This system has been around for several years. Its based on the belief that fund managers start pouring money into the market near the end of the month and this creates momentum that lasts for just a few days. The original system states to enter the market on the close of the last bar of the day if the its above a certain moving average value. In the Jaekle and Tomasini book, the authors describe such a trading system. Its quite simple, enter on the close of the month if its greater than X-Day moving average and exit either 4 days later or if during the trade the closing price drops below the X-Day moving average.
EasyLanguage or Multi-Charts Version
Determining the end of the month should be quite easy -right? Well if you want to use EasyLanguage on TradeStation and I think on Multi-Charts you can’t sneak a peek at the next bar’s open to determine if the current bar is the last bar of the month. You can try, but you will receive an error message that you can’t mix this bar on close with next bar. In other words you can’t take action on today’s close if tomorrow’s bar is the first day of the month. This is designed, I think, to prevent from future leak or cheating. In TradeStation the shift from backtesting to trading is designed to be a no brainer, but this does provide some obstacles when you only want to do a backtest.
LDOM function – last day of month for past 15 years or so
So I had to create a LastDayOfMonth function. At first I thought if the day of the month is the 31st then it is definitely the last bar of the month. And this is the case no matter what. And if its the 30th then its the last day of the month too if the month is April, June, Sept, and November. But what happens if the last day of the month falls on a weekend. Then if its the 28th and its a Friday and the month is blah, blah, blah. What about February? To save time here is the code:
All the code is generic except for the hard code for days that are a consequence of Good Friday.
All this code because I couldn’t sneak a peek at the date of tomorrow. Here are the results of trading the ES futures sans execution costs for the past 15 years.
What if it did the easy way and executed the open of the first bar of the month.
The results aren’t as good but it sure was easier to program.
Since you can use daily bars we can test this with my TradingSimula-18 Python platform. And we will execute on the close of the month. Here is the snippet of code that you have to concern yourself with. Here I am using Sublime Text and utilizing their text collapsing tool to hide non-user code:
This was easy to program in TS-18 because I do allow Future Leak – in other words I will let you sneak a peek at tomorrow’s values and make a decision today. Now many people might say this is a huge boo-boo, but with great power comes great responsibility. If you go in with eyes wide open, then you will only use the data to make things easier or even doable, but without cheating. Because you are only going to cheat yourself. Its in your best interest do follow the rules. Here is the line that let’s you leak into the future.
The curBar is today and curBar+1 is tomorrow. So I am saying if tomorrow is the first day of the month then buy today’s close. Here you are leaking into the future but not taking advantage of it. We all know if today is the last day of the month, but try explaining that to a computer. You saw the EasyLanguage code. So things are made easier with future leak, but not taking advantage of .
Here is a quick video of running the TS-18 Module of 4 different markets.