Mean-Reverting & Bias Strategies on DAX - Refine your Portfolio

by Andrea Unger | The Trading Show

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Like all equity indexes, the Dax tends to respond quite well to mean-reverting strategies.

Today's video offers you a simple and effective mean-reverting strategy that in recent months has managed to successfully exploit the declines that have hit this market.

We'll also talk about a strategy that exploits a recurring behavior of the DAX: the afternoon-overnight bullish bias.

By watching the video you'll discover:

  • How these strategies are structured (both live since 2017)

  • Their real performance

Enjoy!

Transcription

Hey everyone! One of the coaches at Unger Academy and welcome back to our usual chat about our portfolio strategies that have been performing the best in the last period.

Alright, so today we’re going to be talking about the DAX market that has been performing well this year. In particular, we're going to look at the rules of two strategies that have been doing well over the past period.

In particular, let's start with this strategy here, which is a mean-reverting strategy, so if the market goes up, we'll sell, for example in this case here, while instead when the market goes down, we'll try to make some bullish entries.

Where will we enter? We'll enter at a false breakout. For example, in this case, as you can see here above, this was the high of the previous day. The market broke the previous day's high to the upside, but then came back breaking the previous day's high again, from the top to the bottom.

So, there was what we call in jargon "a false breakout" because there was a breakout to the upside that the market then somehow took back.

In this case, the strategy then went into stop loss, by a little, by the way, unfortunately. But more generally we can see that this strategy has certainly been able to perform very well in the out-of-sample period.

It was developed in 2017, we could say around this time, and you can see that even in the out-of-sample period, especially in the last part, very positive trades were executed.

The curve of the long trades is this one, which, however, has defended itself well despite the slump there has been in the last period, and even the short side has been able, with a handful of trades, to take advantage of the downswings that have occurred.

This strategy, as mentioned before, was developed five years ago and since then, it has performed very well. Equity indexes generally tend to be more mean reverting than commodities, for example, which are more trend following. And so, I recommend that you try this type of strategy in your portfolio as well.

Let's turn to the next strategy I want to show you. It differs from the previous strategy.

It's a bias strategy that will open positions at specific times. I'm talking in this case about 5:30 pm, Frankfurt exchange time. And then we’ll close our positions at 9:00 am the following day, before the opening of the cash session of German stocks.

This strategy was also developed 5 years ago in 2017. The bullish afternoon-night bias exploited by this strategy has been present on the DAX for quite a long time. And in fact, the strategy has been performing pretty well in out-of-sample as well.

Here, for example, the pandemic was ongoing... So certainly, a strategy like this that only enters long really suffered the pains of hell but then was able to remarkably recover all the ground it had lost.

So, guys, give it a try as well. This is a very simple strategy to code, and it might seem strange to some people to enter only at a specific time and then exit at a different time. But here are the results, which have been nevertheless fairly consistent over time, and so we expect that maybe in the future they will continue like this.

If there's someone among you interested in the world of systematic trading, I'd suggest that you go and click on the link in the description of this video. From there you'll be able to watch a video presentation by Andrea Unger and get a copy of our best-selling book by just covering the shipping costs. You can even book a free call with a member of our team.

And if you liked this video, please be sure to leave us a Like! And if you haven't already done so, please subscribe to our channel and go and click on the notification bell so you can stay updated on the release of all our new videos and of course all our new content!

And that's it for now, I will see you again soon! Bye-bye!

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Andrea Unger

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.