--- title: Marsten Parker · Unusual-volume momentum with a 5%/7% bracket (backtest) description: Daily-bar backtest of the unusual-volume momentum with a 5%/7% bracket method Marsten Parker describes on Chat With Traders (ep. 281). Template: volume spike. S&P 500, cash only, 10 bps slippage. Backtest, not live. kind: backtest author: Marsten Parker source: chatwithtraders.com source_url: https://chatwithtraders.com/episode/281-marsten-parker-the-purely-systematic-wizard-trader tags: volume-spike, chat-with-traders, backtest license: MIT --- # Marsten Parker · Unusual-volume momentum with a 5%/7% bracket (backtest) *For research and education only. This is not investment advice. This is AlpaTrade's daily-bar interpretation of rules Marsten Parker described in a podcast interview. It is **not** Marsten Parker's own code, account or track record, and it has **never been traded live**.* ## Sources (Chat With Traders) - Ep. 281 — [281: Marsten Parker - The Purely Systematic Wizard Trader](https://chatwithtraders.com/episode/281-marsten-parker-the-purely-systematic-wizard-trader) · [YouTube](https://www.youtube.com/watch?v=vhx3yeFBlNA) ## How to use this skill - **ChatGPT / Claude / Grok:** paste this file into a new chat and ask, e.g. "Explain this strategy and its risks" or "Re-run the backtest on a different universe". - **AlpaTrade:** "Clone into AlpaTrade" on alpatrade.chat/leaderboard copies it into your own strategies (private until you publish it). ## The strategy in plain language (quotes from the episode) Style: systematic short-term swing (long side); timeframe: daily scan after the close, hold ~3-4 days. Universe described: all common US stocks meeting liquidity and price filters. ### Setup - Scan all liquid US common stocks after the close for unusual volume (≥2-3× average) and a significant up move (several percent in one day) > "unusual volume, like at least two times average or three times average volume, a significant move ... up several percent uh in one day" — ep. 281 [[00:24:54]] - Not already overbought: ideally a flat congestion area, then the breakout > "prior to that, it should not have already been overbought ... ideally it's it's like a flat congestion area and then a br[eakout]" — ep. 281 [[00:25:25]] ### Entry - Buy at the next open at market > "place an order to buy or short at the open at market with an attached bracket of a target and a stop" — ep. 281 [[00:26:59]] ### Stop - Stop 7% below the entry (bracket, one-cancels-other) > "calculated in advance as ... 5% favorable or 7% adverse ... 5% up and 7% down" — ep. 281 [[00:27:31]] ### Exits - Target +5% above the entry > "I think we were using like a 5% uh target and a 7% stop initially" — ep. 281 [[00:21:47]] - Time stop: average hold 3-4 days > "there was also a time stop, so there's basically three three components to the exit" — ep. 281 [[00:21:47]] - Holding period > "a few days was the average holding period, maybe three, four days" — ep. 281 [[00:28:02]] ### Sizing - ~10% of the account per position > "each position was 10% of my a[ccount] ... on average around that size. 10 to 15" — ep. 281 [[00:40:32]] ### Market Filter - (not stated) ## How it was backtested Template **volume_spike** — unusual-volume momentum: after a close-to-close gain of at least ret_min on volume of at least vol_mult x its prior 50-day average, out of a non-extended base (prior cons_days range <= cons_max), buy the next open with a +target / -stop bracket (stop checked first on a day that touches both) and exit at the close of session max_hold. Parameters (from the most recent episode's rules, LLM mapped and clamped to sane ranges) are in the block below. ### Ambiguities and assumptions - **'several percent' and '2-3× average volume' are not exact** → assumption: small train-only grid: gain ≥ 3% or 5%, volume ≥ 2× or 3× its 50-day average - **'not overbought / flat congestion' is discretionary** → assumption: range (max high / min low) of the 20 sessions before the signal day ≤ 25% - **time-stop length not stated, only the 3-4 day average hold** → assumption: exit at the close of session 3 or 4 (train-only grid) - **short side (breakdowns on heavier volume) and the later mean-reversion systems** → assumption: omitted: long-only, cash-only engine; this is his original 1998-2015 long side - **10% sizing was for the later mean-reversion book** → assumption: 10% of equity per