[StefanM]

I would add that in this forum (not sure what the forum software type is), it is also difficult to post screenshots to illustrate strategy points. Could the LI team find a way to facilitate uploading screenshots please?

The ‘Notify me of follow-up replies via email’ is not working.

Thanks.

[StefanM]

The other comment I would make is that the data is pasted as text instead of values which means you have to manually clean the data, so you have to remove $ signs out of the symbol price and amount columns to get an excel table to add up to the consolidated allocation (for checking purposes).

Is there a way to paste as values instead of text?

[StefanM]

Hi, the cut paste does not always work. I am finding that it ignores allocations to TQQQ, VGT, MINT and NEAR for example. Thus, I get a pasted table with missing weightings, symbol prices, shares and amount. I then have to populate the table manually with the missing data…

[StefanM]

Thanks very much Alex, the article was interesting reading. I will use the OOS QT methodology and see how I get on (it has certainly saved me from creating my own approach within QT!).

I am sure you have come across the book ‘Systematic Trading’ by Robert Carver; he was a London-based manager of systematic hedge funds. One of his key points when optimising strategies is to avoid ‘cheating’ (to use his language). By which he means that by optimising over in-sample data, the parameters thus generated would never have been available to use within that data set and thus the performance indicated on a backtest over this data would not have been what was actually achieved. My interpretation is that we would have been at risk of greater volatility and greater drawdown than the backtest would have suggested. In short, none of us has a time machine available to go back and trade using the parameters just identified.

In a way very similar to your approach, he then says that we should craft a rolling series of sample vintages (i.e. rolling series, or chunks, of sample data) on which to generate optimisations which are then applied to the immediately following out of sample data period over which the previously-identified parameters are backtested.

The challenge, as you have identified in the article, is that the natural next step is to generate consecutive sample vintages and their subsequent optimised parameters; once you have say, five or ten sample vintages, how do you take the results of these vintages and convert them into a single set of parameters to use going forward? Manual observation, or averaging or perhaps let QT do the heavy lifting?
One goal would be for each sample vintage to cover each subset of market environments, pre crash, post crash, market rise, market top etc. In that way hopefully we would have a suite of parameters for each environment. The challenge would then be how to weight each set of market environment parameters in a non-discretionary way…

[StefanM]

In response to Frank’s comment about trading with margin at IB, for UK retirement funds held within a tax-exempt wrapper, IB have confirmed that margin trading is not available to such accounts, which is somewhat unfortunate as performance for leveraged QT strategies will be quite a lot lower given the requirement to match the risk of the remaining 3x tickers in the strategies.

Hopefully, some other issuer will provide 3x GLD…

[StefanM]

Thanks Frank; I omitted to mention that my comment was in the context of a retirement fund account at IB.

I will check whether they will allow holdings on margin for such an account.

[StefanM]

My understanding is that as you have to purchase 3x the amount of GLD to substitute for UGLD in order to equalise the risk with the other leveraged ETFs; in order to achieve that, you might require a significant amount of extra equity investment (i.e. being 100% of your original equity position plus the equity required for 2x extra GLD over and above your pre-existing consolidated allocation of GLD).

If, for example, you need 50% extra equity, I would then scale back all positions in the indicated consolidated allocation by 100%/150%, to get back to your original equity available. This might mean that you can only earn 100/150 of the strategy results though…

The above approach might be incorrect; perhaps someone in the LI team can provide further guidance.

I hope that the consolidated allocation table in QT can be amended at some point to allow for substitution of unleveraged ETFs for leveraged ETFs.

[StefanM]

Hi Frank, in order to swap in UGL for UGLD in our own QT strategies (and thus seek to replicate UGLD’s 3x leverage using a ticker with 2x leverage), would we go into Strategy Manager, pick our strategy and change the ‘Multiplier’ on the UGL ticker to 1.5 (from ‘not defined’)?

In the Consolidated Allocations, for those strategies so amended, would they then allocate 150% of UGL (instead of 100%) of the chosen/optimised ETF allocation within that strategy (thus providing a work-around for the desired leverage)?

