Automated Trading Strategy #37
Strategy 37 has a Profit Factor of 1.68 and an annual drawdown of only 2.74%
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. 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.
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Strategy #37 Description:
Strategy 37 is based on trends using the inverse relationship of two futures contracts. In general, the stronger the trend, the better the profit factor. Profit factor is calculated by dividing gross profit by gross loss. Strategy 37 has a profit factor of 1.68, which means that the ratio of gross profit to loss is 1.68. In other words, the strategy made 1.68 times more money than it lost during the period. This is why we like to use profit factor as a proxy for the forward strength of a strategy.
Strategy 37 is based on the trading adage, “the trend is your friend”. The algorithm for this strategy looks for a trend using a trend indicator, and then uses the strength of that trend as a guide. As shown below, the stronger the trend, the higher the profit factor and the lower the number of trades made in the time interval.
So, if you’re looking for the highest profit factor using this strategy, you would need to select the strongest trend.
We selected a trend strength that delivered 310 trades for the year, had a profit factor of 1.68 and an annual drawdown of only 2.74%. We did this by increasing the trend strength…to a point. Every time you increase the trend strength, it’s harder for the strategy to find a trade that meets the requirement so you have fewer trades. In the extreme, you could have a strategy with a profit factor of 99 if you set the trend strength to an extreme and are okay with only making a few trades for the year. It depends on what you’re looking for.
Let’s get into how the strategy works and how to increase/decrease trend strength.
Strategy 37 uses the following indicators: