Super high Sharpe ratio strategy

Along the same lines as all the previous tests, just looking at better or simpler exits:

1) Test from 2003 to present (buy the dips), avoiding Nov 2007 to Jul 2009 recession per RecessionAlert real-time model.

2) Select from Fidelity 401k fund universe of FATEX, FBTTX, FDXAX, FEIRX, FLSTX (for reasons discussed previously) using 52 week ROC momentum metric.

3) Exit using profit or trailing stops of ATR multiples (see chart).  No other exits.

Result: Annual return 24%, Max. DD 14%, Sharpe 4, Exposure 54%

This is the effect of varying the main model parameters (note the small z-axis range):

blog figs

Sharpe definition:

The Sharpe ratio (also known as the Sharpe index, the Sharpe measure, and the reward-to-variability ratio) measures the excess return (or risk premium) per unit of deviation in an investment asset or a trading strategy, typically referred to as risk (and is a deviation risk measure), named after William Forsyth Sharpe.


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