Amazing returns = superior stock selection strategy + superior in & out strategy

Following up and, again, open for discussion: For the ‘Quality Companies in an Uptrend’ stock selection (QualUp), the results of the in & outs are markedly closer together which is somewhat comparably reassuring?

Additional thought: The ‘annual saw tooth chart’ shows that the in & outs have their excess returns at different points in time. Could this be a rationale for mixing the two logics and trade them 50-50 in terms of being 100%, 50%, or 0% ‘in’/’out’?

SEL[QualUp] + I/O[In & Out]:

SEL[QualUp] + I/O[Distilled Bear]:

Hi Peter,

Yes, that could be a rationale for looking into mixing the strategies together. Consider calculating the correlation of daily returns between the two strategies. Combining non-correlated return streams may increases profits and reduces drawdowns over the backtest period.

Best,
Derek Melchin

hello,

I found something strange in the script.

# Filter the values of the dict: we only want up-trending securities

values = list(filter(lambda sd: sd.smaw.Current.Value > 0, self.averages.values()))

smaw is simplemovingaverage which is showing stock's average price within certain periods.Therefore, to my understanding, this line of code filters every stocks since stock price should be more than 0?

and following line,

values.sort(key=lambda x: (x.smaw.Current.Value), reverse=True)
        #values.sort(key=lambda x: (x.volume_ratiol), reverse=True)

        # we need to return only the symbol objects
        return [ x.symbol for x in values[:self.num_coarse] ]   

These will filter the most expensive stocks in order.

Can please someone answer my question?

Juwan, smaw should be for volume, not for price.

Chak, can you explain more detail why? Sma does not consider volume.

Hi Guys, 

First, let me tell you that you are doing great work here, please keep it up.

As I am based in the EU and have an account with IB here, I am not allowed to trade TLT or any other US ETF. As QuantConnect does not facilitate the trading of European ETFs, I am trying to find a workaround. Here is what I intend to do: 

1. Use this algorithm to generate the stocks universe and trade them automatically on QC(IB).

2. Once the signal switches from be_in to be_out, it should generate an email, notification for me to trade the European equivalent of TLT (IS04.DE). I will do the trading manually.

3. After the signal switches back to be_in then it should liquidate the IS04.DE position. I want to use self.Liquidate() to close all open positions, before the algorithm does the rebalancing and enters into stocks again. 

Can anyone here tell me, if self.Liquidate() will also close out positions that I have opened manually in IB Trader Workstation? 

Anyone here faced the same issues trading from the EU. Maybe there is a more elegant and automated solution? 

Derek Melchin I saw some discussions from 2017, where QC staff were promising to allow trading of Non-US instruments and also IB CFDs. Is this coming anytime soon? 

Many thanks!

Dimitar 

Dimitar Dimitrov, thanks for joining in and I have to say: that would be amazing to develop an equivalent for European shares!
[side note: Regarding trading US shares at IB, couldn't you just exchange USD, sign their declaration to trade US shares (incl. tax residency) and go for it? You might just have to add the US market to your trading permissions. Of course, being located in Europe, you would then have the exchange rate risk, but that might be still OK in the USD/EUR pair.]

Peter Guenther thanks for your reply. Actually, the Issue is not in trading the stocks' selection. I can trade US Stock at IB and this what I intend on doing. The problem is with trading the Bond Leg as TLT is not available for trading in the EU. It is a regulatory restriction due to the KID rules. There is a European ETF that also tracks the performance of the 20+ Year Treasury bonds (IS04.DE), but unfortunately, QC does not support trading for this instrument. 

If someone knows how the self.Liqidate() behaves it will be great. 

In general, I totally agree that this strategy should also be tested on other markets to make sure that there is not overfitting to the US historical data. Therefore, I asked the QC team, when they intend to allow trading for other Non-US markets. 

Alternatively, if someone has data we could try and implement a Custom Data source at least for the backtest.

