The 1D Exp Move Indicator aims to forecast the next day price movement of an asset. Here we can see Backtesting results of the 1D Move on the SPX Index.
The objective of our project is to build models that support your trading. Our models, or any information we provide is not investment advice. We are quants that provide data, not traders. Our tools should be used in conjunction with others tools you use as well as your fundamental and technical work.
We started the project by building our gamma levels, to help you gauge market positioning. The models use end of day data. As we continue to develop this, we will add real time data to enhance what we provide you.
Like every model, a trader needs to understand the quality and reliability of the data at hand. By looking at historical data, and applying a set of rules, we can simulate how a specific strategy or a model would have performed in the past. This does not predict the future, but it helps you understand how the model has performed during events that have happened.
Backtesting is something that we are going to do for all our models. Because as always we understand that having full transparency is necessary. But it is also an important exercise for us to be able to improve what we are generating. As we backtest, we can improve inputs to obtain better results.
In this article we are going to share some backtesting results on how the 1D Exp Move Indicator has performed on the SPX as well as stocks like Apple, Tesla and Nvidia.
Backtesting Results 1D Move: SPX Index
Period Considered: 1st November 2019 – 30th August 2023
Backtesting Assumptions: We are looking at our historical 1D Exp Range in relation to the next day Closing Price. We are looking at how accurate the data has been in the past and how many times the next day’s closing price stays within the range.
There are three outputs that we tested for:
- Success of 1D Exp Min. We are looking to see how many times the next day’s closing price stayed above the 1D Min.
- Success of the 1D Exp Max. We are looking to see how many times the next day’s closing price stayed below the 1D Max.
- Success of Both Levels. We are looking to see how many times next day’s closing price stayed between the range of the 1D Exp Min and Max. We are looking to see at the potential success of an Iron Condor Strategy.
The objective here is to backtest the indicator for directional strategies but also for spread strategies like an iron condor, or a bull or bear call and put spread. These are the results.
The backtesting showed very interesting results. It told us that our model is not perfect but has some solid results.
- The Iron Condor strategy using the levels to place the strikes worked out 72.63% of the time. As we continue to improve the models, we will be backtesting the levels with other inputs such as the IV*OI, the Bid/Ask Spread etc to try to further improve the strategy.
What we found very interesting was that directionally, the 1D Expected Move Indicator worked better than we had expected. As those that follow us know, we prefer spread strategies to directional ones, especially when it comes to risk management.
- The price of the SPX Index closed above the 1D Exp Min Indicator on 87.62% of the times.
- The price of the SPX Index closed below the 1D Exp Max Indicator on 85.02% of the times.
You can find the Excel File with the data here.
Backtest Results on Single Stocks
Here we look at the results of the 1D Exp Move indicator on various stocks.
The Backtest is as follow:
- Success of 1D Exp Min when next day closing price closes above level
- Success of 1D Exp Max when next day closing price closes below level
- Price in the range when next day closing price closes within the levels
Backtest Results on Single Stocks: AAPL
Now let’s look at the performance and consistency of these indicators on a few single name stocks. We currently do not have the full history like we do with the SPX Index but we are working on acquiring more data for our future backtesting tool.
$AAPL
Period Considered: 83 Trading Days
Finally, as part of our Product Roadmap we are working on a backtesting tool that will be accessible by users. We find that being able to backtest your strategies is necessary for any trader. We will keep you updated on our progress on that front.
You can find these levels within the Premium Membership.