Automated Trading Strategy #2

Strategy #2 made over $55K last year.

Risk Disclaimer: There is no guarantee that these strategies will have the same performance in the future. Some may perform worse and some may perform better. We use backtests to compare historical strategy performance, but there are no guarantees that this performance will continue in the future.


For an overview of what we do, click here.

Backtest Results based on 1 year of trades

Strategy #2 Description:

Strategy #2 uses the MACD Indicator (MACD), Average Directional Index (ADX) and Average Directional Index Rating (ADXR).

Enter Long - When MACD (MACD plot) is greater than MACD (Avg plot)

Exit Long - When MACD (MACD plot) crosses below MACD (Avg plot)

Enter Short - When MACD (MACD plot) is less than MACD (Avg plot)

Exit Short - When MACD (MACD plot) crosses above MACD (Avg plot)

The parameters for this strategy are as follows:

Futures Contract: NQ

ADXR bottom: 14

ADXRtop: 10

ADXtop: 14

MACD1: 12

MACD2: 26

MACD3: 9

Data Series: Range

Data Series Value: 36

You can test the strategy by duplicating backtest results above.

An example of how the strategy works is below.


Optimizing Strategy #2:

We optimized strategy #2 based on varying parameters and data series type.

The strategy itself stays the same, but we optimized the parameters as follows:

ADXR bottom: 14

ADXRtop: 10

ADXtop: 14

MACD1: 12

MACD2: 26

MACD3: 9

Data Series: Range

Data Series Value: 23

Using this optimization strategy we were able to achieve an annual profit of $220,035 on one futures contract with an average of 41.13 trades per day, a daily profit of $601, and a profit per trade of $14. Keep in mind, the number of trades is only a consideration for traders without a flat rate commission plan.

Perhaps the best improvement for this strategy is the annual drawdown, which improved from -21.07% to -14.23%. So, not only did we nearly quadruple the profit per trade, but we decreased the risk level while doing so.

One thing we weren’t happy with is the increase in trades per day, however. So we decided to optimize the parameters at a more granular level.

While the next level of optimization decreased profitability to $114,735, it greatly decreased max drawdown to 6.92% and decreased the number of trades per day to 2.81. This is how the parameters changed for this optimization:

ADXR bottom: 17

ADXRtop: 6

ADXtop: 18

MACD1: 12

MACD2: 26

MACD3: 67

Data Series: Range

Data Series Value: 99

We also want to introduce an optimization strategy that greatly reduced profitability to $27,105, but decreased the drawdown to a staggering 1.49% and trades per day to .10. So, while the profit per day is only $74, the profit per trade is a staggering $713, by far our highest yet. This is how the parameters changed for this optimization:

ADXR bottom: 17

ADXRtop: 6

ADXtop: 18

MACD1: 12

MACD2: 26

MACD3: 9

Data Series: Range

Data Series Value: 99

We are currently in the process of optimizing Strategy #3 and will report out on that shortly.


Download Strategy #2 for NinjaTrader 7: Click Here

Download Strategy #2 for NinjaTrader 8: Click Here

***Strategies are available for download in Ninjatrader 7 & 8 only, but you can duplicate the strategy on all platforms based on the strategy description above***


Ninjatrader 7 Download Instructions

  1. Click on the link above to download file from GoogleDrive.

  2. Download the Strategy to your desktop, keep them in the compressed .zip file.

  1. From the Control Center window in Ninjatrader 7, select the menu: File> Utilities> Import Strategy.

  2. Select the downloaded .zip file.

  3. NinjaTrader will then confirm if the import has been successful. 

If you've never used/run a strategy in NinjaTrader 7, NinjaTrader provides instructions here.

Ninjatrader 8 Download Instructions

  1. Click on the link above to download the file.

  2. Download the Strategy to your desktop, keep them in the compressed .zip file.

  3. From the NinjaTrader Control Center window, select the menu Tools > Import > NinjaScript Add-On

  4. Select the downloaded file from your desktop

If you've never used/run a strategy in NinjaTrader 8, NinjaTrader provides instructions here.


How to compare strategies

We like to look at two sets of metrics when comparing strategies:

1) Backtested results for the first 1,000 trades

2) Backtested results for 1 year

Both perspectives provide a way to confirm the performance of the strategy.

And, keep in mind, March was a wild ride in 2020.

Within each perspective, it's important to look at the # of days the strategy was employed, the max drawdown throughout the life of the backtest, the profitability of the strategy over the given time frame and the average profit per day (see below for performance metrics). The right strategy depends on your risk profile. Those with a lower risk profile should focus on strategies with a lower drawdown. 

I will continue to provide analysis for strategy comparison for all subscribers.

Backtest Results based on ~1,000 trades

Backtest Results based on 1 year of trades

Strategy Performance is updated every two months. New strategies are added every month.

Column Definitions:

  • Strategy - The name of the strategy.

  • Trades - The number of trades used in the backtest to analyze performance. Our goal is ~1,000 trades for comparison.

  • Start date- The beginning date of the backtest.

  • End date - The ending date of the backtest.

  • # of days - The number of days in the strategy.

  • Drawdown - This refers to the maximum drawdown statistic, which provides you with information regarding the biggest decrease (drawdown) in account size experienced by the strategy. Drawdown is often used as an indicator of risk.

    Drawdown = single largest Drawdown

    As an example, your account rises from $25,000 to $50,000. It then subsequently drops to $40,000 but rises again to $60,000. The drawdown in this case would be $10,000 or -20%. Take note that drawdown does not necessarily have to correspond with a loss in your original account principal.

  • Profit - The net profit made on the strategy for the backtest.

  • #trades per day - The average number of trades made per day using the strategy.

  • Profit / Day - The average profit made per day.

  • Profit / Trade - The average profit made per trade.

  • Lowest daily new profit - The worst performing day of the strategy in the backtest.

  • Highest daily net profit - The best performing day of the strategy in the backtest.

If you have any issues, please contact us at automatedtradingstrategies@substack.com.