Is This The One?
This strategy placed an asymmetric “bullish bias” on a reversion to the mean strategy and made $37K in the last 5 weeks.
Important: There is no guarantee that ATS strategies will have the same performance in the future. I use backtests and forward tests to compare historical strategy performance. Backtests are based on historical data, not real-time data so the results shared are hypothetical, not real. Forward tests are based on live data, however, they use a simulated account. Any success I have with live trading is untypical. Trading futures is extremely risky. If you do trade live, be prepared to lose your entire account. There are no guarantees that any performance you see here will continue in the future. The best way to trade is with a simulated account on live data. I recommend using ATS strategies in simulated trading until you/we find the holy grail of trade strategy. This material is for educational purposes only and should not be viewed as investment advice.
As promised in the last Mudder Report and forward test update, I wanted to provide a quick overview of what’s going on with Strategy 40. Let’s get right to it.
As of 8/6, Strategy 40’s inverse (Strategy 40_rev) is the highest performing strategy by net profit in the entire Q3 forward test portfolio, which consists of approximately 145 different strategy variations.
The Q3 forward test is a forward test that started at the beginning of July. It uses live data on simulated accounts. By running the strategy live on simulated accounts, we’re able to get a cleaner understanding for how a strategy performs without having to worry about the myriad issues backtests often create. Case in point, the backtest told us that Strategy 40 was great; it turned out to be the worst.
If anything, this post is a case study in the importance of the forward test. Not only did we save ourselves the misery of a huge loss, we also found a strategy that may perform well in all markets, even highly volatile markets like the one we’re experiencing today.
As a quick background, in the Q1 and Q2 Forward Test, Strategy 40 was one of the worst performing strategies in the portfolio. Instead of scrapping the strategy, I reversed it. As I’ve mentioned before, this is another way to pull value out of forward tests. It’s important to note that this can’t be done with all strategies, i.e., strategies with rigorous risk management systems.
I’ve been forward testing Strategy 40_rev on live data since the beginning of July. These are the performance results:
Strategy 40_rev has a 4.20 profit factor with 11 trades. Keep in mind, this is over one of the most volatile periods the market has seen in the last two years. We’ve got a 63% win rate and a max drawdown of $6K on a total net profit of $37K.
Here’s a tabular view of all trades: