Why do people waste their time trying to make money from options/trying to pick which stocks will perform well when you can reliably + accurately (60-80% depending on how greedy of a profit limit % move you want) time which direction SPX will go? No, I'm not selling you some Discord. No, I'm not claiming to be a genius for finding this. I didn't even come up with it.
- Go to TradingView, look up SPY (or ES1 futures), set the candles to 5 minutes
- Go to Indicators -> Community Scripts. Type in “VWAP/MVWAP/EMA CROSSOVER”. Look for the script by “derricklaflame” with 1900+ stars. Add it to your chart.
- Look at every time it draws “Short” + “Long” on the graph (the arrows above/below the candle). You can ignore the “Buy alert / Risky / Wait / Enter Here” stuff.
The logic of this “algorithm” / “strategy” is very easy. It's a common fast/slow EMA crossover strategy, with VWAP mixed in. It's 3 boolean checks against 4 input numbers: VWAP, EMA of 7 candles worth of close prices, EMA of 25 candles worth of close prices, and EMA of 21 candles worth of VWAP.
// input signals
vwapEma21 = ema(vwap, 21) // ema of 21 candles of vwap
closeEma7 = ema(close, 7) // ema of 7 candles of close
closeEma25 = ema(close, 25) // ema of 25 candles of close
// decisions
check1 = (vwap >= vwapEma21)
check2 = (closeEma7 >= vwapEma21)
check3 = (closeEma25 >= vwapEma21)
shouldBeLong = check1 == true and check2 == true and check3 == true
shouldBeShort = shouldBeLong == false
If you pay attention… it doesn't even care about last price directly. Literally irrelevant. You could turn off OHLC candles when looking at this algorithm on a chart. No drawing support/resistance/trend lines. No RSI, no MACD.
You just wait for this indicator to fire. You should probably ignore any 9:30am alerts given early morning volatility. You should probably close out your positions by the end of the day and ignore any 3:50pm-3:55pm alerts.
You should probably use limit + stop loss orders to the tune of:
1. aim for 0.375%-0.5% profit per trade (scale up if you go to larger duration candles like 15 minute)
2. risk only up to 0.25% loss
You need a margin account to go long without settling issues + go short.
You can also do this with /ES futures which require $11.5k in margin requirement but give you “exposure” to 500 shares worth of SPY (which would take closer to $200k of margin requirement).
It backtests extremely well. It works on multiple timeframes (5 minute, 15 minute, 30 minute, 1 hour, 2 hour, 4 hour, 1 day, etc.)
It fired 10 times in the past 10 months on the 1 day timeframe. Of the 10, 80% of them were extremely profitable. If you don't believe me, please… Look at it for yourself on TradingView. I stand to gain literally 0 by making this up.
I think it's goofy that people are obsessed with earnings, what the Federal Reserve is going to do next, what direction the market is headed short term, etc. I've backtested this extensively on QuantConnect. It performs very well during CoVID crash and more. It generates Alpha compared to S&P benchmark (it handily beats the market) and I think the Sharpe ratio I got was like 6+ with an ROI of 20-30% annual.
Let's use an example of $100k today on 250 shares of SPY. It fired short alert at 1:20pm Eastern today at around $410.73. Market got down to about $409.10. $1.63 change, 250 shares, $400 trade, 0.4% Is that amazing? No. Is it reliable? Yes. Does it pay for gas + lunch every day and then some? Pretty much.
By all means, shit all over this. Poop on it. Tear it to shreds. Call me dumb. I've backtested this, I use it daily. Yes I'm “dumb” for bringing public attention to a “winning” strategy because “if it gets too crowded, it may fail to work”. But I want to collaborate with some smart people and see what they think.
I'm shadowbanned from r/algortrading or something silly so I figured I'd share this with r/stocks to see if there is any interest.
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