The streaks are based on Close to Close Price Performance, while we trade on the next days trading day from Open to Close.
We choose to trade odds based on daily seasonality based on the trading day of the month.
Let's say we want to execute trades for the 15th of June 2017. We notice that it is the 11th Trading Day of the Month of June 2017. We go back to the 11th trading day of June 2016 and do our search - the option is set to same month - which means we are only interested in the month of June. Results that we output will represent open-to-close performance of signal stocks for the 15th of June 2017 which represents the 11th trading day of the month. AGAIN, we are producing the actual historic results of the 11th Trading Day of June or put another way...what actually happened on average with each 11th Day of all Junes in lookback period.
Notice the average performance of the longs was about double the performance of the shorts
We chose to trade the Odds for the last months price performance (in bins) for the upcoming month.
Select price performance signal
Select bin of 1. (1 percent).
In this example, universe is SP500 and look back is 100 months.
Search for signals for 28th of February which is the end of the month.
Long Side: Odds > 65 percent for the long side Average Performance > 2 Short Side: Odds < 35 percent Average Performance < 2 Output is CC (for the next month)
Strategy is mean reverting
Trade longs with negative bins Trade shorts with positive bins
In the next slide you will see the results of the screen:
We get 3 long and 5 short signals (Note: we actually had 6 shorts but LLTC was removed due to being in a merger with ADI)
You can see the actual performance of the longs versus shorts for the month of march.
We choose to trade the odds on past weeks rsi's value (bin based) for the trading period of the next week.