists 3.1 & 3.2 Using Portfolio Manager to create and configure the "Dow Jones" strategy 3.3 Interpreting the Strategy Backtest Window 3.4 Setting up Strategy Algorithms and Parameters 3.5 Optimizing Strategy Parameters 4. Using Portfolio Manager to create and configure the "Hedge" strategy 5. Creating the final "Dow Hedged" Meta-Strategy Please post follow-up questions or doubts either in the comment section of this post, or in the comment section of the YouTube videos. I plan to prepare another video answering the main questions. If you have not yet subscribed to QuantTrader, you can do so from here, read more about its powerful features, or give it a try with our free, no-strings-attached 30 days trial. [...]

2018-03-05T13:03:44+00:00By |3 Comments

Tutorials: Consolidated Signals & Interactive Brokers Portfolio Rebalance Tool

As promised, please find below some short video tutorials on how to create consolidated signals for your portfolio in the Online Portfolio Builder and QuantTrader, and how to efficiently execute the trades using the Portfolio Rebalance Tool from Interactive Brokers. One of the biggest concern raised after we announced QuantTrader Light for all our "All Strategies" subscribers was the abitility to create, backtest and save custom fixed-weight portfolios. Frank just published QuantTrader Version 510, which comes with just that functionality, in the tutorial I still announce this as pre-release, but you can now use this functionality live in January rebalancing. If you are not yet a Logical Invest subscriber, you can use our 30 days free no strings attached QuantTrader trial. You can open a free trial demo account at Interactive Brokers to test the portfolio rebalance functionality. If you already have an IB account you can create a paper account for testing and enhancing your execution skills. And to repeat, we´re in no way afiliated with them, but do appreciate the cost structure and functionalities for trading our own accounts. We will be adding more tutorials about individual features of QuantTrader and how to  build and execute your portfolio. For the time being please let us know which features you´re most interested in, and if there are questions in regard of these first tutorials. Consolidated Signals in Portfolio Builder See here: Consolidated Signals in QuantTrader See here: Configuring the Interactive Brokers Portfolio Rebalance Tool See here: Executing Monthly Rebalance with the Interactive Brokers Portfolio Rebalance Tool See here: As always in anticipation of a vivid discussion in the comments or the QuantTrader Forum. All the best, Alexander

2018-01-30T14:21:48+00:00By |2 Comments

Logical Invest strategy update for an inflation environment

Logical Invest strategy update for an inflation environment. The following strategy update will be in effective for the February rebalancing. QuantTrader user will get a notice of the updated QuantTrader.ini strategy file when they start QuantTrader. You can also download the file also manually from here: It is my opinion that going forward, inflation poses a serious risk for investors. From 1980 to 2015 Inflation went down from more than 10% to near 0%. Since 2015 inflation is steadily rising from nearly 0% to now more than 2%. Inflation is a bond's worst enemy. Since we use Treasuries to hedge our strategies, rising inflation may have a very negative impact on our TLT Treasury ETF positions. It is not just bonds. Inflation could negatively impact the equity markets as well. Many U.S. companies are running on cheap credit and are deeply in dept. The Russell 2000 small caps, in aggregate, have already negative earnings today. Higher credit costs due to inflation would mean the end of many of these companies, resulting in a strong market correction. All this could mean that stocks and bonds go down together which would negatively affect our strategies. One solution to this is to use Gold. Gold has always been one of the best hedges against inflation. So I decided to use it and build a more universal, "inflation-proof" hedge. The Hedge strategy This Hedge is now a separate strategy called “Hedge”. It is composed by TLT, the long term Treasury bond and a slightly redesigned GLD-USD strategy. The new Hedge did perform quite well in the past and can be used profitably as a standalone strategy. This is an advantage for the strategies which use it as a hedge. Most of the time the "Hedge" gets about a 50% allocation within the [...]

