|June 20, 2012||Posted by Oddmund Grotte under strategies|
I’m trading some strategies based on mean reversion on a sample of 77 ETFs. Those ETFs are the most liquid ones.One of the strategies I trade is based on MACD-Histogram. It’s a very much used indicator I have tweaked a little bit. On per trade basis this is one of the best strategies I have. Here you can read about the indicator. I have tweaked this one a little bit to the following:
- The MACD Histogram bar must have fallen 4 days in a row.
- The fourth latest bar must have been below zero.
- The current close of the ETF must be lower than the day before.
Entry is on the close. Exit is in the first day when the close is higher than the day before. Here is an example (exit was on the close the day after because the ETF rose in price):
For short it is vice versa. However, long is a lot better than short. In general short is a lot more difficult to trade.
In total this strategy has generated 6669 trades on my portfolio of 77 ETFs.
This diagram shows the the average gain per trade since 2000. Among those 77 ETFs hardly any is negative:
From month to month we get the following bar chart:
I think this is pretty good results. Assuming one can only trade maximum ten positions at a time as a portfolio, we get this equity curve:
This strategy is in cash most of the time! This strategy can be one of several if swingtrading. This proves that a very simple strategy can be very efficient.