Prior study results indicate it is more profitable to buy ahead and sell to the crowd that try to play "End of Month" strategy. You can find prior study here. This post looks at calendar strategy edge by regime (bull market, bear market). The general idea (and the sequence this post series will take) is to first understand thoroughly the nature of edge and then craft a profitable strategy.
By understanding nature of edge, I mean understanding how does the edge manifest in bull and bear markets? how does it manifest under high and low volatility environments? how about when the trend is in early stages? how about when in late stages?
I think often people read about some idea/setup but then don't spend much time in actually verifying it or understanding the nature of the edge. Also I haven't seen much info on the net that goes beyond surface on "End of Month" strategy. If you come across then please let me know. Coming back to post, following is one simple way to define the regimes.
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| Bull Market Regime Results |
Regime Definition:
Bull Regime: Price > 200 day MA.
Bear Regime: Price < 200 day MA.
Test in Bull Market Regime
Buy @ market the next day open and sell after 5 days only if Price is above 200 day MA. Test Duration: 1970 - Current.
Test in Bear Market Regime
Buy @ market the next day open and sell after 5 days only if Price is below 200 day MA. Test Duration: 1970 - Current.
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| Bear Market Regime Results |
Caveats:
As usual results are friction-less (i.e., no commissions, no slippage). Parameters are not optimized. The test is on the index itself so that longer duration can be covered.
For Readers:
I think results under bear market regime are interesting. It appears the edge is more pronounced during bear markets relative to other days of the month. Any thoughts? Also curious to hear your inferences from the results.
Wish you all good health and good trading!
Wish you all good health and good trading!
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