2018-01-26T08:04:47+00:00By |38 Comments

Portfolio Builder Allocations 2018 – Set yourself up for success

First of January 2018 after a fabulous year in the markets and hopefully also your account. What better time than to spend some hours on revisiting our portfolio allocation to be ready for whatever the new year will bring? As stated previously we update and re-optimize our fixed-weight portfolios in the Portfolio Builder about twice a year. To recap, why do we re-optimize portfolios periodically? Modern Portfolio Theory by Harry Markowitz uses past returns and covariances to construct portfolios which optimize the expected return and variance. While fundamental MPT aficionados would advise to stick to your allocation for several years, at Logical Invest we advocate for a more flexible approach with regular reviews which in our view ensure your portfolio allocation considers also recent market developments. 2017 has been marked by steadily increasing equities while subdued volatility is taking historical levels. SPY, our proxy for the S&P 500 has returned 21.7% while TLT, proxy for the 20+ year bond market has returned 9.2% . The “fear index” VIX, representing S&P 500 volatility, has seen readings in the lower tens most of the year, a historical low of 8.84 and only four spikes above 15, which is the 10 years average. How have our individual strategies performed so far? The strong run in equities coupled with low volatility has provided clear medium-term trends and therefore runs to our high-performing strategies. For example, the Maximum Yield strategy returned close to 65%, this thanks to being in average two thirds invested into ZIV, which alone represents around 48.0% of this return. How has this translated into our Markowitz optimized Portfolios? 2017 has been a mixed picture for the pre-configured portfolios. As some strategies like the Maximum Yield and 3x Universal Investment performed well at or above the historical levels, others performed below [...]

2018-01-01T22:38:48+00:00By |12 Comments

Wishing you a prosperous 2018: QuantTrader for All-Strategies subscribers

Well, we had this on our list for 2017 (evidence here thanks to Marcin!), so even if now only a couple of hours remain for our European followers, and we definitely failed our readers for Asia, we’re to our standards perfectly on time for our subscribers from North and South America: QuantTrader with most functionalities will now be available for our “All-Strategies” subscribers at no additional cost! Thanks to your continuous input and feedback we’ve built a special edition of QuantTrader to enable you to: Generate signals on your preferred day so you’re not bound to the firm monthly cycle and do not have to wait for our signal emails. We still advocate to keep a monthly cycle, e.g. trading at or around the month-end, but with QuantTrader you can now find your own rhythm and cycle to trade either before, on or after the month-end, or even change your trading day when you are for example on business travel or holidays. Cut signals intraday before close to trade at close. This probably is one of the main critique points during 2017: Why do signal subscribers have to delay trading into next opening, while performance of our strategies is calculated at the month-end close. Well, we still believe this is not a killing argument based on our research, but we do understand the psychological importance of trading at close of the month-end, especially when it’s about going relaxed into the weekend. Get the consolidated signals for your preferred portfolio, that is, a blend of different strategies. This is very much as in our Online Portfolio Builder and Consolidated signals, but now you can also save your preferred portfolio allocation, something we were not able to deliver so far in the online version. More on this functionality with practical steps [...]

2018-02-18T03:04:54+00:00By |9 Comments

Permanent Portfolio – Will We Ever Kill The Bug?

An analysis of Harry Browne´s Permanent Portfolio and further enhancements towards:  A Permanent Portfolio ETF Rotation Strategy employing Momentum, Mean Reversion, and Volatility Targeting. It’s not just cars. It’s investment strategies like the permanent portfolio, too. Vintage "all-weather" investment strategies are often simple, easy to execute and give amble 'out-of-sample' data. In other words one can see how they performed in life years after they have been proposed. And like the VW bug, they are "safe" choices. Tried and true. Can you imagine a 1965 VW running in the Autobahn? Although the essence counts for a lot, for the car to survive at today's highway speeds the tech needs to be up to date. So let’s take my favourite oldie and bring it up to speed: Harry Browne’s Permanent Portfolio. The Permanent Portfolio by Harry Browne From Investopedia: … Browne believed that the four asset classes would thrive in one of the four possible macroeconomic scenarios that exist. Stocks would thrive during periods of economic prosperity. Bonds would do well in deflation and acceptably well during periods of prosperity. Gold during periods of high inflation would rapidly increase in value as the only true defence against a deteriorating currency. Cash would act as a buffer against losses during a routine recession or tight-money episode, and would act well in deflationary times. So let’s see how the original permanent portfolio Harry Browne first published has performed. The original rules of the All Weather Portfolio: 25% in a stock market Index ( S&P 500) 25% in Treasuries 25% in Gold. 25% in Cash or similar Not bad. Annual return is 7.1% and maximum draw-down comes in at 17.84% since 1992. For a far more detailed analysis of the so-called fail-save investment or permanent portfolio or "PP" you can see Gestaltu's excellent "PP Shakedown" [...]

2017-10-02T20:00:00+00:00By |7 Comments

Build Custom ETF Portfolios: Mid Year Review Portfolio Builder

For our „All Strategies“ Subscriber who use the Portfolio Builder to blend their own mix of Logical Invest Strategies, here some updates and a short mid-year review: We have now included the “World Top 4 Strategy” into both the online an offline tool. To keep the charts readable, we opted for replacing the Aggressive Version of our “Global Sector Rotation”. The preconfigured and optimized Markowitz Portfolios have been updated, only slight changes in the allocations occurred – all are <5%, so in most cases these can be neglected due to account size.

2017-10-02T20:00:00+00:00By |7 Comments

Welcome to the Investing Academy!

Welcome to the Investing Academy!If we´d be asked to summarize our investing experience into two famous quotes, probably it would be these two:“Don't look for the needle in the haystack. Just buy the haystack!” “It is difficult to make predictions, especially about the future.”The former by John C. Bogle, founder of Vanguard, the latter attributed to Danish physicist Niels Bohr, both nicely recap why we advocate for investing in broad instruments like ETF and avoid market timing or stock picking based on expectation, but rather stick to well researched market anomalies and price action.Being an investor is no easy job, especially if you are a Do-It-Yourselfer, and even more if you´re still in your job. Being an investor with Logical Invest is - so we´ve been told many times - even harder.Rules based, quantitative investing like we advocate for is full of math terms, dives deep into statistics and finance, requires hours of reading to truly understand what you will invest your money in – and on top our unique blend of “LI slang” and geeky, non-native English writing style. We hear you!To empower novice investors to benefit from our strategies and portfolios but also as useful reference for the investing veterans, we´ve started to put some introduction articles about broad investing topics together, and will call this compilation in future our Investing Academy.We´ll start with some 25 articles around below topics, but plan to further add topics of interest as we receive feedback and topics develop in our forum.Investing 101Your Pension Retirement PlanETF InvestingInvestment StrategiesPortfolio ManagementRules-based Trading StrategiesOr get started here, and please share your feedback in the space below.Your Logical Invest team

2017-10-02T20:00:00+00:00By |0 Comments

Fail-Safe Investing – The “straight” BUG with no leverage

In a previous post we introduced our new investment strategy, the BUG. There has been a lot of interest but also some concerns when it comes to using leverage. We are introducing a version of the BUG for non-leveraged accounts. In this version we allocate amongst 6 ETFs: SPY, TLT, GLS, CWB, TIP and PCY. Again as in the original strategy we use these heuristics: Timing (using a simple average rule), Volatility Targeting (we reduce exposure to more volatile ETFs), Momentum (we reduce the size of the worst performer and add to the rest). We don’t employ short term mean reversion and we only trade up to 4 assets.

2017-10-02T20:00:00+00:00By |8 Comments

Logical Invest at the Annual AAII Conference 2015 in Las Vegas – Save the day!

We’re delighted to be invited as exhibitor and speaker to the 2015 Annual Conference of the American Association of Individual Investors (AAII) from Nov 7-9, 2015 at Las Vegas. Frank and I will be attending the conference and we would love to meet you there. Our workshop on Monday, November 9 will have the following topics:

2017-10-02T20:00:00+00:00By |1 Comment