If my understanding is incorrect, can you please explain how we can replicate in QT leveraged ETFs using unleveraged or different leverage ETFs?

Thanks

[StefanM]

Thanks Alexander.
Would you suggest selling out of UGLD positions urgently and leaving proceeds in cash (or another leveraged GLD product)?

[StefanM]

Thanks Frank.

[StefanM]

[post deleted]

[StefanM]

Hi all, we look forward to receiving the new version of QT that can use Tingo at the earliest as some of my strategies are crashing when making minor presentational amendments (e.g. adding SPY as a benchmark) using the Yahoo data (where on data-refresh, many symbols show up with errors that have to be ignored).
Thanks in advance.

[StefanM]

Hi Deshan

In one of Frank’s other posts, he suggests remaining out of the markets until the VIX has fallen to around 25.

I think that the reason for this is that all LI systems are optimised on maximising Sharpe over a certain lookback period. This then gives the recommended ETFs for the following calendar month. My observation is that the systems are optimised to work best with a low(er) volatility environment.

My sense is that the risk with VIX being as high as it now (52 today) is that the chosen ETFs can swing wildly high then low over multiple days during the following month. Given that each system, at the start of a month, chooses a greater or lesser exposure to the equity ETF and the hedge ETF, it might be down to luck as to whether the system chooses an allocation which is profitable during that following month (i.e. the daily results will be highly volatile and the monthly result not necessarily profitable despite ‘paying’ the price of high volatility).

Sometimes, leveraged systems can give a windfall (for example, a greater than 10% daily profit) on an individual ETF position. One could take that profit (i.e. close the individual ETF position) and watch the remaining positions (i.e. checking that they do not fall into loss) until the end of the month and then rebalance. This, however, is more an ‘active management’ style.

One could also say that investing is to a great degree about ‘not losing money’, which could be translated as not exposing one’s portfolio to excessive risk of loss (as we know that markets fall much more quickly than they rise and that drawdowns are emotionally hard to recover from and require ever greater percentage profits to cover the previous losses). Now is probably a time of excessive risk (without a sufficiently high probability of reward). Having said that, the VIX is coming down, and investing a small percentage of your portolfio (‘toe dipping’) might be a sound policy.

Side note: I suspect that the lookback period also should be viewed in conjunction with the holding period. Thus, having an optimised lookback period of less than 20 days (i.e. the number of trading days in an average month) may give unexpected results when used with a monthly rebalancing system. A shorter lookback than 20 days might suggest a weekly rebalancing system. Perhaps the LI team can provide their observations on whether this makes sense.

[StefanM]

Hi LI team, would it be possible to be sent an email when a new version of QT comes out?
I find myself unawares that a new (and no doubt improved) version is available.
Thanks

[StefanM]

Thanks, Frank; I have also been wondering if VIX above or below a certain level would act as a further refinement to the QT systems.

Having said that, it would probably mean exiting a strategy on a non-rebalance day. If such an approach reduced drawdown, then it might have merit.

A further refinement to consider would be exiting certain individual positions within a strategy that are in danger of becoming losing positions and retaining profitable positions until the month end/rebalance date. That would make the strategies more ‘active’ which may or may not suit some or most subscribers.

[StefanM]

I’d also like to give a vote of thanks to Frank and the LI team during this period.

Thanks also for the interesting observation about looking at the Net Assets of the hedge tickers and seeing that they are below NAV. Certainly appears to be an opportunity…

[StefanM]

Would the VIX falling to, say, 25 or below, be a reasonable indicator to re-enter the markets?

What other metrics do LI members find helpful?

Thanks

[StefanM]

I agree that the choice of which Lookback period to run the Optimiser is one of the most challenging and somewhat opaque aspects of QT.

I agree that finding a strategy with stable results over 2, 3, 4, 5, 10, 20 year periods (not 1 because that is too much of a curve fit), is ideal.

Having said that, I would suggest a Lookback of 2 years for the more aggressive strategies as they may have a limited shelf-life because market conditions keep changing.

