2 Strategies to Exploit the Downtrends in Nasdaq: Simple Rules, Great Performance

by Andrea Unger

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Trading equity indexes with strategies that trade both long and short are essential to succeed in exploiting bearish periods. Although these markets are characterized by an underlying bullish trend that drives many traders to trade them with long-only strategies, it’s possible to experience periods of declines that can only be exploited with short trades.

In this video, we discuss two strategies on the Nasdaq that trade both long and short and have succeeded in exploiting the downturns that have hit this index. 

By watching the video you'll discover:

- The entry rules of the two strategies (trend following and mean reverting)

- Their real performance 

Enjoy! 😎

Transcription

Hey guys! Welcome back to our usual chat about the strategies in our portfolio that have performed the best over the past period.

Alright, okay, so this week we’re going to be talking about the Nasdaq. It's a well-known stock index, and specifically, we're going to look at two strategies that have done well in exploiting not only the rises of this market but, more importantly, the falls of this market.

In fact, we'll see that the short side of these two strategies was precisely what saved and allowed these strategies to continue performing well even in difficult years like this year 2022.

So, let's start with the first strategy on the list. It's a trend-following strategy that enters both long and short on price levels that are calculated starting from the high and low of the day before and adding to or subtracting from those levels a certain number of points. So, for the long entries, we're going to calculate the high of the previous day and from this level, we're going to subtract 10 points to enter a little bit better than in classic breakout strategies.

In this specific case, the strategy entered almost or even above or at any rate at the level of the previous day's high but that's because the operating time window of the strategy starts at 11 a.m. And at 11 a.m. the market was already above the level that triggers our entries, and so the strategy entered precisely at 11:00 a.m.

For the short entries, on the other hand, we're going to calculate the previous day's low and add 35 points. Again, as for the time window, we'll wait for 11 in the morning, Chicago time zone you know because the exchange is in Chicago. 

This strategy has fared very well indeed, excellently I'd say. It was codified in 2018, around this point here. And we can see that this strategy has been able to successfully exploit strong declines as well. I mean, look at the buy and hold of the Nasdaq underlying here, and here the curve for the short trades, it's even performing better than the in sample. Look at this amazing series of trades!

The long side hasn't caused much damage, on its end, considering the strong drawdown we've seen on this underlying, and as a result, this is a type of strategy that has performed very well and hopefully will continue to do so in the future.

Let's take a look at the next strategy. It is a mean-reverting strategy and opens positions when false breakouts occur. So, on the upward breakout of the previous day's high - let's take this day as an example.

You can see that the high was on this level here. The market was above this level. When it dropped below this level, the strategy entered the market on the next bar.

So, likewise, taking this day, the low of the previous session was this. You can see that the market first made a breakout which then turned out to be false because the market reversed and then crossed above this level, triggering the entry of our strategy.

This is an intraday strategy, so it will close positions by the session’s end. And this strategy also performed very well in out-of-sample.

It was also developed at about this point here in 2018. And we can see that in the first part of out-of-sample, the strategy made some excellent profits, even better than in sample. And then after that, it went through a period of drawdown and sideways movements that lasted quite a while. And now, just because of the volatility that has been unleashed on this market in the last period, the strategy has been able to regain lost ground and is right now at its equity peaks.

The average trade of this strategy is around $150, $145-146 to be exact, and the number of long trades is even lower than the number of short trades.

This helped us, especially in the last big downturn period, where we also saw this strategy get a really exciting series of short trades.

So, hey guys, go and give it a try too! Nasdaq is a very versatile market indeed.

If you're interested in learning more about systematic trading, we're going to leave a link in the description below from which you can access several useful resources, including a video by Andrea Unger, or you can go and get our best-selling book by covering just the shipping costs, or you can book a free call with a member of our team.

If you liked this video, please leave us a Like, go and subscribe to our channel and click on the notification bell so that you can stay updated on the release of all our new content.

And with, we will see you soon again everyone, bye bye!!

Need More Help? Book Your FREE Strategy Session With Our Team Today!

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Andrea Unger

Andrea Unger here and I help retail traders to improve their trading, scientifically. I went from being a cog in the machine in a multinational company to the only 4-Time World Trading Champion in a little more than 10 years.

I've been a professional trader since 2001 and in 2008 I became World Champion using just 4 automated trading systems. 

In 2015 I founded Unger Academy, where I teach my method of developing effecting trading strategies: a scientific, replicable and universal method, based on numbers and statistics, not hunches, which led me and my students to become Champions again and again.

Now I'm here to help you learn how to develop your own strategies, autonomously. This channel will help you improve your trading, know the markets better, and apply the scientific method to financial markets.

Becoming a trader is harder than you think, but if you have passion, will, and sufficient capital, you'll learn how to code and develop effective strategies, manage risk, and diversify a portfolio of trading systems to greatly improve your chances of becoming successful.