ETF Pairs Arbitrage Final Modifications
Author: B.W.O.
Creation Date: 8/5/2015 10:05 PM
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B.W.O.

#1
Greetings Subscribers!

The Equity Curve Shown is fairly representative of the strategy as a whole, but in terms of offering the highest returns to every subscriber, some modifications were needed as the backtest I submitted carried a QLD QID mismatch to where QID trades had QLD prices submitted and this is a technical issue so what you see in the backtested equity curve are long QLD trades, with short QID trades.

The modifications made were to make QID trades go for longer by waiting for a covering signal that is close to where the QLD oversold level would be so that if QID were to enter, in the old version once fair value was met it would exit, but this churns the account and can prevent some major market moves from being profited from.

So here I wanted to state that the reason this is not self-traded is because I believe in being extremely aggressive (I'm 31), and that means gaining as much leverage as possible on each trade. So, what I do for my family and I is put 100% of the account into either TQQQ, the QLD counterpart, or SQQQ, the QID counterpart.

So, below are the assumptions I actually use for ETF Pairs Arbitrage, and what I've done is approximate the 3x return by allocating 147% of Equity rather than QID and QLD's 97%. This 147% allocation compared to the 97% allocation is nearly equivalent to the leveraged difference between TQQQ/QLD and SQQQ/QID.

Thus, below is also something to consider doing to earn more from the same signal trade TQQQ instead of QLD, SQQQ instead of QID.

Below is the strategy I'm following with the same signals only trading at 147% of Equity to simulate a 3x Leveraged ETF Pairs Arbitrage Model (and, obviously additional leverage can be had in equity options, index options, and futures), but I don't recommend this since most people don't know how to calculate a Delta Leverage Ratio that's equivalent (Yes, I do know how, and as long as the leverage factor isn't greater than 5 to 1 no more than 80% drawdowns are possible).

Here for posterity are the performance summaries I follow and what you can earn trading TQQQ and SQQQ instead of QLD and QID, respectively.

All Trades Long Trades Short Trades Buy & Hold
Starting Capital $1,658.90 $1,658.90 $1,658.90 $1,658.90
Ending Capital $105,365.87 $105,365.87 $1,658.90 $10,147.69
Net Profit $103,706.97 $103,706.97 $0.00 $8,488.79
Net Profit % 6,251.55% 6,251.55% 0.00% 511.71%
Annualized Gain % 57.63% 57.63% 0.00% 21.96%
Exposure 102.86% 102.86% 0.00% 126.15%
Total Commission ($1,272.00) ($1,272.00) $0.00 ($7.95)
Return on Cash $0.00 $0.00 $0.00 $0.00
Margin Interest Paid $0.00 $0.00 $0.00 $0.00
Dividends Received $0.00 $0.00 $0.00 $0.00

Number of Trades 80 80 0 1
Average Profit $1,296.34 $1,296.34 $0.00 $8,488.79
Average Profit % 4.31% 4.31% 0.00% 344.23%
Average Bars Held 19.73 19.73 0.00 2,296.00

Winning Trades 61 61 0 1
Win Rate 76.25% 76.25% 0.00% 100.00%
Gross Profit $130,521.13 $130,521.13 $0.00 $8,488.79
Average Profit $2,139.69 $2,139.69 $0.00 $8,488.79
Average Profit % 8.00% 8.00% 0.00% 344.23%
Average Bars Held 19.36 19.36 0.00 2,296.00
Max Consecutive Winners 15 15 0 1

Losing Trades 19 19 0 0
Loss Rate 23.75% 23.75% 0.00% 0.00%
Gross Loss ($26,814.17) ($26,814.17) $0.00 $0.00
Average Loss ($1,411.27) ($1,411.27) $0.00 $0.00
Average Loss % -7.56% -7.56% 0.00% 0.00%
Average Bars Held 20.89 20.89 0.00 0.00
Max Consecutive Losses 3 3 0 0

Maximum Drawdown ($21,434.30) ($21,434.30) $0.00 ($3,523.19)
Maximum Drawdown Date 10/16/2014 10/16/2014 6/21/2006 3/9/2009
Maximum Drawdown % -57.22% -57.22% 0.00% -104.25%
Maximum Drawdown % Date 1/22/2008 1/22/2008 8/5/2015 3/9/2009

Wealth-Lab Score 23.97 23.97 0.00 -0.74
Sharpe Ratio 1.26 1.26 0.00 -0.06
Profit Factor 4.87 4.87 0.00 Infinity
Recovery Factor 4.84 4.84 0.00 2.41
Payoff Ratio 1.06 1.06 0.00 0.00
Profit / Total Bars $45.15 $45.15 $0.00 $3.70

Period Starting Return Return % Max DD % Exposure % Entries Exits
6/22/2006 $1,028.64 62.01 -5.87 76.41 6 5
1/3/2007 $288.84 10.75 -34.94 90.59 11 11
1/2/2008 $973.67 32.71 -49.80 91.17 10 10
1/2/2009 $7,014.51 177.58 -29.52 97.41 9 9
1/4/2010 $376.95 3.44 -41.16 99.82 9 9
1/3/2011 $2,383.25 21.01 -41.92 96.66 6 6
1/3/2012 $9,652.74 70.33 -15.08 82.50 11 11
1/2/2013 $42,172.74 180.40 -9.84 105.06 8 8
1/2/2014 $22,736.21 34.69 -22.90 112.46 5 5
1/2/2015 $17,079.45 19.35 -16.73 98.92 5 6

Period Starting Return Return % Max DD % Exposure % Entries Exits
6/22/2006 $0.00 0.00 0.00 0.00 0 0
7/3/2006 $388.70 23.43 -2.53 25.66 2 2
10/2/2006 $639.94 31.25 -5.87 119.12 4 3
1/3/2007 $767.84 28.57 -9.92 82.96 2 3
4/2/2007 $621.76 17.99 -5.34 95.24 3 2
7/2/2007 ($480.24) -11.78 -24.96 77.22 3 3
10/1/2007 ($620.52) -17.25 -27.12 107.53 3 3
1/2/2008 ($380.94) -12.80 -40.13 123.41 2 3
4/1/2008 $19.82 0.76 -29.07 129.71 2 1
7/1/2008 ($391.82) -14.98 -33.96 78.39 3 4
10/1/2008 $1,726.61 77.66 -10.30 38.92 3 2
1/2/2009 $982.55 24.87 -29.52 67.77 3 4
4/1/2009 $2,861.11 58.00 -10.18 80.55 3 2
7/1/2009 $1,183.80 15.19 -14.61 86.06 2 2
10/1/2009 $1,987.05 22.13 -15.21 131.56 1 1
1/4/2010 ($2,166.30) -19.76 -27.23 110.61 3 3
4/1/2010 ($1,593.57) -18.11 -34.38 78.52 2 2
7/1/2010 $1,327.55 18.43 -20.83 98.79 2 2
10/1/2010 $2,809.25 32.93 -7.53 108.34 2 2
1/3/2011 $1,956.30 17.25 -19.74 110.18 1 2
4/1/2011 $848.63 6.38 -12.50 98.72 2 2
7/1/2011 ($3,108.19) -21.97 -38.59 62.25 2 1
10/3/2011 $2,686.52 24.34 -26.77 113.52 1 1
1/3/2012 $3,485.89 25.40 -5.83 54.60 3 3
4/2/2012 $2,000.53 11.62 -15.08 94.20 3 3
7/2/2012 $2,755.02 14.34 -11.16 84.39 2 2
10/1/2012 $1,411.30 6.42 -11.04 91.45 3 3
1/2/2013 $5,884.53 25.17 -5.13 93.44 2 2
4/1/2013 $8,937.87 30.54 -8.03 96.00 3 3
7/1/2013 $8,740.77 22.88 -7.56 95.38 2 2
10/1/2013 $18,609.56 39.64 -9.84 123.86 1 1
1/2/2014 ($140.92) -0.21 -14.18 142.20 0 0
4/1/2014 $12,789.23 19.55 -16.53 108.38 2 2
7/1/2014 $12,077.18 15.44 -8.99 121.43 1 1
10/1/2014 ($1,989.27) -2.20 -20.05 84.92 2 2
1/2/2015 ($13,469.59) -15.26 -16.73 107.65 2 2
4/1/2015 $15,979.53 21.36 -7.65 108.47 3 3
7/1/2015 $14,569.50 16.05 -5.41 61.00 0 1
Period Starting Return Return % Max DD % Exposure % Entries Exits
6/22/2006 $0.00 0.00 0.00 0.00 0 0
7/3/2006 $388.70 23.43 -2.53 25.66 2 2
10/2/2006 $639.94 31.25 -5.87 119.12 4 3
1/3/2007 $767.84 28.57 -9.92 82.96 2 3
4/2/2007 $621.76 17.99 -5.34 95.24 3 2
7/2/2007 ($480.24) -11.78 -24.96 77.22 3 3
10/1/2007 ($620.52) -17.25 -27.12 107.53 3 3
1/2/2008 ($380.94) -12.80 -40.13 123.41 2 3
4/1/2008 $19.82 0.76 -29.07 129.71 2 1
7/1/2008 ($391.82) -14.98 -33.96 78.39 3 4
10/1/2008 $1,726.61 77.66 -10.30 38.92 3 2
1/2/2009 $982.55 24.87 -29.52 67.77 3 4
4/1/2009 $2,861.11 58.00 -10.18 80.55 3 2
7/1/2009 $1,183.80 15.19 -14.61 86.06 2 2
10/1/2009 $1,987.05 22.13 -15.21 131.56 1 1
1/4/2010 ($2,166.30) -19.76 -27.23 110.61 3 3
4/1/2010 ($1,593.57) -18.11 -34.38 78.52 2 2
7/1/2010 $1,327.55 18.43 -20.83 98.79 2 2
10/1/2010 $2,809.25 32.93 -7.53 108.34 2 2
1/3/2011 $1,956.30 17.25 -19.74 110.18 1 2
4/1/2011 $848.63 6.38 -12.50 98.72 2 2
7/1/2011 ($3,108.19) -21.97 -38.59 62.25 2 1
10/3/2011 $2,686.52 24.34 -26.77 113.52 1 1
1/3/2012 $3,485.89 25.40 -5.83 54.60 3 3
4/2/2012 $2,000.53 11.62 -15.08 94.20 3 3
7/2/2012 $2,755.02 14.34 -11.16 84.39 2 2
10/1/2012 $1,411.30 6.42 -11.04 91.45 3 3
1/2/2013 $5,884.53 25.17 -5.13 93.44 2 2
4/1/2013 $8,937.87 30.54 -8.03 96.00 3 3
7/1/2013 $8,740.77 22.88 -7.56 95.38 2 2
10/1/2013 $18,609.56 39.64 -9.84 123.86 1 1
1/2/2014 ($140.92) -0.21 -14.18 142.20 0 0
4/1/2014 $12,789.23 19.55 -16.53 108.38 2 2
7/1/2014 $12,077.18 15.44 -8.99 121.43 1 1
10/1/2014 ($1,989.27) -2.20 -20.05 84.92 2 2
1/2/2015 ($13,469.59) -15.26 -16.73 107.65 2 2
4/1/2015 $15,979.53 21.36 -7.65 108.47 3 3
7/1/2015 $14,569.50 16.05 -5.41 61.00 0 1

