The Algorithmic Trading Strategy combines Trend Following and Position Sizing models to take positions in ETFs.
The Strategy seeks to provide a balanced exposure across US stock market and Multi-market protective investment strategy, with attractive returns and low drawdown during times of market stress.
The Strategy combines a multi-market protective asset allocation strategy (Stable Strategy 70%) and a US stock market strategy (Stocks Strategy 30%).
The strategy seeks to minimize losses through market downturns. It experienced a lower drawdown (-7.8%) compared to a buy-and-hold approach (-23%) during the market sell-off in 2008-2009.
The portfolio is rebalanced monthly. The portfolio holds only long positions.
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The strategy aims to provide exposure to multi-market ETFs with a protective asset allocation model.
The model determines a Global Market Breadth Indicator, by analyzing a diversified universe of multi-market ETFs, and detect trends that emerge. The Global Market Breadth Indicator is used to determine the percentage of the Portfolio to allocate to Risk-On assets and Risk-Off assets. The model moves to 100% Risk-Off assets in bad times (crash protection). Risk-On assets are composed of 6 best-performing ETFs from a diversified multi-market universe of 12 ETFs (Stocks, Bonds, Gold, Real Estate, International and emerging markets ...). ETFs that are bought have the best momentum (performance). An Intermediate-term US Treasuries ETF (IEF) is used as a Risk-Off Asset. The strategy experienced very low drawdowns relative to return.
Adjust Risk-On/Risk-Off asset allocation
% Risk-On Assets
Buy/Hold the 6 best-performing ETFs from: SPY QQQ IWM VGK EWJ EEMVNQ EFA GLD JNK LQD TLT
% Risk-Off Assets
The strategy aims to provide exposure to the US stock market only during rising trends.
If the S&P 500 is observed to be in a positive trend, we assume a Risk-On market regime and the Portfolio is allocated to one of three US stock ETFs : S&P 500 (SPY), Nasdaq (QQQ) or MidCap (MDY). The ETF that is bought has the best momentum (performance). If in a falling trend, we assume a Risk-Off market environment and the Portfolio is allocated to a 20+ Year US Treasury Bond ETF (TLT)
S&P 500 Index trend detection
Risk-On Market Regime
Buy/Hold the best-performing ETF from: QQQ SPY MDY
Risk-Off Market Regime
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