[StefanM]

Please bring back the Forum search.

It was here around 6 months/ 1 year ago, then it disappeared.

[StefanM]

Hi ikoslela2

Some time ago, I also built a copy of the Morpheus strategy following Tom Gnade’s posting of his results.

I also could not replicate anything like those results, no matter how many times I attempted it.

I see that in his newer posts, he appears to have dropped his leveraged strategies (aka Morpheus), in favour of Cash Sharpe and Volatility limits.

I have come to realise that minimising drawdown whilst letting the gains accrue is the name of the game.

I suggest experimenting with the latter approaches above to see if your metrics improve.

[StefanM]

Thanks Frank, I’ll look into this approach.

[StefanM]

@Tom Gnade

Thanks for your reply. Following your comment, I have been experimenting with the ‘Cash Sharpe Lim.’ box under ‘Advanced’/’Strategy Parameters’ and am getting useful results against risk strategies, so thanks for this tip. It doesn’t appear to work using DR rank, however is fine for SR, SRE etc. You have to experiment to get an equity curve with the right level of risk on/risk off but I agree that it may have some capacity to go through downturns. Time will tell whether the reality follows backtest…

I agree with your point on the earnings volatility in the Nasdaq100, and I have developed a single ETF tech strategy around VGT which doesn’t have the smooth equity curve of Nasdaq100 but captures a fair return in the tech market. If you go to ETFdb (https://etfdb.com/tool/etf-comparison/), VGT comes off well in comparison to QQQ and XLF.

I also agree that one should apply the Volatility Limit and Cash Sharpe Limit once you’ve optimised the initial strategy i.e. you’ve got the right mix of risk and hedge etc.

[StefanM]

Hi jmont42, I would strongly recommend purchasing Quanttrader if you (like me) prefer knowing whats going on ‘under the hood’.
Yes, its challenging to have to become a ‘quant’ but I found the journey very worthwhile. LI have made the quant journey the easiest it can be without having to go to University!

[StefanM]

Hi, there used to be a search function but it was removed.

LI team, would you please look at reinstating the search function on this forum?

Thanks

[StefanM]

Tom, you say in your post above:

“Optimized over a 20-year timeframe, here are the results:

QQQ 345.27% {CAGR:6.402, SR:0.232, V:27.548, DD:-82.97} Holy sh%t that’s a serious drawdown! If only we had simple cash stops in place…
S3 QQQ with simple cash stops 819.14% {CAGR:11.107, SR:0.529, V:21.008, DD:-56.16}
S3 QQQ Rotator with full cash stops 1447.55% {CAGR:14.320, SR:0.865, V:16.551, DD:-21.99}”

Well, I tried to replicate your results, using a Static Rank algo with QQQ and #CASH, max 70% allocation, optimised over 20 years and these are the results:

CAGR: 5.592%
Sharpe Ratio: 0.294
Volatility: 19.019
Drawdown: 67.51%

Like Tom’s previous posts on his ‘Beast’ algorithm, I find it impossible to replicate his results.

Unless we see a post of the .ini file for Tom’s strategies, I remain highly skeptical that anything like these results can be achieved.

[StefanM]

I’m attempting to replicate your ‘cash stop’ approach by introducing the #CASH strategy against SPLV (only). I get pretty unhelpful results:

– QT doesn’t even select SPLV and only chooses #CASH.
– I entered ‘1’ into the ‘Cash Sharpe Limit’ box but this didn’t do much good.

Can you please explain how to program up your ‘Cash Stop’ approach?

Thanks

[StefanM]

Hi Tom

I note your comment: ‘I also like to avoid holding stocks if they are going to announce earnings during that monthly investment period’.

Is your final result based upon manually having to filter out those stocks about to announce earnings in that month or did you just take QT’s recommendation (without filtering for earnings)?

Thanks

[StefanM]

Thank you Frank.
Logic would suggest that a 10% stop loss would have avoided Nasdaq100’s maximum drawdown of 30%.
Is there a way in QT514 to apply a stop loss to the substrategies to test the theory?
Thanks

[StefanM]

Thanks Vangelis, your solution has worked.
I approached it thinking I needed to tick the box first, then enter a max allocation percentage, however I am happy to do what works.
Thank you.