I realize the information presented is overwhelming but if you analyze it enough, you'll see that trading TQQQ and SQQQ with the signals of ETF Pairs Arbitrage is worth the additional risk of drawdown in my honest opinion such that in the Performance Summaries Above you see $1658.90 grow to $105,365.87 rather than the 2x return shown below growing to $24k in 7 years.


For reference below is how the version displayed with 97% of equity looks with the modifications:

All Trades Long Trades Short Trades Buy & Hold
Starting Capital $1,658.90 $1,658.90 $1,658.90 $1,658.90
Ending Capital $24,117.69 $24,117.69 $1,658.90 $7,294.77
Net Profit $22,458.79 $22,458.79 $0.00 $5,635.87
Net Profit % 1,353.84% 1,353.84% 0.00% 339.74%
Annualized Gain % 34.10% 34.10% 0.00% 17.63%
Exposure 68.10% 68.10% 0.00% 99.48%
Total Commission ($1,287.90) ($1,287.90) $0.00 ($7.95)
Return on Cash $0.00 $0.00 $0.00 $0.00
Margin Interest Paid $0.00 $0.00 $0.00 $0.00
Dividends Received $0.00 $0.00 $0.00 $0.00

Number of Trades 81 81 0 1
Average Profit $277.27 $277.27 $0.00 $5,635.87
Average Profit % 4.10% 4.10% 0.00% 344.07%
Average Bars Held 20.05 20.05 0.00 2,296.00

Winning Trades 61 61 0 1
Win Rate 75.31% 75.31% 0.00% 100.00%
Gross Profit $30,002.83 $30,002.83 $0.00 $5,635.87
Average Profit $491.85 $491.85 $0.00 $5,635.87
Average Profit % 8.03% 8.03% 0.00% 344.07%
Average Bars Held 19.72 19.72 0.00 2,296.00
Max Consecutive Winners 15 15 0 1

