Just had a similar issue where I realized I could not get good point in time market cap data (I use Norgate currently). Ended up just dropping it as a parameter. 🤷🏼♂️
This seems like a great strategy. I'm impressed you don't want to trade it as is. Obviously, you would rather trade it than just invest in the S&P? No matter how much effort you put in, the fact is that it is going to be very difficult to avoid drawdowns, and since the past is not a predictor of the future, it may not be worth trying to find a "better" model .... Perhaps a good approach is adding in selective stock shorts. For example, large cap stocks that have large gap downs tend to continue that downward momentum. Add those on margin for a few day swing may smoothen out the overall strategy performance and help offset the drawdowns. Also, for the long side, I really like your approach of selecting a few stocks with low RSI vs. buying the whole index for a mean reversion. Especially with the advent of AI, that edge will erode faster in the index as a whole than in individual stocks imo where the sell offs and mean reversion reversals are more news driven and can overshoot more in each direction than the overall index.
Great article. Where do you get accurate point in time market cap data? Seems really difficult to obtain for retail traders.
Sharadar Core US Equity Bundle
https://data.nasdaq.com/publishers/SHARADAR
Just had a similar issue where I realized I could not get good point in time market cap data (I use Norgate currently). Ended up just dropping it as a parameter. 🤷🏼♂️
Entering at the next open significantly reduces the edge.
You are right. I’m entering on openings because it’s easier to execute: all my systems are already set up to trade on openings instead of closings.
As a matter of fact, that’s a good idea for a future post: quantifying how much we lose by trading on openings vs closings. Thx for the comment!
Sharadar Core US Equity Bundle
https://data.nasdaq.com/databases/SFA
This seems like a great strategy. I'm impressed you don't want to trade it as is. Obviously, you would rather trade it than just invest in the S&P? No matter how much effort you put in, the fact is that it is going to be very difficult to avoid drawdowns, and since the past is not a predictor of the future, it may not be worth trying to find a "better" model .... Perhaps a good approach is adding in selective stock shorts. For example, large cap stocks that have large gap downs tend to continue that downward momentum. Add those on margin for a few day swing may smoothen out the overall strategy performance and help offset the drawdowns. Also, for the long side, I really like your approach of selecting a few stocks with low RSI vs. buying the whole index for a mean reversion. Especially with the advent of AI, that edge will erode faster in the index as a whole than in individual stocks imo where the sell offs and mean reversion reversals are more news driven and can overshoot more in each direction than the overall index.