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Strategy Collection - Weekly, Monthly, and Quarterly
The Hard Road Newsletter
Jacob Traut
July 3rd, 2023
By popular request, strategies that trade less frequently than Daily!
We’re talking strategies again, but with a new twist. No daily trading, and no threshold trading. What has the community got to offer on this front? Not as much as I had expected! Lets see what we’ve got to work with.
Okay, but why would you want to do that?
Thats exactly what I asked when the topic was brought up in the Discord. There were a couple reasons presented, some more logical than others. Lets chat.
Its much less demanding to manually trade.
Absolutely correct. Manually copying a trade every day can be a massive pain if you aren’t usually free to trade between 3:50-4PM EST every day. Using a weekly or monthly timeframe means that there are significantly less days you need to be available, and you might be able to safely copy trades the next day. Your tracking will be ruined due to price differences, and potentially even different allocations entirely, but the general theory should still work. Honestly if you can’t trade your monthly symphony on the second trading day as opposed to the first, I’d argue there is something wrong with your strategy.
Tax season will be easier easier.
Potentially correct, depending on your situation. Doing my taxes on TurboTax, you add up a couple columns and type it in. It could be 50 pages of trades and still be almost as much work as 3 pages. Your mileage may vary, maybe your CPA charges you more for more paperwork, maybe use other software or services, maybe you have other extenuating circumstances. Its a point to consider, but take note of what your process is like during tax season next year. Does more paperwork make more work? If yes, this is very relevant to you.
Lower Slippage and Fees
Well this is factually correct, but framed in a way I don’t agree with. You will pay less in both fees and slippage when you trade the same strategy less frequently, undeniably true. But, lets look at an example and see what you’re potentially trading off for those lower fees.
Fun fact, the symphony these are both based on is quietly up %168.47 since it was posted in the community, way back in November 2022. Thanks NVDA.
Well, that seems pretty conclusive to me.
The increase in theoretical return is several times more than your fees and a reasonable estimation of slippage. Is it conclusive financial advice? No, but there can be a very stark difference depending on the strategy you’re employing. As always, take this information and use it to inform your judgement.
Those are three pretty big pros, especially for those outside of the US or who can’t use Composer due to account limitations. Now lets go over the one disagreement I have.
Its harder to Overfit on longer timeframes.
With all due respect to the other creators of longer term strategies and anyone who thinks this, you’re completely and totally wrong. You can quite easily overfit a weekly+ strategy. Check this example out.
Well that looks fantastic. 34% AR when backtested to the max length, 8.5% Drawdown. The numbers look really good, so whats the issue here?
Let me introduce you to Volmageddon, if you weren’t as market savvy in 2018 as you are now.
If you don’t have a Bloomberg subscription (who would have one of those anyway?) you’ll have to get creative, sorry. The TLDR is that the VIX doubled more or less overnight, and god forbid you weren’t paying attention while holding short-volatility instruments (like SVIX, which is present in the above symphony.) Accounts were blown up, funds closed, ETN’s evaporated, and the entire “Volatility Trade” changed over the course of one Super Bowl weekend. The lesson is simple, don’t hold assets like that for extended periods of time. The above strategy offers you no protection in a situation like Volmageddon, outside of just liquidating the strategy.
With my incessant negativity and risk-aversion out of the way, lets look at some actual strategies. First up, a creation from one of the Master Architects.
Commander BND is, in my estimation, the closest thing to a high-powered monthly swing trading strategy the community has produced. Several people are actively running this and updating the community with their live results, and they are positive so far!
Selecting from a couple baskets of assets based on the performance of Bonds, SPY, and their relative performance, this symphony is either buying juicy dips or riding the rips. And sitting at the bottom, we’ve got a 20% allocation into a basket of mostly 0-beta assets that do their own thing relative to the rest of the market.
As noted in my example about slippage and fees, the above symphony focuses on specific companies and asset classes, and sorts through them based on what is doing the best. The original symphony that was posted in the Discord under the name SPY, Energy, Chips, and Commodities is a daily/low threshold strategy to account for the Black Swan Catcher at the top. For the purposes of testing, and this newsletter I’ve changed it to weekly, and it seems to hold up to the brief testing I’ve done.
It has seen fantastic levels of outperformance recently, thanks almost entirely to NVDA. The strategy has had some level of allocation to NVDA for the last 6 months straight. Personally, I take issue with this and would rather swap it out for much, much broader ETF’s, but if you want to bet on the continued outperformance of a select basket of companies, this is an excellent way to do so.
The logic appears sound, even if I disagree with the specific stock choices. I’ll likely work on this framework a bit in the future, I like what its done with live money while sporting a comically simple logic tree.
My shameless self insert. I used the Cockroach Portfolio as the main skeleton for this, cut out a bunch of the shorter-term trend following, and attempted to lower the number of tickers you need at any given time. Wasn’t much of a success, we’re still at roughly 20 tickers being held at any given time. Most notably, the entire volatility section has been removed, making this completely different than the Cockroach, hence the naming change. The AR is roughly halved, but the overall tenor and goal is the same, weather any storm the market throws at you. Whether the lack of a long-volatility section allows for that, only time will tell!
Hopefully you found this roundup helpful and informative! If you’ve got any weekly, monthly, or quarterly strategies that you’re particularly fond of be sure to throw them in the comments below, or post them up in the Discord Community!
Til next week, enjoy you short market week, and Independence Day!
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