Inspiration

The Triple B strategy combines three indicators that support each other. The foundation of the strategy is the %B indicator based on Bollinger Bands. This indicator was introduced by the creator of Bollinger Bands, John Bollinger, almost three decades after the famous Bollinger Bands were introduced. The additional indicators used in the strategy support and filter the TripleB's actions.

Key components

• The strategy is reversal-based, meaning it aligns with the typical nature of most stocks.

• %B as the foundation. This indicator is crucial, although not the only element of the TripleB strategy. It helps identify overbought and oversold conditions in the market, finding potential reversal points. While %B is at the core of the strategy, it's worth noting that the Triple B strategy includes a specific application of this indicator, a second supporting indicator, and two filters that activate or deactivate based on prevailing conditions.

• The Stockpicker mechanism searches and automatically selects stocks that meet the entry criteria.

Backtest 1, $ Money Management

In this variant, we invest a constant amount of $100k, which is divided by the maximum number of open positions (10). This results in a capital commitment of up to $10k per position.

We are testing the period of the last 30 years from 1994 to May 2024.

The backtest automatically selects stocks that meet the criteria from the S&P 500 index. It is important to note that the list of stocks included in the index changed over the years, which is taken into account in the Stockpicker data (survival bias).

• Invested capital: $100k

• Test period in years: 30

• Test years: 1994-05.2024

• Test Index: S&P 500
  

Equity Chart for this test:

Basic statistics and results month by month:

Backtest 2, % Money Management

In this backtest, we are investing in a strategy that constantly uses 100% of the current capital (starting with $100k capital). This means that as the capital grows or decreases, the position value changes proportionally. The rest of the parameters remain unchanged.

The Equity Chart for this test looks as follows:

Basic statistics resulting from the test:

Additional information about the strategy

Net profit and CAGR

The net profit above $26 million in the tested strategy is 14x higher than the Benchmark (S&P 500 Index/SPY ETF marked in yellow on the chart), which amounts to $1.8 million, translating to a CAGR of 20.51% vs 10.38%. This means that the tested strategy achieves a much higher net profit and a higher average annual return. 2x higher CAGR makes a huge (14x) possitive difference in a long run.

Drawdown and Return/Drawdown Ratio

The Max Drawdown in the tested strategy was 26.87% vs 55.19% in the benchmark, resulting in a better Return/Drawdown ratio of 11.78 vs 4.41. This indicates that the tested strategy is less risky and more stable because the maximum capital drawdown is smaller, leading to better risk management compared to the benchmark.

Exposure

The average exposure in the tested strategy was 68% vs 100% in the benchmark. The study was conducted on the underlying instrument, which is the S&P 500 index stocks. Exposure is measured through dedicated research, which you can read about here. The tested strategy used less capital and therefore was less exposed to market risk, with the remaining capital available for use in other strategies.

Winning Percent

The Winning Percent in the tested strategy was 66.2%. This means that most of transactions were profitable, highlighting the effectiveness of the strategy in generating positive results and giving the user greater confidence in the frequency of profit generation.

SL & TP

The strategy does not use typical stop-loss and take-profit orders. According to our tests, for most stock strategies, these settings worsen results. Instead, the strategy has one exit signal or additional safety exit after X bars (time-based stop-loss). Diversification of positions within one strategy and across the portfolio serves as protection against the strong impact of a single stock price change on the entire portfolio. Click for more about stop loss order.

Market Regime

The strategy was tested in all basic market regimes and includes filters implemented based on this analysis.

Trading Costs

Trading costs and slippage were taken into account in the backtests, reflecting real-world conditions in our tests with the Alpaca broker. With a diversified portfolio of stocks and strategies, transaction costs can significantly impact your profit or loss, so take the time to thoroughly test and choose a broker.

Robustness

Robustness was assessed by practically conducting all possible stock transactions (max open positions 100) from 1994-05.2024 for the S&P 500 (69'935 transactions) and Russell 1000 (95'362 transactions) indices at %MM. This strategy also passed our tests of parameter modifications. We adhere to the principle that the fewer parameters, the greater the strategy's robustness. Therefore, we make efforts to ensure our strategies have as few parameters as possible and to select only those parameters that have a significant impact on strategy effectiveness while aligning with its nature.

S&P 500 max transactions: 69'935

Russell 1000 max transactions: 95'362

The results are as follows:

Recommended instruments

The recommended primary instrument for this strategy in Algocloud Stockpicker is the S&P 500 index companies, which have shown the best historical results. However, the strategy also yields stable results with Nasdaq 100 stocks.

Primary instrument: S&P 500

Supplementary instrument: Nasdaq 100

Pattern Day Trader

The percentage of closed transactions on the same day in the study on the S&P500 index was approximately 5.5%, which is just slightly below the 6% threshold. We examined in detail the behavior of the strategy in terms of the Pattern Day Trading (PDT) rule. Over 30 years, there were 24 instances of meeting the PDT criteria. Therefore, statistically, it occurred less than once a year. In our assessment, it may be acceptable even for smaller accounts, provided that you understand how the PDT protection activated by your broker works (more information here).

If your account is below $25k, your strategy portfolio should also be subject to PDT examination. Therefore, we suggest you familiarize yourself with our PDT Finder and Exposure Master tools, which we provide for free as part of the BONUS.

Correlation

To check the correlation of this strategy with others, visit the dedicated correlation page.

Summary & Strengths and weaknesses of the strategy

Over the course of 30 years, the analyzed strategy had 3 losing years, which is a very good result for a Stockpicker strategy. The Max Drawdown was 26.9%, which is relatively low for long-term investment strategies.

Strengths of the strategy

Profit stability. In the analyzed strategy, the Net Profit was $26'885'224, while the Benchmark achieved above $1'836'975, making it a 15x better result (!). The CAGR was 20.51%, significantly higher than the Benchmark's 10.38%.

Low Drawdown. The Max Drawdown in the analyzed strategy was 26.87% compared to 55.19% in the Benchmark, showing that the strategy is less risky and more stable.

High Winning Percent ratio. 66.2% of trades ended in profit, highlighting its effectiveness and ease of application.

Robustness. The strategy was successfully tested on the S&P 500 and Russell 1000 indices, reaching a maximum of 69'935 and 95'362 trades respectively.

Weaknesses of the strategy

Capital commitment. The strategy had a relatively high capital commitment compared to other strategies, which was 68%.

The percentage of transactions completed on the same day was 5.5% and according to our research, statistically about 1x a year this can trigger the Pattern Day Trader conditions on accounts below $25k. This requires understanding the mechanisms that follow.

Summary

Since 1994, the strategy has multiplied capital 14x more effectively than the benchmark with half the drawdown. This suggests its exceptional efficiency. Research on nearly 170'000 trades on the S&P 500 and Russell indices leaves no doubt about its high robustness, indicating that the methods the strategy employs work and have the high potential to work in the future.

What you receive in the package for this strategy:

• The e-book with detailed rules and results for the strategy.

• SQX file ready to be used on the Algocloud and StrategyQuant platforms.

• Pseudocode describing all the rules in an easy-to-understand manner.

• Key indicators Tradingview Code
  

If you need the code for this strategy in MultiCharts, MT4, or MT5 (MQL) formats, please contact us regarding this matter.