This is the 4% system for NinjaTrader as interpreted from Martin Zweig’s Winning on Wall Street. The basic rules can be found on our website where we trade the system using the Value Line Index and the UWM ETF.
We use our TradeStation version of this indicator to do our 4% trading and, unfortunately, I don’t have access to a Value Line symbol for Ninja (unless someone knows how to get it). Our example here has substituted the IWZ (Russell 3000) broad based index as a proxy for the trigger symbol and it doesn’t quite produce the same results as the Value Line.
That being said, there are certain advantages that the Ninja version has over TradeStation, one of which is the simplicity of changing the underlying trigger symbol that is built into the strategy.
We have also added in the ability to model profit targets, stops, and even a maximum trade length. These can be disabled by placing a 0 (zero) in their input value fields.
This is a long only strategy but we see room for improvement by adding in some shorting capabilities.
The basic 4% model is that whenever the trigger symbol closes up 4% for the week, you buy. When it closes down 4% for the week, you sell. That’s it. And at its simplest function that is what this strategy does.
We are supplying with the strategy a basic emulation of the Ned Davis 4% system as documented, but we are also supplying a setting that whenever one gets a 4% up on the IWZ, one enters QQQ for a few days to capture some upward thrust profit. That strategy does pretty good with a 61% win rate and a profit factor near 2. We haven’t spent much time yet with the Ninja version except to debug, but we will be looking at it more closely, a lot closely on follow though price action from 4% IWZ moves!
The concept you need to grab here is that there are two symbols and time frames involved in this strategy. There is the underlying index (could be an ETF or any stock really or an index) that is calculated on a weekly percentage gain or loss. That gain or loss is settable by you, as is the trigger symbol but not the time frame, currently fixed to weekly. Then there is the traded symbol, which can be on any time frame. It can be the same symbol as the underlying, or not, and the same time frame, or not. Dealers choice.
In addition, you can set the exit long strategy to be something other than the simple 4% down exit.
Here are some suggested areas to explore with the strategy:
- Change the underlying index to a leading index such as the QQQs and buy traditional laggards long on 4% up weeks.
- Find some good trading pairs that are correlated with a time shift, that is, when one goes up, the next week the other has a high probability of going up.
We have plenty of great ideas to improve this strategy and will be returning as soon as we catch up to implement.
- Add in shorting
- Allow the user to set the time frame for the underlying
- Improve the auto-trading with a break-even stop once profit is hit
- Add in pyramiding
- Look for a filtering indicator to improve entries
Although this strategy carries the NedDavis4% name, it is so much more. I think we will change the name when we do our next version!
|Pct Target||Exit at this percentage target price (0 = disable)|
|Stop Loss target||Exit at this stop loss target price (0 = disable)|
|TradeLength||Exit once the trade has been open this length of bars (0 = disable)|
|Pct Change||The Weekly percentage change of the Trigger symbol to enter long|
|Trigger Symbol||The trigger symbol.|
Fairly basic, and in fact, some of those changes we talked about above most of you could probably code in.. remember we always release our source code with the indicators.
With the strategy there are two examples:
The first example uses the inputs above. The sequence is:
- Watch IWZ (the Russell 3000) for a 4% up week. If there is a 4% up week, then enter long into UWM (Russell 2000 2x). We are looking for a little leverage.
- Stay long undless a 4% down week is detected on a Friday close.
Our 2nd example breaks the 4% model and is an attempt to garner an edge by going long on a 4% up week on the QQQs (Nasdaq 100 ETF). Here are the settings for our 2nd example:
In this example, we are using the same IWZ as the Trigger underlying symbol. The sequence here with these settings is:
- Go long on the QQQs when a 4% up move for the week is detected in the IWZ
- Hold the trade for 3 days and then exit
That’s it. As mentioned above it has a pretty good profile, worth investing some time in.