[StefanM]

Hi all,
Following on from my post above, in the Nasdaq 100 hedged strategy, in order to see whether I could tick/untick a box, I found I was able to untick the TMF Max allocation box, however when I came to re-tick the Max allocation box (so as to reinstate the LI 50% max allocation to TMF), I was not able to.
I then chose not to save the strategy (again, so as not to amend the original LI strategy). When I re-opened Nasdaq 100, I found the TMF Max Allocation had been unticked, even though I had not saved the strategy.
Can anyone please kindly assist.
Thanks

[StefanM]

Hi all,

Similar to G Capistrant, in QT 513S, in Portfolio Manager, under Graphs>Portfolio>Components, I am not able to select and change ‘Min.allocation’, ‘Max.allocation’ or any of the other check boxes.

Can this please be looked at?

Thanks

[StefanM]

Thank-you Frank, will do.

[StefanM]

I tried loading CURE data with Google datafeed but for some reason, WDAY was downloaded…not sure what is occurring in the background.

[StefanM]

Hi, I am having the same data-load failure with CURE (Direxion 3x Healthcare Bull). If someone would kindly assist please.
Apologies for the continued requests.
Thank you.

[StefanM]

Hi, I am having the same data-load failure with VFINX and VUSTX. If someone would kindly assist please.
Thank you.

[StefanM]

Thanks Frank.

[StefanM]

Thank you Frank.

Here is an interesting article on ETF Trends talking about GLDW, a USD-hedged physical gold ETF: http://www.etftrends.com/2017/01/why-the-first-currency-hedged-gold-etf-now/

This was my takeaway from the piece: “For instance, from the end of 2013 through the end of 2016, the U.S. dollar appreciated against a basket of foreign currencies, and gold prices in USD declined from $1,205 per ounce to $1,146 per ounce, or a 5% decline. However, if an investor took away the strengthening dollar from the equation, gold priced in non-U.S. currencies, like the euro currency, rose from €873/oz to €1,096/oz, a 25% increase, according to Bloomberg data.”

Would it be worth substituting GLDW for GLD in the various LI strategies?

Thanks

[StefanM]

Hi Alex

I am using the excel portfolio builder for the first time. In a custom portfolio I have the following result:

Total Return: 1031%
CAGR: 34.1%
Period: 11/08/08-24/04/18 (i.e. nearly 10 years)

Question:
The CAGR required to achieve 1031% over 10 years is 26.3% (i.e. 10th root of 10.31). Why does PB show a CAGR of 34.1%?

Thanks

[StefanM]

Hi Alex

I am using the excel portfolio builder for the first time. In a custom portfolio I have the following result:

Total Return: 1031%
CAGR: 34.1%
Period: 11/08/08-24/04/18 (i.e. nearly 10 years)

Question:
The CAGR required to achieve 1031% over 10 years is 26.3% (i.e. 10th root of 10.31). Why does PB show a CAGR of 34.1%?

Thanks

[StefanM]

Dear Vangelis, thank you for your helpful reply, I appreciate it.

[StefanM]

Dear Vangelis

Thank you for your reply.

Let me put my comment another way – having received the LI Investment Outlook last Thursday 1st March 2018, which stated ‘We would also like to remind subscribers that we do not recommend using the 3x leveraged strategies (ie, 3x UIS) while volatility sits at higher levels’, I took it to mean that the LI team have discretionarily overridden the 3xUIS for very good reasons (the basis of such reasons were not explicitly stated) and as the Investment Outlook was silent on how to action or interpret such a recommendation, I took it to mean that any investment in 3xUIS should be closed and rotated into 1xUIS. I assumed the above Investment Outlook comment was borne from the LI team’s significant prior investing experience (being greater than mine).

I duly sold my 3xUIS investment and realised a loss.

I am concerned that the LI team can make such a strong comment such as appearing to recommend the overriding of a strategy and not expect subscribers to take some sort of immediate action in order to follow this recommendation. I feel that you are attempting to backtrack on the Investment Outlook commentary and not addressing the concerns raised in my initial comment above.

To that end, I would therefore be grateful if you would please kindly answer the following questions (some of which are from my previous post):

• How you would determine when it is recommended to re-enter into 3xUIS? Is it based on VIX having held a certain level for a certain period of time?
• That the subscriber community would be informed of that change/improvement in the volatility environment.
• As I took the LI Investment Outlook comment as a discretionary recommendation to exit 3xUIS, can I please recommend that the LI team model in QT returns based on rotating out of 3xUIS and into 1xUIS.
• I would also recommend that LI make it very clear when apparently discretionarily overriding a strategy and make explicit the basis of the reason for this override and when LI recommend re-entering the strategy.

I subscribed in January 2018 and placed an investment using the 3xUIS strategy, probably at worst time.

I have not yet reinvested in 1xUIS (or 3x UIS as you seem to suggest that its still valid) as yet, as my confidence in the LI position on this strategy is somewhat shaken. Addressing the above questions will go some way to restoring my confidence.

Separately, prior to investing into 3xUIS, I researched the downside of leveraged ETFs in range-trading and downward markets. Indeed, the LI Investment Outlook contained a link re-emphasising leveraged ETF risks.

Furthermore, we had a February recommendation to invest in Gold which is no longer in the March recommendation – can you please confirm why this changed?

I would appreciate a point by point reply to the above questions.

Thank you.

[StefanM]

Hi LI team,

In this month’s (March 2018) Investment Outlook, it states “We would also like to remind subscribers that we do not recommend using the 3x leveraged strategies (ie, 3x UIS) while volatility sits at higher levels. Leveraged ETFs are ‘path dependent’ and may not perform as well in volatile sideways markets.”

If we are to rotate out of 3xUIS (and into 1xUIS), can you please kindly confirm how you would determine when it is recommended to re-enter into 3xUIS and that the subscriber community would be informed of that change in the volatility environment.

Additionally, it may be helpful to remodel the 3xUIS strategy in QT to identify the impact of moving between 3xUIS and 1xUIS at various volatility levels.

Thanks.

[StefanM]

Hi LI team,

I have enjoyed using QT in my trial period and have some observations:

1. I struggled to find a detailed explanation of how to interpret the QT Optimiser report (’50 shades of grey…’):
1.1 For example, I assume the red block in the report is the Optimiser’s choice of lookback and attentuator?
1.2 How do we tell if the portfolio is stable over the backtest period?

2. Do you have a link/video on how to create substrategies (along the lines of ‘the beast’ algo from Tom Gnade)?

3. For QT susbscribers, am I correct in understanding there may be the option for 1 to 1 training in Switzerland (being closest to my location in London)?

Thanking you in advance.

[StefanM]

I agree Deshan – if one exits on emotion, against the strategy indicator, then what determines the re-entry point?

When I was doing my due diligence on LI, I compared LI’s sharpe-ratio based signals to long term moving average signals and I concluded, to my surprise at that time, that LI’s results were better than I could achieve with MA’s. In particular after observing a correction in the backtest period, LI’s signal re-entered more quickly than the MA.

[StefanM]

I plan to do nothing but follow the strategy I subscribed to, being 3x UIS.

As a new subscriber, such a drawdown straight off the blocks is deeply challenging however is (currently) less than the backtested maximum drawdown result so the best action, I can only conclude, is no action.

The only worrying aspect was the February signal for 1x UIS was 50% SPY however for 3x UIS it was 80% SPXL (indeed an increase from 70% in January ) which made me wonder if there was an error in one or the other.

I’d be grateful for LI’s view on the divergence in strategy in this February’s UIS/3x UIS.

[StefanM]

Hi everyone,

I am also finding that UGLD is not available from my UK pension manager as they say that the product is not MIFID II compliant. This is also true for TMF (and probably ZIV).

Would a normal Gold ETF be sufficient?

[Author]

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