DLPAL trading Strategy for XIV volatility ETF has robust out-of-sample performance with 48% CAGR and relatively low drawdown.
The in-sample for training and test is from 11/30/2010 to 12/31/2015. The out-of-sample for validation is from 01/01/2016 to 06/01/2017.
Below is the DLPAL S workspace used for in-sample unsupervised feature identification and supervised train and test. Profit target and stop-loss are set at 5%
The results are shown below:
Each line in the results is a strategy that satisfies the performance parameters specified. Index and Index Date are used internally to classify strategies. Trade on is the entry point, in this case the Open of next bar. P is the success rate of the strategy, PF is the profit factor, Trades is the number of historical trades, CL is the maximum number of consecutive losers, Type is LONG for long strategies and SHORT for short strategies, Target is the profit target, Stop is the stop-loss and C indicates whether % or points for the exits, in this case it is %. Last Date and First Date are the last and first date in the data file.
DLPAL found 28 long strategies in the in-sample. Below is the equity performance in in-sample and out-of-sample with DLPAL code generated for Amibroker platform. Backtest included $0.01 per share commission.
For the out-of-sample only, win rate is 61%, CAGR is about 48% and maximum drawdown is less than 20%. Total return is 68%, 29% in 2016 and 31% year-to-date.
It will be interesting to see whether this strategy will hold well if volatility increases.
Edit: Below are backtest results in Quantopian platform 1-minute data and with code generated by DLPAL. The total return is more than double and drawdown is similar.
One reason for the lower total return in DLPAL is because the generated code for Amibroker in daily data produces very conservative estimates of trade returns.
DLPAL S is only $995 for the first year and if the license is renewed for a second year at the same guaranteed price, then the license is converted to lifetime. Click here for more details.
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Disclaimer: No part of the analysis in this blog constitutes a trade recommendation. The past performance of any trading system or methodology is not necessarily indicative of future results. Read the full disclaimer here.