Automated Trading Strategy #10
Notorious Strategy 10 was originally published in May of 2021. In March of 2022, it became our superstar. A month later we were in tears.
There is no guarantee that any strategy 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. Backtests are based on historical data, not live data. 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.
Original backtest results based on 1 year of trades
*See below for Column Definitions
Strategy 10 was originally published in May of 2021 in the Newsletter ATS, and now I’m publishing it here, in ATS Mini. ATS Mini is the lower cost version of ATS.
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
I thought we’d found the holy grail when we first started live testing Strategy 10, but I was betrayed.
What can I say about Strategy 10?
In March of 2022, Strategy 10 became our superstar. It was outperforming every other strategy. At one point, it had over 15 straight profitable weeks in a row. No wonder it was the first strategy we ran live. As I write this, I shed mental tears over what could have been — oh the dreams I had for Strategy #10. Impaled by our own little unicorn.
This had happened to us once before, but we thought it was an isolated incident. You can read more about our first betrayal here:
While the first betrayal was hard, the second was almost unbearable. Still, we persevered. So resolute were we in the belief that the reason our star strategy performed well in the backtest, but poorly in live trades, was due to a failing or oversight on our part, that we doubled down on the effort. We tried reversing the strategy, changing parameters, instruments, and the time series. Nothing worked. Finally, we had to put Strategy 10 down, but not without a proper send off.
Strategy 10 has made us stronger. It has made us wiser. As I said in the most recent September Portfolio update, it was my best friend and worst enemy. It is because of Strategy 10’s cunning and deception that we developed a new process for improving backtest accuracy. It is because of the heartache caused by Strategy 10 that we started running a real-time test of our strategies (subscribers of ATS can follow this every week in the Mudder Report). It is because of Strategy 10’s lessons that we learned about the failings of the simulation. In particular, that it is far from perfect, and that a big of part of our job on the hunt would be to bridge this gap.
Perhaps you’ll have more success with Strategy 10 than we did, but don’t let it get to you. Let this serve as both challenge and warning: like a mirage, this strategy has the ability to deceive and draw you in.
Good luck, and please let me know if you have any questions, suggestions, or feedback by responding to this post or email: automatedtradingstrategies@substack.com.
Strategy 11, a strategy we still use today, will be published on October 15.