Many of you will think it’s a joke or something, but what can come from a simple thought? Well in this case from a simple thought I managed to write 17 systems starting from a simple and stupid idea, this idea made me write systems on a multitude of underlyings. Do you know how long it took me? 2 months!
2 months may seem like a long time but if you write 17 systems plus you work on other projects, work and do algorithmic trading it’s not bad at all!
THE IDEA
The idea was very simple: if you follow my articles you will know that I don’t write strategies starting from indicators but rather from the instrument I am going to trade, as you well know there are two different macro-categories: Mean Reverting and Breakout/Trend Follow and so I thought “How do I spot a movie without breakout or mean reverting?”
The answer came to me as usual in the shower, and it was very simple: “USE THE CROSSING OF TWO MOVING AVERAGES” it seems a very trivial thing but from what you will see you will change your mind!
DEVELOPMENT
Developing this idea was very simple, especially if you program in Easylenguage or PowerLenguage, for the Breakout/Trend Follow part here is the very simple code:
While the Mean Reverting part:
As for the long and short side of the Trend Follow / Breakout part, it is simple if the fast average crosses the slow fast average from bottom to top then we will have a bullish signal, for the short instead our fast average must cross from ‘up to down the slow average, in this case we will have a bearish signal.
For the Mean Reverting conditions we will have the exact opposite: we will go long if the fast average crosses the slow average from bottom to top, we will go short if the fast average crosses the slow average from top to bottom.
And then a simple condition that checks me if I’m not in the market and that I haven’t made 0 trades:
Then I put it all together to enter the market:
As for the output, for this kind of project I prefer an output after a certain number of bars, this allows me to measure the intensity and strength of each instrument in a different way:
THE SUBSTANCE
Our system is finished, but is it really a system? Well not really particularly because I haven’t added a Stop Loss (remember that if you don’t add stop losses to your systems you will end up in the abyss very soon), actually these types of systems I call them “ ENGINES “ this type of system allows me to check if my idea can be used and above all that it is profitable on the market.
And So?
So I use these engines to test each underlying I use, I’ll give you an example: if I know that crude oil has a purely Breakout/Trend Follow nature I won’t go to use the Mean Reverting conditions but rather I will do the opposite!
From the study of this engine I will get some data and if I evaluate them profitable well I will create the real system based on my engine!
Thanks to this simple engine I created 17 systems, I finished writing them all in 2 months as you can see in this screen:
PERFORMANCE
As I said I created these systems between 10/22 and 11/22, they have now been Out Of Sample for almost 4 months, let’s see how they performed!
Due to time and space problems, I will only show you the equity, if you want more information, don’t hesitate to contact me, you have all the links at the end of the article.
CONCLUSIONS
I tried to put as many different tools, as you can see the systems in the last 4 months have held up very well and some have even had new highs. This makes us understand a very important thing: “It is not the indicator that makes the system but the instrument that I want to trade that does it”
I hope this article has been useful to you and I remind you that if you want to buy my systems just contact me!
To the next article. 🤘
