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TASC 2012-06 | Trading High Yield (B. Gardner)

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Traders' Tip text

Since trading high-yield bonds was a simplistic monthly-based strategy, I thought it would be interesting to see how it performed by varying the monthly period by day of month. To do it, I setup of an optimization that calculates the monthly moving average based on the NAV price for each day of the month 1 to 28 as well as for the standard calendar month. The strategy rules remain the same, but the trades trigger on the specified day of the month. Figure 1 shows the daily NAV prices synchronized with the monthly moving average, whereas Figure 2 has the optimization space plotted against the moving average period varying from 3 to 21. It’s interesting to note that trading FAGIX closer to the end (or beginning) of the month correlates with increased profits. Additionally, a motivated trader can boost performance a bit by estimating the NAV and moving average values and trade on the trigger day instead of the next day. Our WealthScript C# code is conveniently available for customers through the Strategy Download feature.


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Figure 1. Although the chart is Daily, trading occurs only on the transition from one monthly period to the next.


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Figure 2. These results indicate that trading FAGIX is more profitable when using shorter periods of the moving average calculated near the end or beginning of the month.


Tip: Don't copy! Instead, use the Strategy Download feature in the Strategy Explorer (Ctrl+O)

using System;
using System.Drawing;
using System.Collections;
using WealthLab;
using WealthLab.Indicators;

namespace WealthLab.Strategies { public class TradingHighYieldBonds : WealthScript { private StrategyParameter _period; private StrategyParameter _atClose; private StrategyParameter _dayOfMonth; private DateTime _endofMonth; private Queue _priceQueue = new Queue(); // FIFO queue private double AverageQueue() { if (_priceQueue.Count == 0) return 0; double sum = 0; foreach(Object obj in _priceQueue) sum += (double)obj; return sum / _priceQueue.Count; } public void SetNextMonth() { if (_dayOfMonth.ValueInt == 0) return; int y = _endofMonth.Year; int m = _endofMonth.Month; m++; if (m > 12) { m = 1; y++; } _endofMonth = new DateTime(y, m, _dayOfMonth.ValueInt); } public double MonthlyAverage(double currentPrice) { if (_priceQueue.Count == _period.ValueInt) { _priceQueue.Dequeue(); _priceQueue.Enqueue(currentPrice); return AverageQueue(); } else { _priceQueue.Enqueue(currentPrice); return AverageQueue(); } } public TradingHighYieldBonds() { _period = CreateParameter("MA Period",8,3,21,1); _atClose = CreateParameter("Trade AtClose",0,0,1,1); _dayOfMonth = CreateParameter("Day of Month",0,0,28,1); } protected override void Execute() { HideVolume(); int day = _dayOfMonth.ValueInt; bool tradeAtClose = _atClose.ValueInt == 1; bool isLastDayofMonth = false; _priceQueue = new Queue(); DataSeries ma = new DataSeries(Bars, "Monthly Average(" + _period.ValueInt.ToString() + "), dayOfMonth = " + day.ToString()); if (_dayOfMonth.ValueInt != 0) _endofMonth = new DateTime(Date[0].Year, Date[0].Month, day); ma[0] = Close[0]; if (Date[0] >= _endofMonth) SetNextMonth(); for(int bar = 1; bar < Bars.Count; bar++) { bool isLastBar = (bar == Bars.Count - 1); isLastDayofMonth = isLastBar; int today = Date[bar].Day; if (!isLastBar) { if (day == 0) // test calendar months isLastDayofMonth = Date[bar].Month != Date[bar + 1].Month; else if ( today == day || (Date[bar+1] > _endofMonth) ) isLastDayofMonth = true; } if (isLastDayofMonth) { SetBackgroundColor(bar, Color.FromArgb(30, Color.Blue)); ma[bar] = MonthlyAverage(Close[bar]); SetNextMonth(); } else { ma[bar] = ma[bar - 1]; continue; } if (bar < _period.ValueInt) continue; if (IsLastPositionActive) { Position p = LastPosition; if (Close[bar] < ma[bar]) { if (tradeAtClose) SellAtMarket(bar, p); else SellAtMarket(bar + 1, p); } } else if (Close[bar] > ma[bar]) { if (tradeAtClose) BuyAtClose(bar); else BuyAtMarket(bar + 1); } } PlotSeries(PricePane, ma,Color.Blue, LineStyle.Solid, 2); } } }

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