Invite Only to Followers (Seasonal Investing with Dynamic Kelly)
The indicator builds on top of the existing seasonality indicator in some simple, but powerful ways. It's invite only and only to followers. I don't ever charge for scripts but I want to grow my followers so I'm setting this to invite only to try and break 1000 followers.
Believe it or not, this can be used as a drop in replacement for DCA, or used for options trading.
The goal here get people away from the emotions involved in price based indicators and instead focus their attention on long term, risk adverse % returns...
In other words, buy below the average % return or sell when its above the average return, in combination with technical indicators.
Risk Management: Behind the hood, I use a modified Kelly Criterion that provides a mathematical approach to optimizing position sizes, but it requires careful consideration of probabilities and user risk tolerance. Misestimation of these factors can lead to increased risk. Users are encouraged to combine this tool with other risk management techniques to protect their capital.
Seasonality Limitations: Past performance does not guarantee future results. The seasonal trends presented by this indicator are based on historical data and may not be predictive of future outcomes, especially in a highly volatile or unpredictable market environment.
Tool Limitations: The Seasonal Investing indicator is best used as a supplementary analysis tool rather than as the sole basis for trading decisions. It is recommended to use it alongside other forms of technical and fundamental analysis.
Position Sizing with Dynamic Kelly Criterion:
This indicator calculates position sizes dynamically using the Kelly Criterion. The Kelly Ratio is used to determine the optimal position size that aims to maximize returns while managing risk. The position size is then adjusted using the Adjusted Kelly Fraction, which takes into account user-defined risk preferences and broader economic conditions (e.g., a dovish or hawkish Fed stance). Users can input values for their capital available, risk tolerance, margin rate, and other parameters to tailor position sizes to their own requirements.
Visual Representation Using Boxes:
The indicator draws projection boxes on the chart to visually represent each month's expected performance. These boxes are color-coded to reflect the calculated average return and extend from the beginning to the end of the month.
This visual feature allows users to easily spot seasonal patterns and assess the expected price movement for the current month.
User Interface Settings:
The indicator provides a variety of customizable settings:
Table Position: Users can choose the position of the heatmap table (left, center, or right) to best fit their trading interface.
Table Dimensions: Users can adjust the width and height of the table to control its appearance on the chart.
Skipping Specific Months: Users can input specific months (e.g., YYYY-MM) to exclude from the analysis, allowing for greater flexibility if some months are deemed to have unreliable or anomalous data.
Heatmap Metrics Toggle: Users can choose which metrics (average return, standard deviation, positive percentage, and position size) are displayed in the table.
Dynamic Data Updates:
The indicator's data updates dynamically as new data becomes available. This means traders are always working with the latest analysis, which is crucial for making informed decisions in a fast-paced trading environment.
How to Use the Indicator
Customize Inputs and Settings:
Start by entering the starting year for analysis to define the historical range for evaluating seasonality.
Set the available capital, risk tolerance, margin rate, and maintenance rate to tailor the position size calculation to your financial situation and risk appetite.
Customize color settings for both positive and negative values to better visualize monthly trends.
Review Seasonal Patterns:
The heatmap and summary table will help you assess how different months have performed historically.
Use the projection boxes on the chart to visualize the expected monthly price movement based on historical averages.
Analyze Risk and Position Size:
- Review the Position Size metric for each month to determine the appropriate amount of capital to allocate.
The Adjusted Kelly Fraction helps to account for different market conditions (e.g., Fed stance) to ensure that position sizing is optimized in response to external factors.
Ignore Specific Months if Necessary:
If there are specific months that should not be included in the analysis, use the Ignored Months input to exclude them from the calculations.
Make Data-Driven Decisions:
By leveraging the average return, volatility (StDev), and positive return percentage, traders can identify which months are more likely to be favorable and adjust their trading strategy accordingly. The heatmap makes it easy to visualize trends, identify patterns, and determine which months are more reliable for trading.
Important Notes
Conclusion
The Seasonal Investing Indicator offers a powerful combination of seasonality analysis and risk-based position sizing, making it a valuable addition to any trader's toolkit. By presenting information through an intuitive heatmap, detailed metrics, and dynamic position sizing, this indicator helps traders make data-driven decisions while managing risk in a disciplined manner. It provides a flexible, interactive interface that can be customized to fit individual needs, making it suitable for both novice and experienced traders.
