The Mudder Report: Weekly Update 01/23/2022 - 01/28/2022 (NT8 Week 5)

Test 3 made $120K last week; Test 5 made $101K.

Risk Disclaimer: There is no guarantee that our 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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This is the 11th post in a weekly series dedicated to tracking our automated strategies at the weekly level. You can read the first post here. You can also click here for links to all weekly reports. The original post provides an overview of our approach and why we’re doing this. It also provides an explanation of the reporting structure as well as an explanation for the name.

Just like our annual backtest updates that happen every two months (click here for the January update), we’re looking for consistency, but at a more granular level. The goal of the series is two fold:

• to compare weekly stats against annual stats

• to develop a rubric/framework for a strategy selection process

The latter is based on the premise that the holy grail of automated trade strategy may not be static, but more fluid like a chameleon or rather made up of multiple strategies. We are currently testing several theories concurrently to see which one performs better over time.

Weekly update analysis

This week was a big week. Test 3 made $120K and Test 5 made $100K. The bigger news is that we think we know how to duplicate those results. We feel we’ve made something of a revelation that should be fairly easy to exploit on a consistent basis and we’re looking forward to sharing that revelation with you below. Also, due to popular demand, we’re adding the MNQ to the Mudder Report. We’ve already made some interesting observations. For example, the average drawdown for MNQ this week was 1/10th the size of the NQ, as is to be expected, but average net profit for MNQ was half the size of NQ. We’ll talk more about this in a moment.

At the end of 2021 we looked at the first 8 weeks of the Mudder Report’s weekly analysis. The observations that came from that analysis can be read in the post: Mudder Report Analysis. The most salient observation made was that our original selection criteria was flawed. As a result, we decided that our new selection process should be based on any one, or all, of the following:

1. trends in net income from the previous week

2. the strength of the trend as measured by profit factor

3. the individual profile of the strategy

4. weekly historical comps

5. certain economic announcements from central banks

We ruled out historical comps, but we’re still developing the others. These were the tests for last week:

1. The FOMC had a rate announcement last week so we expected net profit for the entire portfolio to be higher than the prior week: Test: total net profit of the total portfolio for NT8 Week 4 vs total net profit of the portfolio for NT8 Week 5.

2. We ran all strategies that were negative with a low profit factor. Test: Run Strategies 7, 8, 37, 38, 41, 41a, 41a(D), 41a(E) and 41a(G)

3. We ran all strategies with one positive week. Test: Run Strategies 1, 3, 4, 5, 9, 10, 11, 12, 13, 14 and 15

4. We ran all strategies with at least 2 weeks of positive trending weeks and a high profit factor. This is the selection criteria that we started using in our first week of the Mudder Report. Test: Run Strategies 10, 23, 39, 40, 41a (F)

5. We ran Strategy 10 for its individual performance. It had 10 straight weeks of positive net profit. Test: Run Strategies 10 on 3 contracts instead of just 1.

We ran all five tests, and this is how they performed:

Note: only Strategies with more than 2 trades for the week are included in the Mudder Report.

This is how well they did in the prior week:

Test 2 did well in the prior week, with $66K in net profit, but it performed horribly last week. Test 3 and 5 were the clear winners this week with $119K and $100K, respectively. What does mean? It could mean several things, but we’ve noticed a few things in particular that we’re proud to announce because it’s a trend we hope to take advantage of in the future. What are the trends: