S&P 500: 2 Strategies that Performed Well Even in Challenging Years (Bias + Trend Following)

by Andrea Unger

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In this video, we discuss strategies on the Mini S&P 500 stock index that are producing excellent performance and that work very well even in difficult times like 2022!

One is a bias strategy while the other is a trend-following strategy based on one of the most well-known and widely used indicators: Bollinger Bands. Both strategies show better performance in out-of-sample than in sample!

By watching the video you’ll discover:

- The Bias strategy's entry and exit days and times 

- The triggers of the Trend-following strategy

- Their real performance 

Enjoy! 😎

Transcription

Hey again and welcome back to our usual chat about the best-performing strategies in our portfolio over the last period.

Okay, so this week I’d like to talk to you about the S&P 500 future, which replicates the performance of the 500 most capitalized US stocks. It certainly is the best-known stock index in the world and also a benchmark for all other existing stock indexes.

We're going to be looking at two strategies together, a bias and a trend-following strategy, that have both proven to work very well even in challenging years for these markets, such as 2022 has been so far.

Let's start with the bias strategy, which I'm sure many of you will remember because we've seen it before, but I'm going to mention it again today because it's continuing to grind out profit after profit, even in years that weren't so easy.

This is because we've seen some strong declines and clearly on a stock index there will be more bullish trades than bearish ones and we'll likely struggle more in years of decline, like the one we've experienced recently.

This strategy, however, hasn't experienced hardship. As I said, it's a bias strategy, so it will enter at certain times and on certain days of the week.

More precisely, long trades will take place at the start of the Tuesday session, which is the second session of the week, and then close the positions, unless a stop loss occurs earlier, on Thursday at the end of the day, the end of the session.

Instead on Friday, we'll go short at eleven o'clock in the morning exchange time. So, this is a strategy that trades both long and short.

Let's look at the Report of this system. This strategy was developed in this period here, in 2017, and as you can see, the out-of-sample curve has even a better positive slant compared to the in-sample.

This applies to both the equity curve of the long trades and the curve of the short trades, which as you can see is certainly more volatile but I wouldn't have expected anything different given the buy and hold of this underlying asset.

This strategy, which is very simple to code and is based on very few rules, is performing very well.

Let's also look at the annual results. In 2020 and 2021 we had some truly astounding years, with profits that we had never seen before using this strategy.

And 2022 is still proving to be a very good year, with an average trade of even $164. Here we're seeing results already net of commissions and slippage, and consequently, these results are to be considered outright net, naturally before taxes.

Let's now look at the next strategy. It is a trend-following strategy, as I mentioned previously, so it's different from the one we saw earlier.

And in particular, it will exploit the indications provided by the Bollinger bands, which is a very famous indicator, to enter the market either long or short.

This strategy, as mentioned, uses Bollinger bands and the trigger, meaning the entry level, will be activated when, on the long side, there is a low that is above the upper band.

So, in this case, for example, you'll see that this bar, namely the low of this bar breaks above the upper Bollinger band, so basically, a strong upward extension is identified at this time, which is therefore likely to continue, and consequently here is where the strategy enters the trend, in this case in a long position.

Vice versa for the short positions, where we instead wait for the high of a bar to break below the lower Bollinger band. When this pattern is reached, the strategy will enter at market.

So again, in correspondence with a bearish trend, we’ll try to exploit the direction of the trend by going in the direction of the trend itself.

This strategy has worked very well over time. Look at the last period. The strategy was developed in 2018, so we could say more or less in this period, and we can see that the out-of-sample, so the post-programming or post-development period, worked even better than the in-sample.

This strategy was also able to make profits in 2022, with an average trade of around $250, which for an intraday strategy like this, closing positions by the end of the session at the latest, is certainly a very high value indeed.

Again, slippage and commissions have already been considered, so we can be satisfied with how this strategy has been able to bring profits to our portfolio.

At this point, guys, please, I invite you guys to give it a try too. These are really very simple strategies to code.

If there’s someone among you who is interested in the world of systematic trading, I suggest that you click the link in the description of this video. From there you'll be able to watch a free presentation of Andrea Unger, get our best-selling book covering only the shipping costs, or even book a free call with a member of our team.

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

And with that we will see you again soon in our next video. Bye-bye everyone!

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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.