[Mark Vincent]

Hello Gianna,

In my opinion, the best thing you can do is learn Quantrader inside out. I Don’t think you need to recreate the formulas and logic but have a high level understanding of what the software does. Spend time learning how the 0 LI strategies of strategies works. More specifically understand the following:

1. Higher volatility means higher risk. Cash equals low volatility lower risk. Bitcoin = High volatility high risk. Quantrader allows you to optimize the volatilty based on your own risk. The great thing is even if your ultra conservative you could just allocate 1 or 2 percent to a high risk strategy like Bitcoin and not see your overall risk and volatility increase a lot. Again you need to learn the software and how to do this.

2. My optimal asset mix is based on my customized strategy of strategies. For example, I still think until the governments of the world step in and regulate the MAG7 stocks they will continue to dominate. Therefore I created a low vol MAG7 strategy and high Vol MAG7 strategy and combined them into a Mag7 balanced strategy. I dropped the Nasdaq 100 strategy. Just personal preference no right or wrong. I also think inflation will return so I use a strategy with GLD, VNQ and TBT. Today I created a strategy with Oil transportation companies. I then put all these into a strategy of strategy system with many other macro themes and the best ones rise to the top. The best part is if I am wrong the bad strategies will go to the bottom of the ranking and not be suggested each rebalance. The possibilities are endless based on your own forecast of the Macro environment. If you want to keep it simple you can just use the LI strategies that best suit your overall risk tolerance and investment style.

3. I track my investments in my brokerage account and compare them to LI I have not had any problem with slippage since I trade very liquid stocks like MAG7. The results are very similar. If you have traded for a long time you will know if the system you created has good profit per trade and low slippage. If you don’t know what slippage is you need to learn it. It is a system destroyer if not controlled.

4. I modify the strategies once a year. I try to create an all weather system like 0 LI strategies of strategies with the above modifications. Once you create a few systems you will see that modifying it to much is curve-fitting and you don’t want to do that. There are some exceptions. I also create systems in QT for risk on or risk off. When all the systems are risk off I pause and listen and reduce my exposure. This rarely happens so I try to stick to the plan.

5. The most useful part is the QT software could not live without it. That being said there is no mechanical trading system that works all the time. 2022 was a very rough year since there was a lot of rotation in the markets and no clear direction. The backtest gives you conviction to execute but it’s not a silver bullet. There are no perfect trading systems just tradeoffs between each system.

Note: These are my opinions and I am sure others have completely different opinions so please do your own homework and feel free to ask.

Cheers,
Mark V.

[Mark Vincent]

Does anyone think we are in a commodity supercycle lasting years?

[Mark Vincent]

Since PFIX is shorting the 20 year Bond. Using TBT or TMV would be a good approximation. The real question is are rising interests highly correlated with shorting the 20 year bond?

[Mark Vincent]

Thanks Frank I need to learn how to trade futures. I use BNO, XOP and USO all hedged with puts. Puts are very expensive right now.

[Mark Vincent]

My guess that commodities would rise was correct and using a strategy like 0 LI strategy of strategies would put you mostly in commodities using SRE 3. Unless you just put all commodities into one strategy then you would have about 33% commodities. I chose to increase the number of strategies selected from 3 to 7 since I have 11 strategies in total. I am also using DRRP with “TAIL” as the hedge about 15%. It is working well (I’m beating SPY on every metric for 4 months) and keeps the commodity, metals and energy around 35% which is still very high but it’s the only thing that is working right now. This is a very short time period but I still think over the next couple of years commodities will rise with a lot of volatility. If I am right the model will beat SPY.

Is anyone else using commodities and how are you using them?

Thank you,
Mark V.

[Mark Vincent]

Thanks Frank,

I took your advice for my energy strategy using the following Symbols:

Name Ticker
First Trust Natural Gas ETF FCG
United States Brent Oil BNO
United States Oil USO
SPDR S&P Oil&Gas Explor&Prodtn XOP

I changed it to SRRP works much better.

My next question is what criteria do you use to add or subtract a asset from a strategy? You already mentioned similar volatilities. Do you look for high correlation between assets or low? What other criteria do you look for? Is it more of a Hypothesis that these assets will rise in price?

Cheers,
MV

[Mark Vincent]

Frank,

What if your hypothesis is that hard assets will rise? I just use the same type of Strategy as 0 LI strategies of strategies and add Metals, Energy and commodities. During 2020 the strategy was rarely in these 3 hard assets but during 2021 it has always been in at least one of them. The system is picking them purely on it’s price action. When the price action goes down the system won’t pick any of my hard asset models and picks the other LI strategies.

I think this is cherry picking winning assets but if hard assets continue to rise I will benefit if they dont’t the strategy will kick me out without to much of a loss.

Cheers,
MV

[Mark Vincent]

Sorry that should have said:

The problem is over the long term energy and commodities asset correlations do not benefit equity returns and sharp ratios like Gold and Bonds.

Not Silver.

[Mark Vincent]

The closest is GSRS but it’s not even in commodities right now. The problem is over the long term energy and commodities asset correlations do not benefit equity returns and sharp ratios like Gold and silver. The volatility is also high and that creates other problems. The best you can do is build your own strategy in QT. I have 3 different strategies I use.

– Metals
– Energy
– Commodities

There is some overlap depending on ETF you use to create them. I also use highly liquid ETF you can find almost any commodity but many are low liquidity (Vol<100k).

These 3 I used in a strategy of strategy just like LI Strategy of Strategy.

Cheers,
MV

[Mark Vincent]

They trade on the toronto stock exchange.

[Mark Vincent]

There are few Bitcoin ETFS traded on the stock exchange like BTCC.

[Mark Vincent]

Thanks Frank,

I know how to import and create one but the initial import will have stocks that don’t have history and QT crashes I was wondering if there a good source to get the initial stock list from that only has stocks with 3 years of history. I guess I just need to manually delete the stocks with no history and then update my list on a regular basis.

Cheers,
MV

[Mark Vincent]

An NYSE stock list with at least 3 years of history for each symbol so that QT does not crash.

[Mark Vincent]

Hello Gordon,

You could use the WorldTop4 Balanced with the stock lists. Another option is to use the 0 LI Strategy of strategies. I have not compared the two methods against each other but I do use the 0 LI Strategy of strategies for my own personal inflation strategies just like you have suggested. I have also included growth and hedging strategies in the same same meta strategy. The universe of ETF I use in each strategy is limited since I like highly liquid assets that have options. Let us know if you find the Worldtop4 balanced to work well for you.

Cheers,
MV

[Mark Vincent]

Same thing happened to me Tingo for now.

[Mark Vincent]

No error message rebalance 1st of month when I change it to Ranking day = 16 it crashes on many strategies. Here is the .ini file for one of the strategies.

[StrategyTitle]
16 Metals
[StockItems]
COPX=Global X Solactive Copper Miners,0,1,1,0.00
GLD=Gold,2,1,1
PALL=Precious Metals,2,1,1,0.00,,0,0
SLV=SILVER,2,1,1,0.00,,0,0
URA=URA,0,1,1,0.00
[StockSets]
StockSet18=16 Metals,1,3,StockSetStrategy18,2021-04-26,2021-05-17,COPX@1,GLD@1,PALL@1,SLV@1,URA@1
[StockSetItems]
StockSet18Item1=11111,StockSet18Item2,0,00000004,2,
StockSet18Item2=11111,StockSet18Item3,1,00000008,2,
StockSet18Item3=-,-,2,00001000,3,
[StockSetStrategies]
StockSetStrategy18=2,2,,11111,10,,1
[StockSetStrategyParameters]
StockSetStrategy18=-3,3,112,3,-2,7,-1,7,-10,7,-1,7,0.00,0,0.00,0,0,0,0.00,0,0.00,0,1.50,1,0,0,0,0,0,0,0,0,0.00,4,0.00,4,0,0,-16,5,0,4,0.00,0,0.00,0,0.00,0

[Mark Vincent]

Thanks Frank not sure I understand how it is leveraged.

QQQ has 100 stocks but 45% of the market cap is FAANG. The nasdaq 100 leaders only picks 4 stocks but will rarely pick FAANG. Therefore QQQ is more diversified from the amount of stocks but not the market cap. Which is more risky or leveraged is hard to understand. Mkt Cap vs the amount of stocks?

If you only ran a universe of stocks that included FAANG and use QT to create a strategy to pick 2 of the FAANG stocks each month the drawdown is half that of QLD and so is the Volatility but the returns are not half. Does my Strategy of picking 2 FAANG stocks each month have more risk than QLD or Nasdaq 100 leaders?

Thanks Again,
Mark V.

[Mark Vincent]

Thank you Frank,

How are you able to backtest on Optionnet?

– Are you able to simulate the 20 year history of the LI permanent portfolio?
– Do you simulate certain time periods as you roll the options and then manually calculate your returns?
– Do you manually enter each months allocations?

Thanks,
Any Help would be appreciated.

MV

[Mark Vincent]

I would also look at 0 LI Strategies of Strategies. When you have a strategy that you would like to evaluate add it to this strategy. There is lot’s of good information. Last year I added my own strategies to this strategy and it did well but now the strategy is rotating into GSRS and GMRS. It keeps me honest. My strategies are no longer in favor. It does not mean they are dead but they are not as favorable. I am seeing the trend to hard assets. Metals, and real estate are doing well. Will be interesting to see how this year unfolds. One of my best strategies was a FAANG strategy. It has not done well lately but it will take a couple of years to see if I give up on it.

The whole process is portfolio construction and it’s not easy. LI helps but if you want an edge you have to adjust and take a bit of risk.

Cheers,
MV

[Mark Vincent]

There is no easy way but you could run each of the strategies at the lowest level then look at the performance log. You can download the performance log to .csv and open in Excel. You can do this for all the strategies then paste them into one spreadsheet. It would be a lot of cutting and pasting. You would have to calculate the allocations manually. Possible but time consuming. You could automate a lot of the work if you used your own database and setup your own reference tables. This would be nice feature to have automate in QT.

Cheers,
MV

[Mark Vincent]

Hello hiker360,

When to optimize is a very good question. The answer in my opinion is not that simple. If you optimize UIS SPY- Hedged it does not matter what parameter or time period you change the results are stable. For all the other strategies it’s not as stable. After you pick a strategy the two parameters in the optimization you change are lookback period and Volatility Attenuator. For most strategies you try to find an area that is stable. This means the return and drawdown do not change a lot within the squares. If the strategy is sound the lookback period and the Volatility Attenuator will produce similar results over time. This is true for UIS SPY- Hedged. The only exception is when you change the ranking day. I have found for a lot of strategies ranking on the 16th changes the lookback and Volatility Attenuator optimal setting. My theory is this is close to options expiry date but I cannot prove that. There are many other parameters you can change but I have not tried to optimize them.

It gets more complicated when you use strategy of strategy like 0 LI Strategy of strategies. The majority of the strategies are not as stable as UIS SPY- Hedged. Therefore you have to try and pick the most stable settings for each. The Strategy of strategy settings in the optimizer are not stable over different time periods so you have to pick the most stable one for that. I think LI is using a 5 year time period and I usually just go with it. If you optimize every month on 5 years you should get similar results for look back and Volatility Attenuator when compared to the LI settings.

The other consideration is if you change a strategy by adding another symbol or strategy it changes everything. For example adding a Hedge to any strategy will change the optimization results. In most cases for the better. I always add a Hedge.