Got it, that's good to know, Dimitar Dimitrov! Regarding your question, self.liquidate() would sell everything, i.e. also the non-algo holdings you have in the account. I found this thread here: 

I reckon the safest way is to open an additional linked IB account for the algo (via Account Settings). The link enables easy funds transfer between the accounts.

Hello guys, 

Firstly I would like to thank all of you for contributing your knowledge to this community. As a beginner, I have learned a lot reading this topic. 

As I come from Europe I have the same issues as Dimitar. I have found this link: https://logical-invest.com/pripps-and-kid-compliant-etfs-for-european-investors/, which says SPY and GLD are also forbidden for Europeans to trade. Is this correct? 

Thanks for your help once again!


 

Hi Primoz Golle

Yes all of those instruments are not available for trading in Europe. The link that you shared is the regulation that requires KID which the US ETF providers don't support. For all of them you can find equivalents traded on the European exchanges, but QC does not support those yet. However, in this strategy you are not trading the ETFs, you only use them for signal generation. You can trade the stocks using QC, for TLT I am still trying to find a solution. 

I hope this helps. 

Best regards, 

Dimitar 

Hello Dimitar,

may I ask which country you reside in? Generally IB provides access to US exchanges and you can trade TLT, this is not an issue with regulation afaik (for me as a german resident at least). Have you checked your account settings / trading permissions?

Best, Fabmei

Dimitar, thanks for detailed explanation. Fabmei, thanks for remark, i will check with the IB. Probably the same rules should apply to the trading of natural persons of all eu residents, if I'm not mistake?

Hi Fabmei

Thanks a lot for the tip. That is strange! I am based in Germany as well, but IB Support told me that I it is not available for trading in Germany. Do you also have an IB PRO Account?

I'll just try and buy 1 on my live account, to see if they are going to execute it or not.

Best, Dimitar 

Hello everyone!

Since this thread and algorithm are popular, let me make some considerations to help those who are considering putting their money on the line.

Scheduled events work slightly differently in live and backtesting mode. While backtest is purely data-driven, scheduled events are triggered by the clock in live mode. So, if the scheduled event is set to fire at 10 am, it will fire at 10 am o'clock. On the other hand, hourly data will be synchronized into the Time Slice a few milliseconds later, e.g. 10:00:00.0123. Consequently, CurrentSlice might not have the market information and CurrentSlice.ContainsKey(symbol) with return false for most if not all symbols.

In order to address this issue, we can use minute resolution data or set the scheduled event to 10:01. I suggest using minute-resolution data. Please keep in mind that minute-resolution data is L1 so orders will be filled at the bid/ask and backtest will be more realistic.

Additionally, we can remove the CurrentSlice.ContainsKey check, since we are getting the price from Securities[symbol].Price. In principle, this variable is not zero for liquid assets with minute resolution data.

I would recommend adding strategic logging to the algorithm in live trading. When we deploy an algorithm for the first time, it will help us understand why it's not working as expected. Since there is a daily quota limit in backtesting but not in live mode, we can use the following method to only log in live:

Really great pointers. Thanks for sharing these hints with us, Alexandre Catarino!

Thanks for sharing, Strongs. Your post just brought up a thought that I think might be worth re-emphasizing (you also mention aspects of it): The ValuationRockets selection (on EV/EBITDA) means to select stocks that are extremely highly valued against the background of their earnings: The smaller the (positive) earnings a company generates, the higher the EV/EBITDA. Of these firms, we select the ones whose stock prices were increasing the fastest (the momentum logic). Think: we hype the hype. This is a high risk strategy, considering that something that is valued very highly might have a lot of room to drop. In comparison, for example, the QualUp stock selection is lower risk (and probably lower return in the long run). Due to the recent market/tech drawdown, the QualUp selection has performed better year-to-date than the ValuationRockets selection. Of course, this is only a current snap shot and we'll have to see what the year still has in store:

ValuationRockets: -16.2%      <-------->      QualUp: +21.4%