K(eep) I(t) S(imple) S(tupid)
One thing I notice when reading blogs and message boards about trading systems, is a general shift towards more and more complexity. More complex indicators, more complex position management systems, more complex signals. How often have you read the phrase “I won’t buy product <XXXX> until they implement <YYYY> and <ZZZZ>”. I’ve often found increased complexity to be at odds with successful systems. For one thing, when a system gets too complex it becomes far more difficult to determine by hand if the signals you’re generating every day are actually correct as well as each degree of freedom provides additional opportunities for curve fitting.
I prefer systems that use simple entries and exits. This weekend I decided to see how simple of a system I could make. This system was designed to trade the QQQQs but has similar results on the SPYs. It places one buy order per day and only sells at market. It can have up to 8 entries (I used 12.5% per position). The whole script is only 9 lines including the loop/begin/end, etc and does not use any indicators.
Here are the results from 1990-Present w/ a 100K starting portfolio and 12.5% per position:
And for those who always ask how it performs in a bear market… same parameters 1/2000-1/2003:
Any guesses on the entries and exits in this system? Â I’ll give you a hint, the exit is one that has already been mentioned on this site by Dave in a previous post.
- John
Monday, May 21 1:07 pm
I’ll take a guess at the exit:
“I’d look to exit that one once we get a close above the high of 2 days prior. Otherwise a 10 day timed exit will occur.”
That it?
Tuesday, May 22 6:14 pm
I tried several backtest with some simple entry methods like the reversal of the exit quoted by Damian (enter once we get a close lower than the low of 2 days prior) as well as just entering after 2 down days. However, I’m unable to find the 12% returns your tests are showing. This makes me curious to know what your entry method was. It seems like this would be better than a buy and hold strategy that many proponents suggest for ETF index investing. I’m just wondering how I can get this “free lunch” - have the same returns as an QQQQ without the sleepless nights like btw 2000-2003
BTW, this is a awesome site!
Thanks,
Ryan
Tuesday, May 22 11:07 pm
Ryan,
Make sure you’re allowing multiple entries. I’m only using 12.5% of the portfolio per position so sometimes I can have up to 8 entries before an exit. You’re on the right track.
-John
Monday, May 28 4:51 pm
[...] anyone have a clue as to what the entry criteria is for the QQQQ KISS trading system John had posted last week? Look at the number of entries. Look at the returns. Remember it can take [...]
Tuesday, June 12 5:32 pm
I think you enter at the close on a down day. Maybe at the open after a down day. I see 377 trades in 756 days from 1/2000 to 1/2003. That is about 1 trade every 2 days. Likewise 2027 trades since 1990 is about 1 trade every 2 days. About 50% of days are down days.
I like nice simple systems. Complex stuff does not work.
Counter-trend systems work on QQQQ.
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