In summary when the optimization is stable like UIS SPY- Hedged you don’t need to optimize often unless volatility changes drastically and that would mean Gold and bonds are not a good hedge. For all the other strategies I don’t think there is a perfect answer but I am hoping LI will add some context to this conversation.

Cheers,
MV

[Mark Vincent]

Frank thank you for sharing the details of how to turn a stock trading system into an options trading system. You are the only one I have found who has described this. I cannot find it anywhere on the internet. You might want to publish this on seeking alpha I’m sure there would be a lot of interest and it would be good advertising for LI. I am trying to turn some of the other systems into options trading systems. For example would the same criteria apply to the NASDAQ 100 leaders? I know it would be a lot of work but I’m sure there would be interest in following your trades and the reason why you placed each one. The greeks seem to be as important as a winning system itself and that is the part that I think people get confused about.

Thanks Again for sharing,
Mark V.

[Mark Vincent]

I really wish LI would get a better forum that can paste with proper formatting and pictures. Or post a quick tutorial on how to post things.

[Mark Vincent]

Thanks Richard I had a quick look and will comment later. How did you paste the screen shots in? Those are very helpful. Saves you describing every parameter.

Cheers,
MV

[Mark Vincent]

Let me ask this a different way.

Does anyone have a logical process to add a strategy to another strategy? For example if you create a strategy why would you add it to the 0 LI Strategies of strategies? I have added a few of my own with very good results.

I’m looking for others thought process.

Cheers,
MV

[Mark Vincent]

Thanks Stefan,

I was referring to this forum as it is not What you see is what you get. If you paste something with formatting it gets distorted. Yes screenshots would be nice to have also.

Cheers,
MV

[Mark Vincent]

The second half of 2016 GLD and TLT were both down. Let’s hope the trend reverses over the next couple of months going into 2021.

[Mark Vincent]

Yes Tail is highly correlated to VXX but with a lot less volatility. It’s only going to go up when the VIX goes up. Just like VXX it lowers volatility but will have a drag on returns. If you don’t want to trade options how can you have a Hedge against left tail risk when all asset classes (Bonds, Gold, Stocks) all go down at the same time. Over the long term your hedged but as we saw from the last few drawdowns during the month all asset classes went down except for volatility. Having a permanent volatility Hedge without options seems impossible for the short term drawdowns? It comes down to are you willing to live with monthly volatility being high and GLD and Bonds will kick in the next month or do you want that permanent protection from Tail or VXX and live with the Drag on returns.

None of the data providers LI uses provide the full history of TAIL is there a reason why?

[Mark Vincent]

TAIL is not suppose to make money it is only to reduce left TAIL risk.
Tail is more uncorrelated to stocks than TLT.
TAIL works better than VXX since it has very little drag.

Yes it has very little history but it hard to create a strategy over the last 3 years that beats the one I posted. Almost to good to be true.

[Mark Vincent]

Frank for those of us who don’t want to use options what do you think of an ETF like TAIL? The backtest looks great. I think to good and I probably curve fitted it with quarterly rebalancing.

I used Tail with QQQ, HEDGE and achieved following over 3 year backtest:

CAGR: 25%
Sharpe: 3.0
Volatility: 8.5
Draw Range: -4.1

Note: I listen to a lot of Resolve Riffs and the focus is on tail risk these days and during market drawdowns liquidity dries up and everything goes down except volatility. LI does not have this in the models I know you trade options to control this just wondering if there is any other way?

Cheers,
MV

[Mark Vincent]

Thanks Frank,

It’s on my todo list to learn options.

[Mark Vincent]

Hello Michael and thanks for posting that question I think about it often and there is no perfect answer.

If you are using the QT software you can see that the Hedging strategies (Hedge) will rotate many uncorrelated assets as follows:
Gold-USD
o GLD
o GSY
o MINT (NOT ACTIVE)
o TIP (NOT ACTIVE)
o UUP (NOT ACTIVE)

Treasury Hedge
o GSY
o TIP
o TLT

If the Bond market becomes uncorrelated to the stock market the Hedge should switch to a different asset class that is performing better and uncorrelated to stocks.
This is my very simplistic view of how it should work and I am sure LI staff will have a better explanation. We as users also rely on LI to update the hedge and allocation based on market conditions. None of us have a crystal ball but LI tries to adjust the hedge based on the current market conditions. LI also updates the maximum allocation of the hedge and the assets in the hedge as volatility is increasing they apply more allocation to the hedge and I am thankful they do. I do not have the time to analyze every uncorrelated asset and make a prediction on how it will perform in the future.

Regards,
Mark Vincent

[Mark Vincent]

Did anyone else get an index error when trying to load the s3-2-4 strategies?

[Mark Vincent]

Thanks for posting Tom,

I cannot get the S3 – 2 – 4 strategies to load. Gives me an index error message. Is anyone else having that issue? Any ideas on how to change the .ini file to make it work?

Cheers,
MV

[Mark Vincent]

Here is my experience over the last 20 years which is my opinion,

I have followed this topic on many investment sites and they all failed to produce Alpha OS. You can have the best strategy to assure you don’t over fit but if the market forces change you are finished. You need to have an edge and a Hypothesis of what the market will do going forward because the past may not hold true. I think the current stats are 95% of active managers don’t beat the market over 10 years. That’s how hard it is to get Alpha. The only thing that matters is OS. You can spend all your time on making sure you don’t curve fit but it may not help. Here is what I do:

1. Use uncorrelated assets (This is an Edge)
2. Use risk parity
3. Use LI to help you do both (The strategies of strategies model is great place to start)
4. Come up with your own Hypothesis that will give you an Edge and allocate 10% to it. Mine is FAANGM.

Good Luck,
MV

[Mark Vincent]

Some questions for the next five years?
– Will inflation rise? If no assets rise.
– Will the US government keep printing money? If yes assets rise.
– Will the government keep servicing debt? If yes assets rise.

My Crystal ball says assets rise until something drastically changes. Like Hyperinflation, a recession or the government stops servicing debt. They won’t stop printing money they have no choice. How long will this incredible bull market last no one knows.

Cheers,
MV

[Mark Vincent]

Dwoods,

Yes it is very surprising that a quarterly rebalance works well. It even works with non leverage just GLD and TLT. Non leveraged 3 year return is over 30% and 2.5 sharpe. Would anyone like to comment on the pros and cons of the following:

– What are the risks of hedging with only GLD and TLT? Is there a scenario where both GLD, TLT and stocks all go down for long period of time. The backtest shows the worst 3 month period was -14% and the strategy did not work well in 2013.

– Is hedging with GLD and TLT better than using QT Hedge? The Backtest would say yes but you loose diversification.

– Is a quarterly rebalance high risk vs a monthly rebalance. The negative is the system cannot react as quick to a downturn and we only had 1 recession in the last 20 years so it is hard to say yes or no.

Cheers,
MV

[Mark Vincent]

Hello Martyfreed,

I have been using LI for over a year and it works. Risk parity models have worked for the last 20 plus years will it work going forward time will tell. Also read about in history when they don’t work. This will give you a basic understanding of LI. Follow some of the models in a simulated account I don’t know your risk profile but if you study the models on the LI website you should be able to pick one that suits your risk profile. If you are an advanced trader then download QT software and after a couple of months you will have a good understanding of LI and QT. The forum has lots of great advice so if you have time read through it and most of your questions will be answered. If you are are stuck or have questions post them and someone will answer them.

Cheers,
MV

[Mark Vincent]

Just copy this and save as an .ini file.

[StrategyTitle]
Extreme TQQQ TMF UGL SR3 RQ L170
[StockItems]
TLT=Barclays long term treasury (10 years),2,2,1
TMF=3x direxion leveraged 20-yr treasury,2,2,1
TQQQ=,2,1,1,0.00,,0,0
UGL=GLD*2,2,1,1,0.00,,0,0
[StockSets]
StockSet63=Extreme TQQQ TMF UGL SR3 RQ L170,1,3,StockSetStrategy63,2020-07-28,2020-07-28,TLT@1,TMF@1,TQQQ@1,UGL@1
[StockSetItems]
StockSet63Item1=0111,StockSet63Item2,0,00000004,2,
StockSet63Item2=0111,StockSet63Item3,1,00000008,2,
StockSet63Item3=1000,StockSet63Item4,2,00000010,2
StockSet63Item4=-,-,2,00001000,2,
[StockSetStrategies]
StockSetStrategy63=2,2,,0111,10,,1
[StockSetStrategyParameters]
StockSetStrategy63=-5,3,170,3,-2,7,-3,7,-6,7,-1,7,0.00,0,-150.00,1,25,1,0.00,0,0.00,0,0.50,1,0,0,0,0,0,0,0,0,0.00,4,0.00,4,0,0,0,4,0,4,0.00,0,0.00,0,0.00,0

[Mark Vincent]

Thanks Frank,

Using the US Mkt strategy would be a much better option. I replaced TQQQ with US MKT strategy and used TLT and GLD. Quarterly rebalance and the results over 20 years are very good especially the last 3 years.

[Mark Vincent]

I’m really curious to see how this does OS. The long lookback and Quarterly rebalancing are not adviseable. It could just be dumb luck and over optimized. With a 3 year CAGR= 90 and 2.5 Sharpe It’s interesting. We will not know until the next major drawdown.

[StrategyTitle]
Extreme TQQQ TMF UGL SR3 RQ L170
[StockItems]
TLT=Barclays long term treasury (10 years),2,2,1
TMF=3x direxion leveraged 20-yr treasury,2,2,1
TQQQ=,2,1,1,0.00,,0,0
UGL=GLD*2,2,1,1,0.00,,0,0
[StockSets]
StockSet63=Extreme TQQQ TMF UGL SR3 RQ L170,1,3,StockSetStrategy63,2020-07-28,2020-07-28,TLT@1,TMF@1,TQQQ@1,UGL@1
[StockSetItems]
StockSet63Item1=0111,StockSet63Item2,0,00000004,2,
StockSet63Item2=0111,StockSet63Item3,1,00000008,2,
StockSet63Item3=1000,StockSet63Item4,2,00000010,2
StockSet63Item4=-,-,2,00001000,2,
[StockSetStrategies]
StockSetStrategy63=2,2,,0111,10,,1
[StockSetStrategyParameters]
StockSetStrategy63=-5,3,170,3,-2,7,-3,7,-6,7,-1,7,0.00,0,-150.00,1,25,1,0.00,0,0.00,0,0.50,1,0,0,0,0,0,0,0,0,0.00,4,0.00,4,0,0,0,4,0,4,0.00,0,0.00,0,0.00,0

Cheers,
MV

[Mark Vincent]

That was very interesting. I added the investment that returns 7% every year to US Market strategy Hedged. Optimized for 3 years and 80% of the time it would allocate 60% to the 7% investment and the rest to the Hedge. Annual return is 10.5% with a sharpe of 3.2 and draw/range of 3.8. For a little extra risk you can add 3% per year to an investment. Obviously the 7% is not guaranteed and has it’s own risk.

[Mark Vincent]

Thanks Frank,

[Mark Vincent]

Thanks,

[Mark Vincent]

Thanks Frank any comments on the following:

I have the below Strategy using TQQQ but the optimization only seems stable with Quarterly rebalance and long look backs. Does this in general raise red flags when the optimization is not steady across different time periods and look backs? I noticed the new leveraged strategies are only stable in the optimization with short lookbacks? I think you mentioned that with leveraged ETF you want short lookbacks and monthly rebalancing to act quick?

Would appreciate your thoughts on leveraged ETF, Rebalance period and lookback period when using the optimizer.

[Mark Vincent]

Hello Frank,

I have the below Strategy using TQQQ but the optimization only seems stable with Quarterly rebalance and long look backs. Does this in general raise red flags when the optimization is not steady across different time periods and look backs? I noticed the new leveraged strategies are only stable in the optimization with short lookbacks? I think you mentioned that with leveraged ETF you want short lookbacks and monthly rebalancing to act quick?

Would appreciate your thoughts on leveraged ETF, Rebalance period and lookback period when using the optimizer.

Cheers,
Mark V.

[StrategyTitle]
0 TQQQ TMF UGL SR3
[StockItems]
TLT=Barclays long term treasury (10 years),2,2,1
TMF=3x direxion leveraged 20-yr treasury,2,2,1
TQQQ=,2,1,1,0.00,,0,0
UGL=GLD*2,2,1,1,0.00,,0,0
[StockSets]
StockSet7=0 SV RRSP TQQQ TMF UGL SR3,1,3,StockSetStrategy7,2020-06-24,2020-06-29,TLT@1,TMF@1,TQQQ@1,UGL@1
[StockSetItems]
StockSet7Item1=0111,StockSet7Item2,0,00000004,2,
StockSet7Item2=0111,StockSet7Item3,1,00000008,2,
StockSet7Item3=1000,StockSet7Item4,2,00000010,2
StockSet7Item4=-,-,2,00001000,2,
[StockSetStrategies]
StockSetStrategy7=2,2,,0111,10,,1
[StockSetStrategyParameters]
StockSetStrategy7=-5,3,170,3,-2,7,-3,7,-6,7,-1,7,0.00,0,-150.00,1,25,1,0.00,0,0.00,0,0.50,1,0,0,0,0,0,0,0,0,0.00,4,0.00,4,0,0,0,4,0,4,0.00,0,0.00,0,0.00,0

[Mark Vincent]

Hello Frank is there a strategy for mixing different leverage ratios of different asset types? If UGL gives you better results than UGLD then what is the risk of using it? Most of the Strategy’s will give you better results using UGL but since it has less volatility the percent allocated is higher than SPXL or TMF. This could be because Gold has outperformed both SPXL and TMF over the last couple of years. If the return is higher and the optimizer is stable why not use UGL?

Interested in your thoughts.

Regards,
Mark V.

[Mark Vincent]

Thanks Frank I missed that. UGL in most strategies outperforms UGLD. And UGL has outperformed SPXL over the last couple of years. What is the danger in just using UGL? A better question is what is danger in mixing different leverage ratios if the results are better in the backtests and the optimizier looks good?

[Mark Vincent]

Hello Frank,

What is the difference between UGL and UGLD. They are both 3 times leverage but the returns are different? More Blunt why is UGL not a good choice to replace UGLD.

Regards,
MV

Note: Does anyone know why they are closing them?

[Mark Vincent]

Sorry this explains it:

https://logical-invest.com/ziv-myrs/

My personal opinion is volatility spikes will be more frequent instead of once a year it will be 2 or 3 times a year not sure if ZIV is a good choice.

[Mark Vincent]

Hello James here are my thoughts,

Trading for about a year very pleased. Slippage trading costs are not an issue. I can’t comment on the portfolio you mentioned my favorite is the Top 3. The results are very close to what is published.

As long as risk parity and uncorrelated assets hold up we are good. They did not work well in the 80’s will they work in the future do not know. Risk parity works now and probably to well. Here are a few thoughts:

If you traded a model you should achieve close the results during that given year. Just check out the year end results they will be close. BRS was a disappointment but black swan events are part of investing. Everything else broke down but most of LI systems did not have as much drawdown as SPY.

The models do change and it would be nice if they showed the real results with simulated and the point in time where the model changed other websites do this but there are pros and con’s to both. You could download previous version of LI and string them together but I don’t care.

Time horizon I think is very important when evaluating a system. 5 years vs 20 years you would want very different risk models but maybe not different assets. The models are trying to give you an edge there is no free ride but I would be willing to bet over 5 years I will sleep better with LI than without.

Understand that by controlling volatility you are increasing your chance of success. That is proven. You can read about it on Websites like Resolve asset management. They prove this methodology but they are much more conservative. Which killed their returns for the last 10 years. They are also globally diversified on every asset class which hurts them over the last 10 years since the US markets are so dominate.

I also like LI since the only input is price. You can’t hide behind price. Other sites that use fundamentals they tend to break down quickly and you need to pivot all the time.

Picking an LI model for the first time is confusing there is a lot of choice but after following a few for a couple months you will understand them better. Most models have a common theme. It would take you a couple months to learn them all and another couple of months to learn all the advanced boundaries.

LI updates the models this is great I don’t have to. They are changing as the market changes and that is very important. The current trend is more hedging. Some would call this curve fitting but as long as the changes achieve better risk adjusted returns in the future I am good with it.

Building your own models yes you need a good Hypothesis mine is technology rules the US Economy and now the world that would be FAANG +MS. Imagine if they disappeared went to zero or even 50% decline? I stated this back in 2009 on other forums and no event yet has proven me wrong. That being said if I am retiring next year I would not want a large tech component because of volatility. And LI is perfect for my hypothesis and Hedging you just need to figure out your time horizon and risk.

Back testing is good but OS is all that matters. You need to have a hypothesis on what is going to happen to give you an edge. Be conservative only beat the market by 1% over 10 years you are better than 95% of mutual fund managers. LI can help you do that.

Hope that gives you some perspective,
Cheers,
Mark V.

[Mark Vincent]

The question is when don’t they win. Just like every market timer your right once every 20 years but you missed the bull. Right now volatility is over 30 I have missed out on a 5% uptick since I liquidated March 10, 2020. Except for 20% gold. Right now with volatility so high I am happy to sit it out. Interested to see others opinions on trading when vix is over 30?

