Interest Rates Trading Using I Know First – 32% in 7 months

Interest rates trading is generally seen as done by the pros only.  The lower amount of information and steep learning curve make it a more difficult market to trade. The I Know First algorithm take the difficulty out of equation by creating an output value (the signal) which is equal across all different asset classes such as stocks, commodities, indices, and of course interest rates. Over the last 4 years our tracking universe has grown significantly to now include many interest rate indices and ETF’s such as

  • ^FVX – Treasury Yield 5 Years

    ^TNX – CBOE 10-Year Treasury Note

    ^TYX – Treasury Yield 30 Years

    BND – Vanguard Total Bond Market ETF

    All iShares Swiss Domestic Government Bonds

    CWB – SPDR Barclays Convertible Secs ETF

    HFRCX – Highland Floating Rate Opportunities C

    HYG – iShares iBoxx $ High Yield Corporate Bd

    IBCX.L – iShares Public Limited Company – iShares Euro Corporate Bond Large Cap UCITS ETF

    IEF – iShares 7-10 Year Treasury Bond

    IEI – iShares 3-7 Year Treasury Bond

    IEMB.L – iShares Trust – iShares J.P. Morgan USD Emerging Markets Bond ETF

    JNK – SPDR Barclays High Yield Bond ETF

    LQD – iShares iBoxx $ Invst Grade Crp Bond

    MORL – UBS ETRACS Mthly Py 2xLvg Mortg REIT ETN

    SHY – iShares 1-3 Year Treasury Bond

    TBF – ProShares Short 20+ Year Treasury

    TBT –  ProShares UltraShort 20+ Year Treasury

    TIP – iShares TIPS Bond (

    TLT – iShares 20+ Year Treasury Bond

 

The daily interest rate chart is used to make buy/sell/hold decisions according to the 5 day moving average rule. More information regarding this strategy can be found here and here.  Below is the results of trading using the strategy from July 1st 2014 to February 1st 2015. The chart below includes all trades up to that date, one can see it is volatile but clearly up trending.

line chart

Most Interest rates never qualified for a trade, below we can see what specific tickers had what influence on the portfolio:

asset performance

When we sum returns we can see two things very quickly. The first is the algorithmic performance was near perfect. With the exception of TYX the 7 months returns were outstanding. Secondly we can see that the returns are too high to yield only 32%. The reason for this is our risk management. There are many days where only 1 asset fits all qualifications for a trade. On such days we create a filler asset called base 1 and 2, which represents cash. We do this in order to avoid over allocation into one asset, potentially placing the entire portfolio at risk, at the downside of giving up some of our expected return.

Below you can see the exact trades on each day. Please note the algorithm checks the previous nights closing price and uses that as the opening price for buying, this mall deviation might shift the results (up or down); however, the net change is expected to be around 0. All signals are based off of the actual 1 month interest rate table subscribers received. When not enough trades are available according to all entry rules on a given day – they are simply kept as cash (base 1, base 2). You can also DOWNLOAD the excel with the original data or view it below by clicking “show trades”.