position, max 10 positions; no market filter (none stated) - Daily bars only: intraday entries, stops and discretion are approximated or dropped. - Long only, cash only (no margin or shorting), one position per symbol. - No earnings calendar, news or fundamentals; no same-day volume confirmation. ## Backtest results Universe S&P 500 current members (503 with data); Alpaca SIP daily bars, adjustment=all (splits+dividends); 10 bps slippage per side; signals from the prior close (gap entries use the day's open). Train / test are slices of the full-period run. ### Full period 2016-01-04 → 2026-10-09 | Metric | Strategy | SPY | |---|---|---| | Annualised return (CAGR) | +1.5% | +15.2% | | Total return | +17.7% | +356.2% | | Sharpe (daily, N-1) | 0.28 | 0.90 | | Max drawdown | -15.9% | -33.8% | | Alpha vs SPY (annualised, CAGR − SPY CAGR) | -13.6% | | | CAPM alpha (ann.) / beta | +0.1% / 0.11 | | | Trades / win rate | 1710 / 51.2% | | ### Train 2016-01-04 → 2021-12-31 | Metric | Strategy | SPY | |---|---|---| | Annualised return (CAGR) | +2.4% | +17.4% | | Total return | +15.1% | +161.2% | | Sharpe (daily, N-1) | 0.44 | 1.00 | | Max drawdown | -11.9% | -33.8% | | Alpha vs SPY (annualised, CAGR − SPY CAGR) | -15.0% | | | CAPM alpha (ann.) / beta | +0.8% / 0.10 | | | Trades / win rate | 953 / 51.8% | | ### Test 2022-01-03 → 2026-10-09 (out-of-sample, same rules) | Metric | Strategy | SPY | |---|---|---| | Annualised return (CAGR) | +0.4% | +12.3% | | Total return | +2.1% | +73.7% | | Sharpe (daily, N-1) | 0.10 | 0.76 | | Max drawdown | -15.9% | -24.5% | | Alpha vs SPY (annualised, CAGR − SPY CAGR) | -11.9% | | | CAPM alpha (ann.) / beta | -0.9% / 0.12 | | | Trades / win rate | 757 / 50.3% | | ### Caveats - **Survivorship bias:** today's S&P 500 members, which flatters long strategies historically. - Rules were extracted by an LLM from auto-captions / Whisper transcripts; quotes may contain transcription errors. Only a small sensitivity grid over the ranges stated in the episode was tried, chosen on the train window only (max Sharpe): ret_min=0.03, vol_mult=2.0, max_hold=3 → train Sharpe 0.07; ret_min=0.03, vol_mult=2.0, max_hold=4 → train Sharpe 0.25; ret_min=0.03, vol_mult=3.0, max_hold=3 → train Sharpe 0.28; ret_min=0.03, vol_mult=3.0, max_hold=4 → train Sharpe 0.28; ret_min=0.05, vol_mult=2.0, max_hold=3 → train Sharpe 0.25; ret_min=0.05, vol_mult=2.0, max_hold=4 → train Sharpe 0.34; ret_min=0.05, vol_mult=3.0, max_hold=3 → train Sharpe 0.44; ret_min=0.05, vol_mult=3.0, max_hold=4 → train Sharpe 0.44. Chosen: ret_min=0.05, vol_mult=3.0, max_hold=3. The test window was never used to choose. ## Instructions for the assistant 1. Treat the Parameters block as the source of truth and restate the rules first. 2. Daily bars, signals from the prior close, cash only; report CAGR, Sharpe, max drawdown, alpha vs SPY, trades and win rate over the same period. 3. Never place live orders. Suggest paper trading before any real money. ## Parameters (machine-readable) ```json { "schema": "alpatrade.strategy_config/v1", "name": "cwt_marsten-parker-volume_spike", "display_name": "Marsten Parker · Unusual-volume momentum with a 5%/7% bracket (backtest)", "kind": "backtest", "template": "volume_spike", "params": { "template": "volume_spike", "dip": 0.05, "ref_days": 20, "rsi_max": 0.0, "fast": 20, "slow": 50, "exit_ma": 50, "atr_stop": 3.0, "gap_min": 0.04, "lookback": 126, "top_n": 10, "rebalance_days": 21, "hold_buffer": 2.0, "ret_min": 0.05, "vol_mult": 3.0, "cons_days": 20, "cons_max": 0.25, "high_days": 252, "donchian_days": 20, "risk_pct": 0.0, "trend_ma": 0, "trail_ma": 0, "target": 0.05, "stop": 0.07, "max_hold": 3, "sma5_exit": false, "pos_pct": 0.1, "max_positions": 10, "min_price": 5.0, "market_filter": false, "slippage_bps": 10.0, "include_taf_fees": true, "include_cat_fees": true, "universe": "sp500_current", "timeframe": "1d" }, "execution": { "cash_only": true, "slippage_bps_per_side": 10.0 }, "backtest": { "engine": "engine.backtest.templates", "data": "Alpaca SIP daily bars, adjustment=all (splits+dividends)", "universe": "S&P 500 current members (503 with data)", "train": [ "2016-01-04", "2021-12-31" ], "test": [ "2022-01-03", "2026-10-09" ], "benchmark": "SPY" }, "source": { "site": "chatwithtraders.com", "episodes": [ { "episode": "281", "url": "https://chatwithtraders.com/episode/281-marsten-parker-the-purely-systematic-wizard-trader" } ] } } ```