Losing Trades 20 20 0 0
Loss Rate 24.69% 24.69% 0.00% 0.00%
Gross Loss ($7,544.03) ($7,544.03) $0.00 $0.00
Average Loss ($377.20) ($377.20) $0.00 $0.00
Average Loss % -7.87% -7.87% 0.00% 0.00%
Average Bars Held 21.05 21.05 0.00 0.00
Max Consecutive Losses 3 3 0 0

Maximum Drawdown ($3,537.70) ($3,537.70) $0.00 ($2,340.22)
Maximum Drawdown Date 10/16/2014 10/16/2014 6/21/2006 3/9/2009
Maximum Drawdown % -42.91% -42.91% 0.00% -83.60%
Maximum Drawdown % Date 9/17/2008 9/17/2008 8/5/2015 3/9/2009

Wealth-Lab Score 28.59 28.59 0.00 2.91
Sharpe Ratio 1.17 1.17 0.00 0.63
Profit Factor 3.98 3.98 0.00 Infinity
Recovery Factor 6.35 6.35 0.00 2.41
Payoff Ratio 1.02 1.02 0.00 0.00
Profit / Total Bars $9.78 $9.78 $0.00 $2.45

Period Starting Return Return % Max DD % Exposure % Entries Exits
6/22/2006 $606.91 36.59 -4.08 50.57 6 5
1/3/2007 $88.27 3.90 -24.60 58.14 11 11
1/2/2008 $364.86 15.50 -36.01 56.37 10 10
1/2/2009 $2,524.43 92.85 -25.10 69.52 9 9
1/4/2010 $315.79 6.02 -28.31 70.89 10 10
1/3/2011 $722.98 13.01 -30.52 69.34 6 6
1/3/2012 $2,558.85 40.73 -9.97 54.23 11 11
1/2/2013 $8,777.30 99.28 -6.56 70.14 8 8
1/2/2014 $3,836.79 21.78 -15.83 76.10 5 5
1/2/2015 $2,662.62 12.41 -11.34 65.39 5 6


Period Starting Return Return % Max DD % Exposure % Entries Exits
6/22/2006 $0.00 0.00 0.00 0.00 0 0
7/3/2006 $240.75 14.51 -1.83 17.12 2 2
10/2/2006 $366.16 19.28 -4.08 82.13 4 3
1/3/2007 $383.63 16.93 -6.18 53.49 2 3
4/2/2007 $279.17 10.54 -3.61 59.69 3 2
7/2/2007 ($246.75) -8.43 -16.62 50.32 3 3
10/1/2007 ($327.78) -12.22 -18.18 69.36 3 3
1/2/2008 ($259.08) -11.01 -25.79 65.81 2 3
4/1/2008 $23.44 1.12 -19.98 86.05 2 1
7/1/2008 ($234.23) -11.06 -23.13 48.68 3 4
10/1/2008 $834.73 44.30 -6.97 24.74 3 2
1/2/2009 $46.20 1.70 -25.10 51.58 4 4
4/1/2009 $1,424.99 51.53 -7.07 71.19 2 2
7/1/2009 $393.35 9.39 -9.74 57.00 2 2
10/1/2009 $659.89 14.40 -10.39 89.53 1 1
1/4/2010 ($718.24) -13.70 -18.75 71.33 3 3
4/1/2010 ($397.00) -8.77 -22.99 74.32 3 3
7/1/2010 $485.41 11.76 -14.22 65.87 2 2
10/1/2010 $945.61 20.50 -5.08 72.20 2 2
1/3/2011 $638.98 11.49 -13.29 74.97 1 2
4/1/2011 $240.37 3.88 -8.64 66.02 2 2
7/1/2011 ($999.13) -15.52 -30.52 58.24 2 1
10/3/2011 $842.76 15.49 -19.22 78.01 1 1
1/3/2012 $1,001.99 15.95 -3.97 36.54 3 3
4/2/2012 $517.11 7.10 -9.97 61.53 3 3
7/2/2012 $713.83 9.15 -7.64 56.76 2 2
10/1/2012 $325.92 3.83 -7.36 59.77 3 3
1/2/2013 $1,410.92 15.96 -3.42 62.05 2 2
4/1/2013 $1,978.86 19.30 -5.36 64.17 3 3
7/1/2013 $1,816.57 14.85 -5.12 64.05 2 2
10/1/2013 $3,570.96 25.42 -6.56 84.45 1 1
1/2/2014 ($25.80) -0.15 -9.74 97.26 0 0
4/1/2014 $2,213.38 12.58 -11.45 73.14 2 2
7/1/2014 $1,993.10 10.06 -6.05 81.91 1 1
10/1/2014 ($343.89) -1.58 -13.70 55.84 2 2
1/2/2015 ($2,218.00) -10.34 -11.34 69.94 2 2
4/1/2015 $2,588.52 13.46 -5.15 71.67 3 3
7/1/2015 $2,292.10 10.50 -3.58 41.41 0 1

Period Starting Return Return % Max DD % Exposure % Entries Exits
6/22/2006 $0.00 0.00 0.00 0.00 0 0
7/3/2006 $0.00 0.00 0.00 0.00 0 0
8/1/2006 $149.24 9.00 -1.83 24.92 1 1
9/1/2006 $91.51 5.06 -1.33 23.95 1 1
10/2/2006 $222.45 11.71 -3.17 91.90 1 0
11/1/2006 $126.28 5.95 -3.34 77.76 2 2
12/1/2006 $17.43 0.78 -3.04 76.72 1 1
1/3/2007 $146.22 6.45 -1.40 28.42 0 1
2/1/2007 $132.55 5.50 -6.18 64.30 2 1
3/1/2007 $104.86 4.12 -5.76 66.09 0 1
4/2/2007 $38.05 1.44 -0.86 10.87 1 0
5/1/2007 $95.26 3.54 -3.57 88.12 1 1
6/1/2007 $145.86 5.24 -3.61 74.85 1 1
7/2/2007 ($210.83) -7.20 -8.41 31.08 1 1
8/1/2007 ($58.27) -2.14 -13.33 62.10 0 1
9/4/2007 $22.35 0.84 -4.02 59.30 2 1
10/1/2007 $52.74 1.97 -6.74 93.70 1 1
11/1/2007 ($287.94) -10.53 -18.18 61.67 1 2
12/3/2007 ($92.58) -3.78 -4.64 47.39 1 0
1/2/2008 ($478.42) -20.32 -25.79 73.43 0 1
2/1/2008 $91.65 4.89 -4.67 52.66 1 0
3/3/2008 $127.69 6.49 -9.03 70.74 1 2
4/1/2008 $183.62 8.76 -6.50 66.78 1 0
5/1/2008 $320.02 14.04 -7.08 92.79 1 1
6/2/2008 ($480.20) -18.48 -19.98 97.29 0 0
7/1/2008 $13.05 0.62 -7.26 47.92 0 1
8/1/2008 $27.40 1.29 -5.37 39.74 2 2
9/2/2008 ($274.68) -12.72 -21.53 59.56 1 1
10/1/2008 $0.00 0.00 0.00 0.00 0 0
11/3/2008 $779.64 41.38 -6.97 47.72 2 2
12/1/2008 $55.09 2.07 -3.92 26.34 1 0
1/2/2009 $234.44 8.62 -11.53 57.44 1 2
2/2/2009 ($186.95) -6.33 -14.07 63.40 2 1
3/2/2009 ($1.29) -0.05 -12.84 34.68 1 1
4/1/2009 $721.67 26.10 -6.40 99.26 0 0
5/1/2009 $475.44 13.64 -4.94 67.64 1 1
6/1/2009 $227.88 5.75 -7.07 53.21 1 1
7/1/2009 $66.57 1.59 -9.74 42.99 0 1
8/3/2009 $22.99 0.54 -7.76 83.35 1 0
9/1/2009 $303.79 7.10 -3.81 45.50 1 1
10/1/2009 ($282.04) -6.15 -10.39 95.93 0 0
11/2/2009 $519.22 12.07 -4.87 96.09 0 0
12/1/2009 $422.70 8.77 -3.05 78.00 1 1
1/4/2010 ($765.74) -14.60 -15.44 91.09 1 1
2/1/2010 $81.93 1.83 -5.52 45.99 0 1
3/1/2010 ($34.43) -0.76 -5.65 74.35 2 1
4/1/2010 $220.60 4.87 -3.71 54.50 1 1
5/3/2010 ($657.01) -13.84 -22.07 93.12 0 1
6/1/2010 $39.41 0.96 -13.42 78.63 2 1
7/1/2010 $763.03 18.48 -5.32 86.78 1 1
8/2/2010 ($478.04) -9.77 -14.22 95.54 0 0
9/1/2010 $200.42 4.54 -1.06 13.66 1 1
10/1/2010 $438.67 9.51 -2.31 48.97 0 1
11/1/2010 $25.20 0.50 -5.08 65.13 2 1
12/1/2010 $481.73 9.49 -1.54 98.13 0 0
