I11L - Meanreverter 4h — Strategy by I11L
By I11L
Performance Metrics
- Author: I11L
- Symbol: NASDAQ:AMZN
- Timeframe: 4 hours
- Net P&L: +36,378.79 USD (+384.53%)
- Win Rate: 76.5%
- Profit Factor: 2.757
- Max Drawdown: 4,188.58 USD (18.07%)
- Total Trades: 243
- Sharpe Ratio: 0.3
Description
---Overview---The system buys fear and sells greed.Its relies on a Relative Strength Index (RSI) and moving averages (MA) to find oversold and overbought states.It seems to work best in market conditions where the Bond market has a negative Beta to Stocks.Backtests in a longer Timeframe will clearly show this.---Parameter---Frequency: Smothens the RSI curve, helps to "remember" recent highs better.RsiFrequency: A Frequency of 40 implies a RSI over the last 40 Bars.BuyZoneDistance: Spacing between the different zones. A wider spacing reduces the amount of signals and icnreases the holding duration. Should be finetuned with tradingcosts in mind.AvgDownATRSum: The multiple of the Average ATR over 20 Bars * amount of opentrades for your average down. I choose the ATR over a fixed percent loss to find more signals in low volatility environments and less in high volatility environments.---Some of my thoughts---Be very careful about the good backtesting performance in many US-Stocks because the System had a favourable environment since 1970.Be careful about the survivorship bias as well. 52% of stocks from the S&P500 were removed since 2000.I discount my Annual Results by 5% because of this fact.You will find yourself quite often with very few signals because of the high market correlation.My testing suggests that there is no expected total performance difference between a signal from a bad and a signal from a good market condition but a higher volatility.I am sharing this strategy because i am currently not able to implement it as i want to and i think that meanreversion is starting to be taken more serious by traders.The challange in implementing this strategy is that you need to be invested 100% of the time to retrieve the expected annual performance and to reduce the fat tail risk by market crashes.