Believe it or not, this can be used as a drop in replacement for DCA, or used for options trading.
The goal here get people away from the emotions involved in price based indicators and instead focus their attention on long term, risk adverse % returns...
In other words, buy below the average % return or sell when its above the average return, in combination with technical indicators.
Risk Management: Behind the hood, I use a modified Kelly Criterion that provides a mathematical approach to optimizing position sizes, but it requires careful consideration of probabilities and user risk tolerance. Misestimation of these factors can lead to increased risk. Users are encouraged to combine this tool with other risk management techniques to protect their capital.
Seasonality Limitations: Past performance does not guarantee future results. The seasonal trends presented by this indicator are based on historical data and may not be predictive of future outcomes, especially in a highly volatile or unpredictable market environment.
Tool Limitations: The Seasonal Investing indicator is best used as a supplementary analysis tool rather than as the sole basis for trading decisions. It is recommended to use it alongside other forms of technical and fundamental analysis.
Position Sizing with Dynamic Kelly Criterion:
This indicator calculates position sizes dynamically using the Kelly Criterion. The Kelly Ratio is used to determine the optimal position size that aims to maximize returns while managing risk. The position size is then adjusted using the Adjusted Kelly Fraction, which takes into account user-defined risk preferences and broader economic conditions (e.g., a dovish or hawkish Fed stance). Users can input values for their capital available, risk tolerance, margin rate, and other parameters to tailor position sizes to their own requirements.
Visual Representation Using Boxes:
The indicator draws projection boxes on the chart to visually represent each month's expected performance. These boxes are color-coded to reflect the calculated average return and extend from the beginning to the end of the month.
This visual feature allows users to easily spot seasonal patterns and assess the expected price movement for the current month.
User Interface Settings:
The indicator provides a variety of customizable settings:
Table Position: Users can choose the position of the heatmap table (left, center, or right) to best fit their trading interface.
Table Dimensions: Users can adjust the width and height of the table to control its appearance on the chart.
Skipping Specific Months: Users can input specific months (e.g., YYYY-MM) to exclude from the analysis, allowing for greater flexibility if some months are deemed to have unreliable or anomalous data.
Heatmap Metrics Toggle: Users can choose which metrics (average return, standard deviation, positive percentage, and position size) are displayed in the table.
Dynamic Data Updates:
The indicator's data updates dynamically as new data becomes available. This means traders are always working with the latest analysis, which is crucial for making informed decisions in a fast-paced trading environment.
How to Use the Indicator
Customize Inputs and Settings:
Start by entering the starting year for analysis to define the historical range for evaluating seasonality.
Set the available capital, risk tolerance, margin rate, and maintenance rate to tailor the position size calculation to your financial situation and risk appetite.
Customize color settings for both positive and negative values to better visualize monthly trends.
Review Seasonal Patterns:
The heatmap and summary table will help you assess how different months have performed historically.
Use the projection boxes on the chart to visualize the expected monthly price movement based on historical averages.
Analyze Risk and Position Size:
- Review the Position Size metric for each month to determine the appropriate amount of capital to allocate.
The Adjusted Kelly Fraction helps to account for different market conditions (e.g., Fed stance) to ensure that position sizing is optimized in response to external factors.
Ignore Specific Months if Necessary:
If there are specific months that should not be included in the analysis, use the Ignored Months input to exclude them from the calculations.
Make Data-Driven Decisions:
By leveraging the average return, volatility (StDev), and positive return percentage, traders can identify which months are more likely to be favorable and adjust their trading strategy accordingly. The heatmap makes it easy to visualize trends, identify patterns, and determine which months are more reliable for trading.
Important Notes
Conclusion
The Seasonal Investing Indicator offers a powerful combination of seasonality analysis and risk-based position sizing, making it a valuable addition to any trader's toolkit. By presenting information through an intuitive heatmap, detailed metrics, and dynamic position sizing, this indicator helps traders make data-driven decisions while managing risk in a disciplined manner. It provides a flexible, interactive interface that can be customized to fit individual needs, making it suitable for both novice and experienced traders.
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