The models are holding up but is there a next leg down? Is there a scenario where you make 15% next year and volatility is over 30? Without 20% drawdown? If I knew I would do it but I don’t.

Just waiting?

Cheers and stay safe.
MV

[Mark Vincent]

Thanks Pat I did not know any of that.

[Mark Vincent]

1. All strategies are updated Monthly Except for Maximum Yield Strategy (MYRS) which is updated twice per month. If you are using the website the strategies will be updated on the 1st of the month and 15th for MYRS. If you are using Quantrader which I highly recommend then you can get the allocations after the price data is available (A day earlier).
2. What strategies/portfolios you see is driven by your plan. The process to calculate is basically what you have today plus or minus what the strategy recommends. The website and Quantrader has an allocation tool and will help you know the current allocations. You have to calculate what to buy and sell.

A typical change (Turnover) is hard to calculate it varies by strategy and month. If you use Quantrader you can download the changes and analyze it to calculate turnover. The turnover drives the amount of trades and slippage. Slippage is not a problem since the most assets are highly liquid. There is trading each month and you will see something different. Different assets and different allocations. The exact amount again is hard to calculate. For me running 6 portfolios it is less than an hour per month of trading. I have created a spreadsheet that calculates it for me. The Quantrader software has a function called Cons. Allocation it helps you calculate any strategy from LI or your own. The math again is up to you for what to sell and buy. I took a quick look at the Dow 30 Strategy on the website and most months the stocks change 2 out of 4 and sometimes 3 out of 4. The Hedge changes also and the exact amount is hard to calculate. If you want more details on the calculation it is basically what you have today plus or minus the new recommendations.
Hope this helps.

Cheers,
Mark V.

[Mark Vincent]

Yes that would be nice to have. The CAGR does not help me.

[Mark Vincent]

Hello Richard I have tried both ways and it works for me.

[Mark Vincent]

I cannot replicate this error anymore thanks Frank.

[Mark Vincent]

Hello Richard this happens to me. To get around it I do the following:

1. Use your mouse to change the dates.
2. Use the tab key to highlight Apply
3. Hit enter (Don’t use your mouse to select Apply)

The above procedure works for me. There are a few other functionalities I use the tab keys and enter keys for and not the mouse. I cannot remember them.

Cheers,
MV

[Mark Vincent]

Risk Parity and Tactical Asset allocation is not going to work in this envirnment as the big guys need to unwind. Cash is king.

[Mark Vincent]

I cannot replicate the results either. My results are not even close. Maybe someone else has the magic formula.

[Mark Vincent]

It’s probably easier to to just rebuild it yourself (Good practice and Learning) since it requires 5 different strategy changes. Then you create the 2 strategy of strategy and finally the Morpheus strategy. If your still having issues let me know and I can try and create the 8 different .ini files for you.

The settings for all of these are in the link below:
https://logical-invest.com/401k-backtesting-morpheus-etf-strategy/

Here is a high level summary:

1. Copy, Rename and modify 5 existing strategies:
– BRS
– GLD-USD
– Nasdaq 100 Hedged
– MYRS
– UIS SPXL-TMF 3x Leveraged

2 Create 2 Strategy of Strategy
– Blue Pill (BRS, GLD-USD)
– Red Pill (Nasdaq, MYRS, UIS SPXL)

3. Create the final Morpheus strategy
– Blue Pill and Red Pill

Cheers,
Mark V.

[Mark Vincent]

+2 on forum search.

[Mark Vincent]

Hello LI Community,

As mentioned above this is not a recommendation but this strategy is up 48% in 4 months but volatility is 21%. On the flip side my conservative model is up 10% with volatility of 4%. It will be interesting to see what happens in the next pullback. When models shootup like hockey sticks it’s usually a sign of reversion to the mean is coming soon. Let’s wait and see.

Happy Trading,
Mark Vincent

[Mark Vincent]

Hello Delphion,

I am not sure what you mean by period but I presume you mean History Range and not the Lookback(LB)Per.(Days). The current conditions in a 12 year bull market the settings in most strategies are set to hedge more. This sacrifices a bit of Alpha but I would agree it’s the right choice. There is no one History Range that is best in my opinion. If you take a very simple strategy like UIS SPY-hedged and run it across multiple time frames like 2, 3, 5, 10, 20 years you will see that the optimizer is very stable across all Volatility Attenuator options and lookback periods. Which means it is more reliable and more likely to have the same future results but nothing is guaranteed. If you have the opposite when you run the optimizer the strategy is probably not that stable and is very sensitive to any changes. You probably don’t want this. The optimizer settings and how to use it are one of the hardest things to figure out what is best. I am hoping LI or other members can add to the discussion. For instance I have never used the advanced settings I am not sure how or when I would use them.

Regards,
Mark Vincent

[Mark Vincent]

Hello Ian. First I would like to say that Quantrader is worth it. I have really good returns with it with very low volatility. 2019 was also a dream year in a 12 year bull market. The answers to your questions are not straight forward and these are my opionions and might not be the best answers. I’m sure other members have better solutions that we can all learn from.

1. The more you rebalance a strategy the more you open yourself up to slippage. None of the LI strategies rebalance weekly and only one (MYRS) rebalances 2 times per month. This might suggest it is very hard to execute a weekly strategy but I am open to anything. It’s also more work.

2. To operationalize your strategy you need to do the following 4 or 5 times a month just like you would with MYRS. In the post below it’s only 2 times per month but the concepts can be applied every day if you wanted to. This is also a lot more work to calculate and execute.
https://logical-invest.com/forums/topic/how-to-calcuate-the-myrs-strategy-at-the-15th-of-the-month/

3. The consolidated allocations has the ability to rebalance every day. Monday morning you would pick the option (base on last close date) for the strategy you want to rebalance. Then follow the procedure I posted in step 2. The values will not be exact. This is the same issue with rebalancing on the 15th of the month with MYRS.

Hope this helped,
Mark Vincent

[Mark Vincent]

I just realized when SH is on you would not be in SPY you would subtract the difference and use what ever is greater, the rest in cash. Not sure if that would make a difference.

[Mark Vincent]

Here is the Hedge With SH added:

[StrategyTitle]
Hedge SH
[StockItems]
#GLD-USD=#GLD-USD,2,1,1,0.00
#Treasury hedge=#Treasury hedge,2,1,1,0.00
GLD=Gold,2,1,1
SH=,2,1,1,0.00,,0,0
SPY=SPDR S&P 500 Index,2,1,1
TLT=Barclays long term treasury (10 years),2,2,1
[StockSets]
StockSet43=Hedge SH,1,3,StockSetStrategy43,2020-02-04,2020-02-06,#GLD-USD@1,#Treasury hedge@1,GLD@1,SH@1,SPY@1,TLT@1
[StockSetItems]
StockSet43Item1=111111,StockSet43Item2,0,00000004,2,
StockSet43Item2=110100,StockSet43Item3,1,00000008,2,
StockSet43Item3=000001,StockSet43Item4,2,00000010,3
StockSet43Item4=000010,StockSet43Item5,2,00000020,3
StockSet43Item5=-,-,2,00001000,3,
[StockSetStrategies]
StockSetStrategy43=2,2,used only a sub strategy,110100,10,,1
[StockSetStrategyParameters]
StockSetStrategy43=-3,3,92,3,-2,7,-2,7,-6,7,-1,7,0.00,0,0.00,0,0,0,0.00,0,0.00,0,0.00,1,0,0,0,0,0,0,0,0,0.00,4,0.00,4,0,0,0,4,0,4,0.00,0,0.00,0,0.00,0

Here is UIS SPY with the Hedge and SH:

[StrategyTitle]
Hedge SH
[StockItems]
#GLD-USD=#GLD-USD,2,1,1,0.00
#Treasury hedge=#Treasury hedge,2,1,1,0.00
GLD=Gold,2,1,1
SH=,2,1,1,0.00,,0,0
SPY=SPDR S&P 500 Index,2,1,1
TLT=Barclays long term treasury (10 years),2,2,1
[StockSets]
StockSet43=Hedge SH,1,3,StockSetStrategy43,2020-02-04,2020-02-06,#GLD-USD@1,#Treasury hedge@1,GLD@1,SH@1,SPY@1,TLT@1
[StockSetItems]
StockSet43Item1=111111,StockSet43Item2,0,00000004,2,
StockSet43Item2=110100,StockSet43Item3,1,00000008,2,
StockSet43Item3=000001,StockSet43Item4,2,00000010,3
StockSet43Item4=000010,StockSet43Item5,2,00000020,3
StockSet43Item5=-,-,2,00001000,3,
[StockSetStrategies]
StockSetStrategy43=2,2,used only a sub strategy,110100,10,,1
[StockSetStrategyParameters]
StockSetStrategy43=-3,3,92,3,-2,7,-2,7,-6,7,-1,7,0.00,0,0.00,0,0,0,0.00,0,0.00,0,0.00,1,0,0,0,0,0,0,0,0,0.00,4,0.00,4,0,0,0,4,0,4,0.00,0,0.00,0,0.00,0

[Mark Vincent]

Thanks Patrick,

Just did it this month worked fine took a couple of minutes.

Cheers,
MV

[Mark Vincent]

Hoping for an easier way but I just realized that you can only use the shares you own at the 1st of the month when no other strategy uses MYRS symbols (UGLD, ZIV and TMF).

Using the first method and the allocation tool to calculate MYRS at the 1st of the month and then on the 15th is the only way when 2 or more strategies require you to buy and sell (UGLD, ZIV and TMF).

Regards,
MV

[Mark Vincent]

Correction to the steps you already own symbols from MYRS therefore the steps are:

1. Multiple NAV by % MYRS contributes the overall mega strategy
2. Enter that value in Allocation tool using MYRS
3. Set Allocaiton tool to 15th of month and calculate shares for all symbols.
4. The difference between what you already own (1st of the Month) and step 3 is the shares you buy or sell for each Symbol that are only contributed by MYRS.

[Mark Vincent]

I run QT on a Windows HP laptop i5 processor and 16 GB ram no issues. More complex strategies take longer to run but that is to be expected. The only issue I had was when I imported my own stock symbols that only had 6 months of data. QT crashed.

[Mark Vincent]

Hello LI community,

I would never suggest anyone invest in Leveraged ETF but they are fun to build. I know LI has a UIS SPXL strategy why is there not a UIS TQQQ strategy? The Nasdaq out performs the S&P and US is built on technology just look at fang stocks.

Is there a better way to build a UIS TQQQ strategy? The one I created is killing it. Comments from members would be appreciated.

Note: I have a very small amount of real money in the strategy for a very short period of time. Once the next correction comes and I lose 30 or 40% I might not be so curious.

Cheers,
MV

[Mark Vincent]

Here you go.

[StrategyTitle]
UIS QQQ-hedged
[StockItems]
#Hedge=#Hedge 1,2,1,1,0.00
QQQ=PowerShares Nasdaq-100 Index,2,1,1
[StockSets]
StockSet79=UIS QQQ-hedged,1,3,StockSetStrategy79,2019-05-08,2019-06-03,#Hedge@1,QQQ@2
[StockSetItems]
StockSet79Item1=11,StockSet79Item2,0,00000004,2,
StockSet79Item2=11,StockSet79Item3,1,00000008,2,
StockSet79Item3=-,-,2,00001000,3,
[StockSetStrategies]
StockSetStrategy79=2,2,Logical Invest Universal Investment Strategy,11,10,,1
[StockSetStrategyParameters]
StockSetStrategy79=-3,3,134,3,-3,7,-1,7,-6,7,-1,7,0.00,0,-200.00,1,25,1,0.00,0,0.00,0,0.50,1,0,0,0,0,0,0,0,0,0.00,4,0.00,4,0,0,0,4,0,4,0.00,0,0.00,0,0.00,0

[Mark Vincent]

Not ideal but you can replace the Nasdaq 100 strategy with UIS QQQ. I use DR not SR and it did 26% last year with 4% drawdown. Less trading and the majority of the time it was 60% Hedge and 40% QQQ. If you want the .ini file let me know.

[Mark Vincent]

Hello Manu,

In short I try to find something else that will accomplish my objectives. For example I only use GLD-USD which uses the ETF (GLD and GSY) these are very liquid. GLD-USD Aggressive uses the ETF(CROC, EUO, GLD and YCS). CROC AND EUO are not that liquid. The difference in performance is minimal so I just stick with GLD-USD.

Cheers,
Mark V.

[Mark Vincent]

Hello Ras,

This strategy uses Maximum Yield Strategy (MYRS) which rebalances twice per month on the 1st and 15th. The rest of the assets rebalance once per month on the 1st. From what I understand when using MYRS you only rebalance it on the 15th of the month and leave the rest of the assets. If you look at the MYRS strategy under the section titled “Allocations of Maximum Yield Strategy” it says it was last rebalanced (as of 2019-10-16). The other strategies like “BRS” listed under Volatility <15 the Allocation last rebalanced (as of 2019 10 01).

Here are the links to the strategies descriptions. The rest are there also.
BRS: https://logical-invest.com/app/strategy/brs/bond-etf-rotation-strategy
MYRS: https://logical-invest.com/app/strategy/myrs/maximum-yield-strategy

Regards,
Mark V.

[Mark Vincent]

Thank you for sharing Tom,

Is there anyway you can post the .ini files for these strategies?

For example here is the US Market Strategy with UIS QQQ (UIS QQQ is the same as UIS SPY using QQQ)

[StrategyTitle]
0 UIS QQQ US Market Strategy TLT GLD
[StockItems]
#UIS QQQ-hedged=#UIS QQQ-hedged,2,1,1,0.00
DIA=,2,1,1,0.00,,0,0
GLD=Gold,2,1,1
QQQ=PowerShares Nasdaq-100 Index,2,1,1
SPLV=SP500lowvola,2,1,1,0.00,,0,0
SPY=SPDR S&P 500 Index,2,1,1
TLT=Barclays long term treasury (10 years),2,2,1
[StockSets]
StockSet18=0 UIS QQQ US Market Strategy TLT GLD,1,3,StockSetStrategy18,2019-08-12,2019-08-18,#UIS QQQ-hedged@1,DIA@1,GLD@1,QQQ@1,SPLV@1,SPY@1,TLT@1
[StockSetItems]
StockSet18Item1=1111111,StockSet18Item2,0,00000004,2,
StockSet18Item2=1111111,StockSet18Item3,1,00000008,2,
StockSet18Item3=0000010,StockSet18Item4,2,00000010,3
StockSet18Item4=-,-,2,00001000,3,
[StockSetStrategies]
StockSetStrategy18=2,2,,1111111,10,,1
[StockSetStrategyParameters]
StockSetStrategy18=-3,3,92,3,-6,7,-2,7,-8,7,-1,7,0.00,0,-200.00,1,30,1,0.00,0,0.00,0,0.00,1,0,0,0,0,0,0,0,0,0.00,4,0.00,4,0,0,0,4,0,4,0.00,0,0.00,0,0.00,0

[Mark Vincent]

The strategy Max drawdown is 50%. That means your investment is cut in half very quickly. On the upside the likelihood of both stocks, Gold and bonds going to zero is almost zero. If you have a long term horizon and nerves of steal this strategy will work but it’s hard to swallow a 50% loss.

[Mark Vincent]

Crazy Returns leveraged Models.
I created a Meta Strategy for fun using 3 other strategies that seems to switch assets well. The Return is 50% over 5 years. The unleveraged version does well also. Her it is:
1. Leveraged US Market Strategy (LB=20, SR, ETF=2, Max Allocation=70, Min Allocation =30, Vol Att=0)
a. SPLV
b. SPXL
c. TMF
d. TQQQ
e. UDOW
f. UGLD
2. UIS using TQQQ (LB=28, DR, ETF=1, Max Allocation 90, Min Allocation=0, Vol Att =0)
a. TLT
b. TMF
c. UGLD
d. TQQQ
3. MYRS ZIV-hedged
a. ZIV
b. TMF
Meta Strategy (LB=104, SRRP, ETF=2, Max Allocation = 70, Min Allocation = 0, Vol Att=1.5)

[Mark Vincent]

Sorry I meant in Quant Trader. What are the optimizer settings? I’ve tried SR and SRRP and nothing works.

[Mark Vincent]

Newbie question:

I don’t understand the following statement made by Frank: The optimizer changes the allocation for the metastrategy every month?

“No, I don’t think it makes sense to change the meta strategy allocation each month. The problem is that if you would for example change from the Nasdaq 100 strategy to a safer strategy like Bond Rotation, then you profit only half if there is a recovery. It’s like selling half of your Nasdaq100 allocation and go to cash. This means that you realize a loss with no chance to recovery. The Nasdaq 100 strategy had a lot of such one month draw downs but it had even more really big monthly gains with single stocks surging 20% or more.
However due to the high valuation of the Nasdaq100 and the normally underperforming summer period I would not invest too much in the Nasdaq100.”

Cheers,
Mark Vincent

[Author]

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