Automated Trading Strategy #4 (Update): Identifying Trends in Volatile Markets
Strategy #4 updated and revised
Important: There is no guarantee that these strategies will have the same performance in the future. I use backtests to compare historical strategy performance. Backtests are based on historical data, not real-time data so the results shared are hypothetical, not real. Even with forward tests, there is no guarantee that performance will continue in the future. Trading futures is extremely risky. If you trade futures live, be prepared to lose your entire account. I recommend using these strategies in simulated trading until you/we find the holy grail of trade strategy.
When I first started publishing strategies, Strategy 4 was among the first batch of 9. It was one of a group of strategies created with other traders during COVID lockdowns. None of us knew what we were doing.
Strategy 4 is a simple strategy. When first published in January of 2021, it made $21K for the year with an average profit per trade of $21.
This is the chart I published with that first batch of strategies:
From the original batch of nine strategies, only Strategies 2, 4, and 7 are still in use today. The good news is that strategy performance is much better today than it was when we first started the hunt. Among the many things learned along the way is a framework for thinking about strategy development. So with a few changes I can take Strategy 4 from this:
…to this:
And this for a proper portfolio:
The first screenshot above is from the flawed Strategy 4a. Not bad, but nothing like the new and improved Strategy 4, aka, Strategy 4c. I’m going to use this post to help explain the thought process behind creating Strategy 4c out of Strategy 4a. First, let’s take a look at how Strategy 4 performed in the forward test.
Strategy 4 - ATS Forward Test Performance
One thing I have access to now that I did NOT have access to when I first started is forward test data. Backtests can point you in the right direction, but you still have to run the strategy live (on a simulated account) to know how it really performs.
So, I created simulated accounts and started testing strategies to see if they were aligned with the backtest.
This is a breakdown of Strategy 4’s performance in the ATS Forward Test which was started in January of 2023: