Hey everyone! One of the coaches at the Unger Academy and welcome back to our usual chat about our portfolio strategies that have performed the best over the last period.
Alright, so today we’re going to be talking about the Soybean market, a market that belongs to the Grains market, and I’m going to be showing you two strategies for this market.
The first one is a trend-following strategy, which is the one we are looking at now.
This strategy enters at the breakout of a level that is calculated starting from the day’s opening price, plus or minus a factor calculated on the range of the previous days.
Should the market exceed this level, which is calculated as a distance from the day’s open, then we’ll enter long.
Conversely, if the market, from the day’s open, starts to decline until it touches our level, then we’ll enter short.
The range on which we’ll calculate the distance to enter long or short will simply be the difference between the high and the low of the previous day.
So, we’ll take this difference, add it to the day’s open, and at that level, we’ll enter long, while we’ll do the opposite for short entries, so we’ll take the range of highd1 and lowd1, meaning the highs and lows of the previous day, and then subtract this difference from the day’s open.
Should the market go down and come close to breaking this level, then we’ll enter at market.
This strategy has worked quite well over the years. Only the last two years have been uploaded here, starting from the beginning of 2021, so roughly a year and a half.
You can see that the first part of 2021 was quite positive indeed. Then the end of 2021 and the beginning of 2022 were less rewarding, while the last 3-4 months saw this strategy returning to perform very well.
The average trade of this system is quite high. It’s a multiday strategy so you can get some good results. Obviously, $350 isn’t the norm on this underlying asset, but an average trade around $150-$200 could even certainly be able to cover all the costs needed to trade this market.
Let’s now turn to the next strategy. This is a bias strategy, so it differs from the one I’ve just shown you.
Instead of entering on the breakout of specific price levels, entries and exits occur at certain times of the day.
As you can see, we’re using a 7-minute timeframe, so we have 7-minute bars.
This is intended to try to limit slippage, which on this market anyway should be quite limited since contracts traded exceed 100,000 pieces each day.
The short side of this strategy will enter at 4:00 a.m., while the long side will enter at or around 1:00 p.m.
Then, since we’re on a 7-minute timeframe, you’ll have to select the correct time stamp for the bars. So we used 3:58 as the time for the short side entry and 12:57 for the long side.
These times all refer to the Chicago Exchange timetable for the Grains Market.
So, these times will refer to the Chicago time zone. The trade will be closed around the entry of the other side, so simply the long trade will be closed when the time window of the short trades begins and vice versa.
This strategy has also performed well over the past year and a half. In this case, we see smaller average trades.
This is because this strategy stays in the market just a few hours plus the Soybeans market has a volatility that isn’t so high. So it isn’t easy to stay a few hours in the market and get a good average trade.
In this case, we can see that the long side definitely fared better than the short side. We see an average trade of only $20. In contrast, on the long side, it’s as high as $140.
Let’s look at the overall equity line of both sides. You can see that even this strategy, in the final period of 2021 and early 2022, struggled a bit, but then here in the last few months, it managed to reach its equity peaks again.
The long side, as mentioned before, has certainly brought better returns. On the short side, on the other hand, there have been more ups and downs in recent times, due to the strong bullish bias characterizing the commodities market in the last months of 2022.
Well, guys, if there is someone among you who’s interested in the world of systematic trading, I suggest you click the link in the description below. From there you can watch a video of Andrea Unger, get our best-selling book by just covering the shipping costs, or even book a free call with a member of our team.
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And with that, I will see you again very soon! Thanks a lot, bye-bye!
