Quant Strategies

Time Cycle, Fractals and Price

Ajit Kumar

Strategy Test
• Have worked on various strategies based on momentum, trends and volatility.
Given their obvious advantages there are some very glaring shortcomings
– Missing the beginning of the move, specially counter trend moves
– Averages take time to turn thus are lagging indicator
– Momentum tends to diverge negatively much before the price turns or in some case can
sustain for long time
• Worked on strategies based on fractals, time cycle and pure price based
triggers for trading
– Fractals are part of our daily life and are as much part of markets i.e. similar patterns are
repeated in each time frame be it minutes, hours, days or weeks
– Time cycle similar to fractals act as points of important reversal or continuation of trend
– Volatility is used to identify opportunities which can payoff faster in terms of time
– Pure price based methods rely on absolute price levels for entry and exit thus have little
room for bias

Fractals & Time Cycle

• Tested various fractals (that can be coded) and derived list of fractals which
have strong advantages in terms of RR (Risk:Reward) and success ratio
• Time cycle is used to identify the fractal pattern with a time cycle pattern and
tested in terms of Risk:Reward and success ratio
• Each pattern and strategy was tested for last 20-30 years various index data
(national and international). Observation
– Has significant advantages over trend/momentum based strategies
– Strategies doesn’t get whipsawed as its able to capture every big move (Long or Short)
– Strategy is used to identify trailing Stop Loss as well as Stop Loss, thus acts as
automatic filter for profit booking too
• All the test results are purely based on fractals and time . It doesn’t contain
filters based on any technical. Filters improve the winning percentage and profit
factors significantly
• Tests prove statistically using these strategies have a strong edge over other
rules
Trading Chart-Long
Performance- Long
Performance- Long/Short
 Monthly Return Table
Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total
1991 -5.0 17.0 -6.0 3.0 2.0 1.0 23.0 10.0 0.0 7.0 -4.0 2.0 57.2
1992 17.0 17.0 21.0 -5.0 0.0 0.0 0.0 7.0 5.0 -3.0 0.0 -2.0 68.1
1993 -1.0 -9.0 0.0 -8.0 0.0 -1.0 4.0 14.0 -3.0 -2.0 14.0 -3.0 2.3
1994 15.0 -2.0 -5.0 2.0 1.0 8.0 0.0 10.0 -2.0 -3.0 -1.0 -4.0 18.4
1995 0.0 -4.0 2.0 -3.0 3.0 -1.0 3.0 -2.0 5.0 3.0 0.0 0.0 5.7
1996 -5.0 15.0 2.0 14.0 -3.0 6.0 -3.0 1.0 -3.0 -2.0 -3.0 5.0 23.9
1997 11.0 -2.0 1.0 7.0 -2.0 13.0 0.0 2.0 0.0 5.0 -2.0 0.0 36.6
1998 -7.0 5.0 10.0 2.0 -9.0 0.0 -4.0 0.0 3.0 -3.0 -1.0 7.0 1.3
1999 4.0 -5.0 7.0 0.0 15.0 0.0 9.0 5.0 -5.0 -5.0 -1.0 4.0 29.3
2000 4.0 10.0 0.0 4.0 3.0 2.0 2.0 1.0 4.0 0.0 0.0 5.0 40.6
2001 -1.0 0.0 0.0 -5.0 3.0 0.0 -6.0 0.0 0.0 4.0 3.0 -1.0 -3.4
2002 2.0 4.0 0.0 0.0 -4.0 0.0 -2.0 3.0 -4.0 -1.0 8.0 5.0 10.8
2003 -2.0 -1.0 -2.0 -2.0 8.0 14.0 3.0 2.0 2.0 12.0 3.0 12.0 58.8
2004 -2.0 -2.0 -1.0 2.0 0.0 -1.0 8.0 2.0 8.0 1.0 11.0 4.0 33.2
2005 3.0 4.0 2.0 -3.0 4.0 4.0 -3.0 0.0 6.0 -1.0 6.0 2.0 26.2
2006 0.0 3.0 7.0 2.0 2.0 -1.0 -2.0 4.0 2.0 0.0 2.0 0.0 20.4
2007 0.0 1.0 -1.0 -2.0 1.0 -3.0 3.0 3.0 12.0 4.0 -3.0 0.0 15.1
2008 2.0 -11.0 -3.0 9.0 -8.0 0.0 3.0 -5.0 -2.0 0.0 -9.0 2.0 -21.4
2009 3.0 -3.0 8.0 19.0 26.0 0.0 4.0 -1.0 5.0 -7.0 2.0 2.0 69.2
2010 1.0 0.0 3.0 1.0 -7.0 2.0 -1.0 -3.0 9.0 -1.0 0.0 5.0 8.4
2011 -2.0 -1.0 1.0 -1.0 0.0 -1.0 -3.0 0.0 0.0 -1.0 0.0 -6.0 -13.3
8.0 7.0 -1.0 -3.0 0.0 NA NA NA NA NA 11
2012
NA NA
Rolling 12-Month Performance
Next Step- Volume Analysis