This document outlines a trading strategy that employs a Hull timer and micro waves to determine when to enter bullish or bearish trades. The Hull timer indicates when markets are rising or falling, and which assets to trade accordingly - stocks in bull markets and bonds in bear markets. Micro waves further refine entry and exit criteria. Trades use put spreads with the short strike at 75% of the position to improve odds. Profits are taken at 50% of credit received and losses cut at smaller percentages to raise daily returns. The strategy kept trades on the right side of the market from 2012 to mid-2013, achieving a compound annual return of 35% with limited drawdowns, though more evaluation is needed on stop criteria.

1. Macro/Micro Wave Strategy
Jay A. Leavitt, PhD

2. Looking Back on Previously Tried Ideas
Back Testing to Explore & Evaluate New Ideas

3. A New Idea for Trading in the Future

4. Employing the Hull to Determine
1. What to Trade
2. Entry Criteria
3. Exit Criteria

5. SPX Hull Timer

8. Bullish
Trade Stocks in Rising Markets [concept]
SPY Active
Bull Put Spread 2 Strikes Wide
Short Strike 75% POS
Bearish
Trade Bonds in Falling Markets [concept]
TLT Active
Bull Put Spread 2 Strikes Wide
Short Strike 75% POS

9. Hull[25]
Bullish
Profit Exit >= Credit/2
Loss Exit <= Risk/4
Bearish
Profit Exit >= Credit/2
Loss Exit <= Risk/8
Entry Not Allowed

10. Hull Micro Wave

11. Limit of 25% of Equity at Risk per Trade

12. The SPX Hull Timer keeps trades on the right side
of the market
Bear Micro Waves keep you out of the market
when it’s against you
Stops
When the SPX Hull Timer changes it is a Stop
When the Micro Waves turn bearish it is NOT
a Stop

13. The 75% POS of the short strike puts the
odds in your favor
The exit at 50% of credit improves these
odds and raises the daily return/trade
When the Micro Wave is bearish the per
trade exit is only 3.125% of equity

14. Average Days in Trade
9.80
Average Days in Losing Trade
8.44
Percent of Winning Trades
79.55%
Maximum Draw Down
-10.84%
Compound Rate of Return
23.96%

16. Wave reversals lasting
3 or fewer bars
Two types
Bull  Bear  Bull
5 occurrences
These are of no
consequence
Bear  Bull  Bear
2 occurrences
2nd resulted in the
largest Draw Dowm

18. Until June ‘12 the Compound Rate of Return was
~35%/year with a Maximum Draw Down of -7.62%
The market was unusually choppy 7/3/12 – 6/20/13
Need to re-evaluate Stops relative to Whip Saws
TOS Thinkback only uses Close data. Intraday data
could produce different results
This Macro/Micro Wave strategy is an ideal strategy
for investors with no desire to day trade

19. Jay A. Leavitt, PhD
leavitt@buffalo.edu