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Fluxionization Trading Strategy For S&P 100 Stocks

The Fluxionization™ strategy (FLUXSP100) makes use of Isaac Newton’s fluxions and probability theory to trade long-only S&P 100 stocks. The strategy has performed well even during the financial crisis bear market with a hypothetical return of about +9%.

Isaac Newton’s idea of fluents and fluxions changed mathematics, physics and the world. Very briefly, a fluxion is the instantaneous rate of change of a fluent at a given point in time. The Fluxionization™ strategy makes use of these ideas and probability theory to trade long-only S&P 100 stocks.

Fluxionization™ strategy (FLUXSP100)

Time-frame: Daily (adjusted data)
Strategy type: Long-only
Universe: S&P 100 stocks from current composition
Backtest period: 01/03/2000 – 08/11/2017
Maximum open positions: 30
Commission per share: $0.01
Position size per stock: Equity/30
Position entry and exit: Open of next bar

Strategy performance

Parameter Strategy Buy and Hold
CAGR 6.6% 4.85%
Max. DD -18.2% -55.2%
Sharpe 0.63 0.25
MAR 0.36 0.09
Win rate 58.6%  –
Trades 50,935  –
Profit factor 1.26  –
Avg. bars in trades 5  –
Exposure 44.4% 100%

It may be seen that based on the backtest results the strategy has outperformed buy and hold by about 200 basis points in terms of CAGR. As far as MAR (CAGR/max. DD), there is significant outperformance, 0.09 for buy and hold versus 0.36 for the strategy. Note that exposure for the strategy is less than 50%.

Below are the equity curve, underwater equity curve, monthly returns table and Monte Carlo simulation curve for drawdown percent . (Click on images to enlarge.)

A +11.6% return in 2008 and a +9.5% return in 2011 are indications of the robust performance of this long-only strategy. The Monte Carlo simulation shows less than 1% probability of a 4% or larger drawdown.

This strategy is available for sale to hedge funds only. Contact us for details.

If you have any questions or comments, happy to connect on Twitter: @priceactionlab

Note that the author of this website is not a registered financial adviser. Strategy performance results are hypothetical. Please read the Disclaimer and Terms and Conditions.

All charts were created with Amibroker – advanced charting and technical analysis software.