1/3/2011 $299.49 5.39 -5.12 98.25 0 0
2/1/2011 $547.36 9.34 -2.22 51.22 1 1
3/1/2011 ($207.87) -3.24 -13.29 75.34 0 1
4/1/2011 $542.15 8.75 -2.09 63.37 1 0
5/2/2011 ($184.96) -2.74 -8.43 96.23 0 0
6/1/2011 ($116.82) -1.78 -5.75 39.20 1 2
7/1/2011 $39.99 0.62 -5.38 55.24 1 0
8/1/2011 ($894.13) -13.80 -26.56 90.12 0 1
9/1/2011 ($144.98) -2.60 -9.65 27.98 1 0
10/3/2011 $1,087.72 20.00 -5.12 95.82 0 0
11/1/2011 ($387.66) -5.94 -18.91 95.78 0 0
12/1/2011 $142.70 2.32 -2.86 42.37 1 1
1/3/2012 $199.68 3.18 -0.38 4.92 0 1
2/1/2012 $510.64 7.88 -0.95 58.98 2 1
3/1/2012 $291.67 4.17 -3.97 43.25 1 1
4/2/2012 ($119.16) -1.64 -9.97 87.64 0 1
5/1/2012 $88.44 1.23 -3.14 31.24 1 1
6/1/2012 $547.83 7.55 -7.61 68.68 2 1
7/2/2012 $185.01 2.37 -7.64 88.59 0 1
8/1/2012 $97.76 1.22 -1.94 25.46 1 0
9/4/2012 $431.07 5.33 -2.97 60.51 1 1
10/1/2012 ($220.68) -2.59 -7.36 55.47 0 1
11/1/2012 $176.71 2.13 -2.79 32.38 2 1
12/3/2012 $369.89 4.37 -7.09 91.83 1 1
1/2/2013 $531.73 6.01 -0.86 27.92 1 1
2/1/2013 $333.40 3.56 -3.42 60.94 1 1
3/1/2013 $545.79 5.62 -2.69 96.36 0 0
4/1/2013 $931.73 9.09 -3.90 74.95 1 1
5/1/2013 $541.26 4.84 -1.76 39.29 1 1
6/3/2013 $505.87 4.31 -4.09 80.79 1 1
7/1/2013 $1,538.86 12.58 -1.39 61.12 1 1
8/1/2013 ($142.07) -1.03 -5.12 98.87 0 0
9/3/2013 $419.78 3.08 -0.91 29.23 1 1
10/1/2013 $1,372.53 9.77 -6.56 97.21 0 0
11/1/2013 $1,036.64 6.72 -3.70 97.38 0 0
12/2/2013 $1,161.79 7.06 -0.92 60.83 1 1
1/2/2014 ($698.32) -3.96 -8.36 97.18 0 0
2/3/2014 $1,685.60 9.96 -4.36 97.27 0 0
3/3/2014 ($1,013.08) -5.45 -8.50 97.33 0 0
4/1/2014 ($185.76) -1.06 -11.45 97.16 0 0
5/1/2014 $1,743.85 10.02 -2.45 68.44 1 2
6/2/2014 $655.29 3.42 -0.31 56.21 1 0
7/1/2014 $354.30 1.79 -4.47 49.58 1 1
8/1/2014 $2,002.60 9.93 -2.21 97.98 0 0
9/2/2014 ($363.80) -1.64 -4.51 98.06 0 0
10/1/2014 ($818.85) -3.76 -13.70 63.14 0 1
11/3/2014 $1,183.55 5.64 0.00 25.83 1 1
12/1/2014 ($708.59) -3.20 -9.39 73.94 1 0
1/2/2015 ($326.56) -1.52 -6.68 62.10 0 1
2/2/2015 ($809.80) -3.83 -4.64 49.93 1 0
3/2/2015 ($1,081.64) -5.32 -6.35 95.74 1 1
4/1/2015 $1,957.14 10.17 -0.99 50.05 1 1
5/1/2015 $580.47 2.74 -4.40 98.41 1 1
6/1/2015 $50.91 0.23 -4.20 66.59 1 1
7/1/2015 $2,292.10 10.50 -3.58 47.27 0 1
8/3/2015 $0.00 0.00 0.00 0.00 0 0


As you can see, a very small amount of money can grow to a fairly nice sized account and I highly recommend these strategies for IRA's, but if you want to play it safe, 42.91% Drawdown for 97% of Equity compared to a 57+% Drawdown by 147% of Equity that is the approximate equivalent to trade 3x instruments TQQQ and SQQQ and that's what I trust.

If you spent 7 years with me and only had that much to start with, wouldn't you rather make almost $100,000 versus less than $25,000 trading 2x?

My Strategy ETF Pairs Arbitrage is based on Active Trader Magazine Articles from 2005, and where improvements were made were mathematical corrections to the inherent theory of finding overbought oversold thresholds and what makes this strategy the best in the world is how the thresholds change relative to the volatility of the ratio of QLD to QID.

Thank You for Subscribing and know these are neither recommendations nor solicitations to buy or sell any security.

The 3x Equivalent to the 2x ETF Pairs Arbitrage I believe needed to be shown so that folks who subscribe and are aware that TQQQ and SQQQ are essentially moving in lock step proportionally then I wanted to let you know that I do trade the signals of this model but because I trade TQQQ and SQQQ instead of QID and QLD and the 3x instruments were not allowed on Wealth-Lab.com then the approximations of the 3x I wanted to show so that you have an idea how much to risk, and, how much profit you want to make with your subscription.

The Data Provided is for Informational Purposes Only for you to consider increasing leverage over the 2x version of ETF Pairs Arbitrage and it was because I trade 3x instruments, not 2x, that I decided to explain both how to maximize your subscription, but also by disclosing the additional risk involved in doing so and also explain why this strategy is not classified as self-traded.

Thus, while the ETF Pairs Arbitrage System says that it is not self-traded, the reason is because I trade TQQQ and SQQQ rather than QID and QLD with the exact same signals that come as market orders after close for the open the next day.

I'm always with 30 minutes of the close posting and entering signals may or may not coincide with the signals of one of my other systems, which determines whether I enter on the open the next day or in the afterhours market but since that is not possible to do on Wealth Signals, then this was the best way to show how I utilize the system by itself.

I use the signals, but I don't trade QID and QLD and so I am disclosing the version triple leveraged instruments I actually use. But buy and sell signals are the same, and in practice 97% of equity is used on the 3x instruments TQQQ and SQQQ rather than 97% in QID or QLD.

I hope this information helps you see the possibilities for what I believe is the best publicly available Pairs Arbitrage Model in the World, and while I've disclosed the leveraged versions, I want to take the time to explain Pairs Arbitrage Trading.

When you examine the ratio of QID and QLD, there are several manipulations of the ratio that I've done the serve to "normalize" volatility and what that means is that because the indicators take on a value between infinity and minus infinity the ability of people to create non-extremum values but with thresholds is how I time markets.

The Normalized Volatility Thresholds indicate levels of mispricing and once we have crossed through those thresholds a trade is entered the next day on the open and won't exit until the exact opposite threshold is reached followed by at least two days of just waiting either for it to normalize again, or if it stays beyond the thresholds the exit will be followed a couple days later by an entry in the opposite direction and while I respect Wealth Signals for keeping it less volatile by not allowing TQQQ/SQQQ systems on this site, what I do I'm confident in, and you should be, too.

Thank You for Subscribing, and please decide now which version is better for you because percentage wise the reason 147% of equity in the same QID and QLD signals is numerically equivalent to a leverage factor close to 3 rather than a 97% of equity allocation at 2:1.

The 3x Version is how I'd planned retire in 30 years and how long I plan to be on this website.

Most days there are no signals, but when you get one, just know it could last up to 4 months, and so you're aware there is a mandatory 15 minute delay between the time I get my signals for the night and the signal’s arrival in your e-mail. Most days my trading signals come before 4:30 PM and usually around between 4:15 PM and 4:25 PM because if I do get a signal, and my other strategies are in agreement with it, I'll actually put the trade on overnight, but for subscribers, this shouldn't make any difference. Check your e-mail between 4:15 and 4:45 and the signal will say either buy/sell QID or buy/sell QLD or there are not any signals for today.

You can also learn to anticipate which direction of the market we will be trading typically as the market falls it becomes more oversold thus QLD becomes more undervalued so in a falling market expect longs, and in a rising market expect QID to become more undervalued as the market becomes more overvalued and so usually after large rises we get a QID entry.

Finally, once you have the trade in place, expect to hold for a month or approximately 20 days because it takes that long for the Normalized Volatility Thresholds to cross from a long to a short and expect between 5-12 trades per year.

