Macro/Micro Wave StrategyJay A. Leavitt, PhD

Looking Back on Previously Tried IdeasBack Testing to Explore & Evaluate New Ideas

A New Idea for Trading in the Future

Employing the Hull to Determine1. What to Trade2. Entry Criteria3. Exit Criteria

SPX Hull Timer

BullishTrade Stocks in Rising Markets [concept]

SPY ActiveBull Put Spread 2 Strikes Wide

Short Strike 75% POS

BearishTrade Bonds in Falling Markets [concept]

TLT ActiveBull Put Spread 2 Strikes Wide

Short Strike 75% POS

Hull[25]

BullishProfit Exit >= Credit/2

Loss Exit <= Risk/4

BearishProfit Exit >= Credit/2

Loss Exit <= Risk/8

Entry Not Allowed

Hull Micro Wave

Limit of 25% of Equity at Risk per Trade

The SPX Hull Timer keeps trades on the right side of the market

Bear Micro Waves keep you out of the market when it’s against you

Stops

When the SPX Hull Timer changes it is a Stop

When the Micro Waves turn bearish it is NOT a Stop

The 75% POS of the short strike puts the odds in your favor

The exit at 50% of credit improves these odds and raises the daily return/trade

When the Micro Wave is bearish the per trade exit is only 3.125% of equity

Average Days in Trade

9.80

Average Days in Losing Trade

8.44

Percent of Winning Trades

79.55%

Maximum Draw Down

-10.84%

Compound Rate of Return

23.96%

Wave reversals lasting 3 or fewer bars

Two typesBull Bear Bull

5 occurrences

These are of no consequence

Bear Bull Bear

2 occurrences

2nd resulted in the largest Draw Dowm

Until June ‘12 the Compound Rate of Return was ~35%/year with a Maximum Draw Down of -7.62%

The market was unusually choppy 7/3/12 – 6/20/13

Need to re-evaluate Stops relative to Whip Saws

TOS Thinkback only uses Close data. Intraday data could produce different results

This Macro/Micro Wave strategy is an ideal strategy for investors with no desire to day trade

Jay A. Leavitt, PhD

leavitt@buffalo.edu