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Dual Moving Average: subpar performance.

Hi,

I tried to implement the dual moving average algorithm. It is a basic momentum based algo that invests once a short moving price average crosses a long moving price average. I heard this mention in a couple of places but as you can see, the performance is quite poor. Any suggestions for improvement?

Thomas

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Backtest from to with initial capital
Total Returns
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Alpha
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Beta
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Sharpe
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Sortino
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Max Drawdown
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Benchmark Returns
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Volatility
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Returns 1 Month 3 Month 6 Month 12 Month
Alpha 1 Month 3 Month 6 Month 12 Month
Beta 1 Month 3 Month 6 Month 12 Month
Sharpe 1 Month 3 Month 6 Month 12 Month
Sortino 1 Month 3 Month 6 Month 12 Month
Volatility 1 Month 3 Month 6 Month 12 Month
Max Drawdown 1 Month 3 Month 6 Month 12 Month
# Backtest ID: 5033ac6096a3430f600000b6
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13 responses

Have you tried running this algorithm across a longer time frame?

Disclaimer

The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by Quantopian. In addition, the material offers no opinion with respect to the suitability of any security or specific investment. No information contained herein should be regarded as a suggestion to engage in or refrain from any investment-related course of action as none of Quantopian nor any of its affiliates is undertaking to provide investment advice, act as an adviser to any plan or entity subject to the Employee Retirement Income Security Act of 1974, as amended, individual retirement account or individual retirement annuity, or give advice in a fiduciary capacity with respect to the materials presented herein. If you are an individual retirement or other investor, contact your financial advisor or other fiduciary unrelated to Quantopian about whether any given investment idea, strategy, product or service described herein may be appropriate for your circumstances. All investments involve risk, including loss of principal. Quantopian makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances.

Thanks for the suggestion. Trying this next and will report back!

Another potential problem I identified is the following:

If the short mavg crosses the long mavg it means that they are very close. If they are very close it is very easy for it to cross again so the algo would buy and sell in quick succession. I noticed that on many days there are about equal buys and sells which could be explained by this.

This might be fixed by adding a timer that once a threshold has been crossed a certain time must have passed before we sell again when the threshold is crossed again.

Since you are using moving averages, it would be easy to try adding some hysteresis to your logic with a simple spread factor between the moving averages. For example, your first gate:

if (data[cur_sid].mavg(10) > data[cur_sid].mavg(50))  

could be recase like this:

if (data[cur_sid].mavg(10) > 1.01 * data[cur_sid].mavg(50))

You would then be requiring a 1% spread of the long over the short. It would be interesting to experiment with a few values for this spreading factor - too wide and you'll miss profiting, too narrow and you'll experience flapping in your indicator that drains capital in transaction costs and slippage.

Or only invest if short-term mavg > long-term mavg for T days...

Yoav, hit the "clone" button and try it yourself!

(Welcome back to the US, by the way ;)

Dan

Disclaimer

The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by Quantopian. In addition, the material offers no opinion with respect to the suitability of any security or specific investment. No information contained herein should be regarded as a suggestion to engage in or refrain from any investment-related course of action as none of Quantopian nor any of its affiliates is undertaking to provide investment advice, act as an adviser to any plan or entity subject to the Employee Retirement Income Security Act of 1974, as amended, individual retirement account or individual retirement annuity, or give advice in a fiduciary capacity with respect to the materials presented herein. If you are an individual retirement or other investor, contact your financial advisor or other fiduciary unrelated to Quantopian about whether any given investment idea, strategy, product or service described herein may be appropriate for your circumstances. All investments involve risk, including loss of principal. Quantopian makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances.

Thanks. Will do, likely this weekend. Finding this more interesting and addictive than I expected :)

Hey Thomas, I noticed you're having to do some awkward checks on context.invested when what you really want to say is "enter/exit a particular position".
Here's my crack at making that code a little clearer :)

Source Code

Disclaimer

The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by Quantopian. In addition, the material offers no opinion with respect to the suitability of any security or specific investment. No information contained herein should be regarded as a suggestion to engage in or refrain from any investment-related course of action as none of Quantopian nor any of its affiliates is undertaking to provide investment advice, act as an adviser to any plan or entity subject to the Employee Retirement Income Security Act of 1974, as amended, individual retirement account or individual retirement annuity, or give advice in a fiduciary capacity with respect to the materials presented herein. If you are an individual retirement or other investor, contact your financial advisor or other fiduciary unrelated to Quantopian about whether any given investment idea, strategy, product or service described herein may be appropriate for your circumstances. All investments involve risk, including loss of principal. Quantopian makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances.

@fawce Running over a longer period (i.e. 10 years) definitely helped a lot, thanks for the suggestion!

it is so slow when i want to check the performance from bejing. why?

Tomas: You mean if you clone the algorithm and run it yourself? It can take quite a while (consider that we are dealing with minute events).

what does the Benchmark refer to? Is that some standard model that you're running?

@vishal, it is the S&P 500.