These modifications make the strategy extremely robust and can also be used on ETF Pairs like SDS/SSO, MVV/MZZ,etc., but the results in the NASDAQ 100 Pairs Arbitrage Trading Algorithm work the best and also one word on the sector, I have a personal belief that technology is the savior to every Zeitgeist, and that by ignoring S&P500 instruments that are less robust, you'll be able to earn a massive profit without sacrificing peace of mind in things like S&P400 or DOW pairs.

I appreciate the time spent by everyone who chooses to work with me, and I expect that now you as a new subscriber can finally review why the performance of the out of sample trades seems to be more robust than the backtest is because IT IS!

We'll do well for a long time, but one thing I should point out as an anomaly is that in 3x instruments I can average 60+% annually, yet only have a 5% total return at the end of a bad year, and I hope you see that in 2010 not even double digit returns yet there are two years that nearly tripled and two nice 70+% annual returns that would be representative of what I was expecting when I first started in March 2007 trading a 196% of Equity position in QID and QLD originally but now with the final codes, I will say this has been very rewarding to be vindicated from College Random Walk Theorists to come up with a sound mathematical quantitative way to use Arbitrage to manage huge sums of money, and that's what I want is to have 500 subscribers and a waiting list.

So, thank you again for subscribing, and please give me at least one year to make you some insane pockets full of dough!

Thank You!

Happy Trading!

It's Time To Make Some Money!

Your Arbitrageur:


Beau Wolinsky
President and CEO, Master Limited General Partner (MLGP)
K.C. Capital Management, Inc.
SEC Exempt IA, CFTC Exempt CTA, CPO
Beau World Omnimedia
iPhone: 1-859-583-9016
E-mail: bwolinsky@kccapitalmanagement.com
K.C. Capital Management, Inc. on Facebook
BWorldOmnimedia on Twitter
BWO Vision

President and CEO
The Kansas City Stock Exchange, Inc.
The Kansas City Stock Exchange Periodical

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Aldo

#2
Dear Mr. Wolinsky,

I just subscribed to your system and I am a bit confused on how to trade it; being presented as an arbitrage system, I expected to see a position on both QLD and QID; but in open position I see just a QLD long.

Can you please help me with some information material on the general principles of the system and how to trade it?

Kindest regards

Aldo P

PS oddly enough, the email you provide above - and only contact I could find - does not work:
Your mail message to the following address(es) could not be delivered.
This is a permanent error. Please verify the address(es) and try again.

<bwolinsky@kccapitalmanagement.com>:
child status 100...The e-mail message could not be delivered because the user's mailfolder is full.
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B.W.O.

#3
Hi, Aldo!

To trade the system you have to decide how conservative or aggressive you want to be.

In backtests a 97% allocation QID and QLD trades are used because they represent ETF's from the same index so you can just go long one of the two depending on if you're supposed to go long or short. So you're either going long QLD or QID and TQQQ and SQQQ respectively.
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B.W.O.

#4
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Aldo

#5
Thanks,

I still don't get why it is called "arbitrage" if you take only one position at any given time (long or short). Still, I subscribed and I'm following (happy so far) - but I choose to buy / short the E-mini Nasdaq 100 future, that is cheaper, more liquid and free from fx exchange risks. And of course with a future you can have as much leverage as you like.

Kind regards
Aldo
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B.W.O.

#6
Aldo! Fair warning to you: Yes you can do this, and I've made over a quarter million dollars that way when I was at worldcupadvisor, but do not exceed the 5.63 Leverage factor in the Equity Curve Snapshot. If you do the drawdown can exceed 75% and I don't want that for you.

So to calculate your leverage factor, multiply the number of contracts by 1% and figure out how much money that is. Divide 1% into 1% increase in your equity. If that ratio exceeds 5.63, reduce, else as long as that number is two or higher you'll be able to match the returns.

Thanks for your subscription!

Imagine if this research comes to fruition in another twelve years! Wow! I'll have a backtest that goes to $1 Trillion off $45k in 24 years...HA...anyway...

Goodnight! Happy Pairs Trading!
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Eugene

#7
A trillion in just 24 years? Sounds like a good idea to invest in your system and buy me the whole Mexico or Indonesia whose GDP is equal. What a retirement plan. ;)
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B.W.O.

#8
The plan would work wouldn't it? Nah this system alone makes $1 trillion at some point in the multi-decade future but I also have two other companies that can reach a combined market cap of $2 Trillion through Public Private Partnerships in twelve to fifteen years if I can ever reach or raise just a half billion in capital. So there's three trillion dollars of value in my head including $1 Trillion coming from ETF Pairs Arbitrage.