Automated Strategy Development: High Win Rates & Correlation Studies
ISO rational and irrational models to find the holy grail.
Important: There is no guarantee that our strategies will have the same performance in the future. We use backtests to compare historical strategy performance. Backtests are based on historical data, not real-time data so the results we share are hypothetical, not real. There are no guarantees that this performance will continue in the future. Trading futures is extremely risky. If you trade futures live, be prepared to lose your entire account. We recommend using our strategies in simulated trading until you/we find the holy grail of trade strategy.
As a quick reminder, our goal is to find the holy grail of automated trade strategy.
We haven’t found the holy grail yet, but we get closer with every strategy. Click here for the most recent performance chart.
The Holy Grail of Automated Trading Strategy
Now that we’re over two years in, I can’t help but wonder if the holy grail of automated trading strategy even exists.
In a perfect world, the holy grail is a strategy that forecasts every movement the market makes, but we’d settle for a strategy that had a 100% win rate. The former is the unicorn, a fiction, rarely if ever seen. The latter is much more tangible. It feels more rational. Hunting for a unicorn is by its very nature irrational. Still, if given such a choice, I would choose the irrational option every day and twice on Sunday.
I think it’s time to approach this question from both a rational and what some would call an irrational or biological perspective. In the first group are “strategies with a high win rate”. In the second group, we’re going to look at a few “irrational models” in sub-atomic physics and AI/ML to see if they can help find the unicorn.
Rational Hunt: How to Create Strategies With A High Win Rate
From a rational perspective, finding the holy grail is about identifying the best times to trade. That may be a time of day or day of week. It may be a certain market condition. Ultimately, from a rational perspective, the best time to trade is also the most predictable. In the same way that a ‘mudder’ refers to a horse that runs faster in the rain, we’re hunting for a strategy that does best under certain conditions.
We’ve learned a lot from our forward testing over the last two quarters. The most salient takeaways are as follows: