Automated Trading Strategy #59
In 1-yr Strategy 59 net a profit of $174K on a portfolio of equity-based futures. Portfolio profit factor is 4.39, and 73% of trades are profitable.
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 as defined below:
Profit factor greater than 3
Annual drawdown less than 3%
Annual return on max drawdown greater than 500%
Maximum daily net loss of -$1,000
Avg Daily profit greater than $1,000
Less than 5,000 trades annually
More than 253 trades annually
We haven’t found the holy grail yet, but we get closer with every strategy. See below for the most recent performance chart, which provides:
the strategy,
the instrument to use for the strategy and the data series (all of our strategies are backtested on a minute-based data series from 1 - 60)
the parameters,
the trade count, and
the max drawdown.
The max drawdown is the cumulative drawdown, not absolute. In other words, it is the most the account balance has ever fallen from its high (not $0), which is why we use it to calculate return rather than absolute drawdown.
You’ll also find the percentage of profitable trades, net profit (broken down by gross profit and loss), along with a few stats like # of trades per day, profit per day, profit per trade and profit factor.
The performance chart below is based on backtest results from December 1, 2021 to December 1, 2022.
For links to all strategies click here.
We usually focus our process on capturing strategies that are based on market structure rather than just indicators. We may use indicators to capture the action, but the rationale behind the action is market driven. This requires more knowledge of markets than programming, which is our groove. In this way, I like to think of our strategies as being more ‘automated’ than ‘algorithmic’.
That being the case, Strategy 59 is the most “algorithmic” strategy we’ve ever published because it came about by merging three other indicator-based strategies together.
We’ve tracked these three strategies over time using both backtests and real-time tests. In the weekly Mudder Report, these three strategies perform well, but never in the same week.
So, we know the following about these three strategies: they are profitable based on backtest and real-time results, but never at the same time.
The three strategies I’m referring to are:
Incidentally, all of these strategies are available for ATS Mini subscribers as well.
For Strategy 59, we merged all three strategies together and got the following results:
Strategy 59 nets a profit of $174K on a portfolio of equity-based futures. Portfolio profit factor is 4.39, and 73% of trades are profitable. If we isolate the NQ contract we see a profit factor of 3.90 on 77% of profitable trades.
These are great preliminary results. One of the biggest lessons of our real-time test over the last 12 weeks is that a high percentage of profitable trades is just as critical as a high profit factor and Strategy 59 has both.
This is what the strategy looks like in chart form over a 17-day period. Keep in mind, this is just one contract that closes at the end of the trading session.
Strategy 59: The Merge
Now let’s talk about how to create this strategy. It takes a little more finesse than just merging all three together.