Long UVXY and VXX Trading Strategy Idea
This is for going long UVXY or VXX.
I am fine-tuning on systematic approach to trading long volatility. I have back tested the rules below with great results! Please comment and share your thoughts. I traded this several times recently and have done well with it. It is fade-it or half-life approach; decaying position or reverse pyramid, since the underlying is decaying. Take a look at the chart; arrows indicate recent entries
UVXY
.
CHART SETUP
195 minute bar chart (split the day into two bars)
RSI set to 2 periods
MACD - set to 2, 6, 1. (essentially a Moving average cross over)
Stochastics Full. 13,3,3
EMA 5 and 8 day EMA.
Bollinger bands -standard settings.
TTM Squeeze
BUY RULES
Buy Full position when:
- MACD crosses from red to green - above zero line AND
- bar close is higher than previous bar AND
- Stochastics are trending higher AND
- RSI(2) has crossed or is greater than 70 AND
- VXX/UVXY price is below the upper bollinger band AND
- VXX/UVXY is above the 5 period EMA
SELL RULES
- 4.1% stop upon entry
- sell entire position of MACD 2,6,1 closes red on the day.
- sell 50% position on first bar/price trading above the upper bollinger bands
- sell 25% of position on second bar/price trading above the upper bollinger bands
- sell remaining 25% position upon hard MACD sell signal or discretionary.
REPEAT:
- repeat and refill full position. For example, if you are down to final 25% position and VXX/UVXY crosses from below to above 5 EMA AND MACD is still green AND price is below upper bollinger band, AND bar close is higher than previous bar close, buy back to full position. Repeat sell rules.
Notes:
- if you miss a sell signal, sell the bar. for example, VXX traded above the upper BB briefly then below, sell the respective portion of the position.
- you may see several trades back to back in high market volatility
- I use the TTM Squeeze indicator for direction; histogram trending up? is it green?
- This system entry matches up with Heiken Ashi charts buy signals if these are your thing.
- the compounding of this strategy works well with 100% re-investment on each trade.
- long volatility trades are quick and fade fast. occasionally you will see an extended high volatility; this is the reason the for the 25% last part of the position. (I owned TVIX in Feb 2020 and sold it all once it hit +100%, it went up 11x)
- I back tested this to 2016; the results were amazing. in 2021 you had 30 trades, 23 winners, a trade expectancy of 9%, and with 100% re-investment upon every trade, a 783% return if I am doing the math correctly. (rough results below)
- other years had better results (2018) but still validating. (2018 returns look ridiculous)
- I set buy stops above trading prices at where my signals would be met to automate the entry.
- you need some real fortitude as you may take several losses in a row. -4.1, -4.1, -4.1
Again, share your thoughts and comments
2021 UVXY Trades. (Rough backtesting results) starting with 100k hypothetical)
Trade Returns trade profit/loss running percentage Running total of capital
6.52% 6,520.00 6.52% $106,520.00
15.56% 16,574.51 23.09% $123,094.51
16.06% 19,768.98 42.86% $142,863.49
-4.10% -5,857.40 37.01% $137,006.09
12.82% 17,564.18 54.57% $154,570.27
14.33% 22,149.92 76.72% $176,720.19
4.00% 7,068.81 83.79% $183,788.99
-2.88% -5,293.12 78.50% $178,495.87
3.66% 6,532.95 85.03% $185,028.82
2.80% 5,180.81 90.21% $190,209.63
-4.10% -7,798.59 82.41% $182,411.03
16.76% 30,572.09 112.98% $212,983.12
-4.10% -8,732.31 104.25% $204,250.81
3.66% 7,475.58 111.73% $211,726.39
12.02% 25,449.51 137.18% $237,175.91
10.66% 25,282.95 162.46% $262,458.86
22.19% 58,239.62 220.70% $320,698.48
17.91% 57,437.10 278.14% $378,135.58
-1.05% -3,970.42 274.17% $374,165.15
6.14% 22,973.74 297.14% $397,138.89
-4.10% -16,282.69 280.86% $380,856.20
22.23% 84,664.33 365.52% $465,520.53
6.22% 28,955.38 394.48% $494,475.91
6.73% 33,278.23 427.75% $527,754.14
8.80% 46,442.36 465.40% $574,196.50
11.67% 67,008.73 519.71% $641,205.23
11.23% 72,007.35 578.07% $713,212.58
10.69% 76,242.42 639.87% $789,455.00
-4.10% -32,367.66 613.63% $757,087.35
16.14% 122,193.90 712.67% $879,281.25
I am fine-tuning on systematic approach to trading long volatility. I have back tested the rules below with great results! Please comment and share your thoughts. I traded this several times recently and have done well with it. It is fade-it or half-life approach; decaying position or reverse pyramid, since the underlying is decaying. Take a look at the chart; arrows indicate recent entries
UVXY
. CHART SETUP
195 minute bar chart (split the day into two bars)
RSI set to 2 periods
MACD - set to 2, 6, 1. (essentially a Moving average cross over)
Stochastics Full. 13,3,3
EMA 5 and 8 day EMA.
Bollinger bands -standard settings.
TTM Squeeze
BUY RULES
Buy Full position when:
- MACD crosses from red to green - above zero line AND
- bar close is higher than previous bar AND
- Stochastics are trending higher AND
- RSI(2) has crossed or is greater than 70 AND
- VXX/UVXY price is below the upper bollinger band AND
- VXX/UVXY is above the 5 period EMA
SELL RULES
- 4.1% stop upon entry
- sell entire position of MACD 2,6,1 closes red on the day.
- sell 50% position on first bar/price trading above the upper bollinger bands
- sell 25% of position on second bar/price trading above the upper bollinger bands
- sell remaining 25% position upon hard MACD sell signal or discretionary.
REPEAT:
- repeat and refill full position. For example, if you are down to final 25% position and VXX/UVXY crosses from below to above 5 EMA AND MACD is still green AND price is below upper bollinger band, AND bar close is higher than previous bar close, buy back to full position. Repeat sell rules.
Notes:
- if you miss a sell signal, sell the bar. for example, VXX traded above the upper BB briefly then below, sell the respective portion of the position.
- you may see several trades back to back in high market volatility
- I use the TTM Squeeze indicator for direction; histogram trending up? is it green?
- This system entry matches up with Heiken Ashi charts buy signals if these are your thing.
- the compounding of this strategy works well with 100% re-investment on each trade.
- long volatility trades are quick and fade fast. occasionally you will see an extended high volatility; this is the reason the for the 25% last part of the position. (I owned TVIX in Feb 2020 and sold it all once it hit +100%, it went up 11x)
- I back tested this to 2016; the results were amazing. in 2021 you had 30 trades, 23 winners, a trade expectancy of 9%, and with 100% re-investment upon every trade, a 783% return if I am doing the math correctly. (rough results below)
- other years had better results (2018) but still validating. (2018 returns look ridiculous)
- I set buy stops above trading prices at where my signals would be met to automate the entry.
- you need some real fortitude as you may take several losses in a row. -4.1, -4.1, -4.1
Again, share your thoughts and comments
2021 UVXY Trades. (Rough backtesting results) starting with 100k hypothetical)
Trade Returns trade profit/loss running percentage Running total of capital
6.52% 6,520.00 6.52% $106,520.00
15.56% 16,574.51 23.09% $123,094.51
16.06% 19,768.98 42.86% $142,863.49
-4.10% -5,857.40 37.01% $137,006.09
12.82% 17,564.18 54.57% $154,570.27
14.33% 22,149.92 76.72% $176,720.19
4.00% 7,068.81 83.79% $183,788.99
-2.88% -5,293.12 78.50% $178,495.87
3.66% 6,532.95 85.03% $185,028.82
2.80% 5,180.81 90.21% $190,209.63
-4.10% -7,798.59 82.41% $182,411.03
16.76% 30,572.09 112.98% $212,983.12
-4.10% -8,732.31 104.25% $204,250.81
3.66% 7,475.58 111.73% $211,726.39
12.02% 25,449.51 137.18% $237,175.91
10.66% 25,282.95 162.46% $262,458.86
22.19% 58,239.62 220.70% $320,698.48
17.91% 57,437.10 278.14% $378,135.58
-1.05% -3,970.42 274.17% $374,165.15
6.14% 22,973.74 297.14% $397,138.89
-4.10% -16,282.69 280.86% $380,856.20
22.23% 84,664.33 365.52% $465,520.53
6.22% 28,955.38 394.48% $494,475.91
6.73% 33,278.23 427.75% $527,754.14
8.80% 46,442.36 465.40% $574,196.50
11.67% 67,008.73 519.71% $641,205.23
11.23% 72,007.35 578.07% $713,212.58
10.69% 76,242.42 639.87% $789,455.00
-4.10% -32,367.66 613.63% $757,087.35
16.14% 122,193.90 712.67% $879,281.25
David Franck