‌Strategy of the Month (November): The Winner is a Reversal on Nasdaq Futures!

Transcription
Introduction

Hello and welcome to this brand-new video.

Today we’ll look in detail at the results of our November Strategy of the Month contest.

We’ll look at a selection of the most promising strategies from all the entries we received and then discover the strategy that won.

Again, this month, it wasn’t easy to decide on a winner. So in addition to performance, we also focused on the specific characteristics of the strategies and decided for an original one.

And this month, one strategy on the Nasdaq caught our eye.

As always, we also give you trading insights by going straight into the basic logic of the best strategies and observe their performance together.

I want to remind you that the Strategy of the Month contest is reserved for Unger Academy students. Thanks to this contest, students can participate every month by submitting their own strategy and compete for a chance to win an Amazon voucher worth €1,000.

I would also like to tell you some great news. In particular, something regarding the Unger Strategy Club.

This is one of the Academy’s newest offerings, and it gives you access to a monthly Live Masterclass where you can get advanced coaching on systematic trading. You also get monthly videos with quite detailed insights into how it works, where we explain the main rules of one of the strategies in our portfolio. You also get exclusive access to the open-source code of the winning strategy of this contest, as well as to the database of all strategies that have won in the past months.

Well, let’s jump in and see the best strategies you sent us in the month of November.

The equity you see on the screen here is the equity of the winning strategy on the Nasdaq, but first, I want to show you three other strategies that are really very interesting.

Breakout Strategy on the Gasoline Futures

The first strategy is on the RBOB Gasoline, or Gasoline futures. Let's look at the performances together.

They are consistent. Year over year, the strategy has also gained quite a bit, although not in some of the weak areas in the first part of the available historical data, especially in 2013.

And this strategy has the peculiarity of being really, really simple.

Indeed, the average trade net of costs equals $357, which is more than enough to cover all the costs associated with trading this underlying asset, which remains one of the most expensive to trade precisely because the slippage can be very high.

However, this strategy is based on a very simple trigger - and I am telling you this because it isn’t a secret – it’s based on a breakout, so it follows the current trend starting from the extreme levels of the previous day, so the high and low of the previous day.

So, we’ll buy high and sell low. And as I said, the strategy works mainly in the most liquid phase of the market. This means that entries are made during the day exchange time. So, during the day, relative to the time zone of this instrument, RBOB Gasoline futures.

Both stop loss and take profit are calculated on an absolute monetary basis. Specifically, we have a take profit around $5,000 and a stop loss just over $2,000.

I remind you that this underlying instrument is quite demanding in terms of portfolio.

Aside from giving you great value in terms of profits – because we see that this strategy has earned over $300,000 from 2010, it is also true that the drawdowns regarding this strategy, as nice as the equity is, are quite substantial and quick. In fact, we can go as far as losing as much as $15,000 in just a few months.

So, it remains a strategy that isn’t for everybody's portfolio, but still an excellent addition to diversify operations for those who can afford it.

Breakout Strategy on the Gold Futures

The second strategy I want to show you is also a breakout strategy on Gold futures, so on Gold.

It’s a breakout strategy that follows the market trend and is based on a Donchian Channel. We talked about this a few videos ago. It’s simply a channel built on the highest highs and the lowest lows. In this case, a Donchian Channel is about one trading session long, so about 23 hours.

Now, let's look at the performance of this system, which I think holds up quite well. We have a small period of weakness at this stage, but that’s normal for Gold.

2017 and 2018 weren’t great years, but as you can see, despite some periods, this strategy defends itself very well in almost all market conditions.

Also, we have a substantial average trade here that can abundantly cover all associated costs. And even on a year-to-year basis, this strategy generates substantial profits.

Swing Strategy on the Gold Futures

The third strategy, on the other hand, is very similar to the previous strategy. It is also based on a breakout in Gold but uses one of the advanced engines available in the Unger Academy, namely the engine called "Swing."

Swing points are used precisely to restrict the levels beyond which the underlying asset will continue its direction either downwards or upwards.

There is no take profit in this case, but a stop loss and breakeven still manage the trades. The unique feature of this system is that it has an asymmetric trigger, namely, the swing strength isn’t the same for long and short.

But that’s still acceptable because, due to the way the swing engine works, it’s, let’s say, better to be used in an asymmetric perspective, even if we are talking about commodities that have an almost symmetric behavior both long, meaning up, and short, meaning down.

Again, let's look at the performance of this system. It’s a good performance. We are trading less than the previous system. The trades are even slightly lower. Again, the average trade is around $300.

Reversal Strategy on the Nasdaq Futures (the winner of the contest)

Finally, we come to the winning strategy of the November contest, namely Simone's strategy coded on the Nasdaq.

I told you earlier that this is a particular strategy, because the Nasdaq has done pretty well this year and even last year in terms of breakout strategies, namely, trend following, this strategy goes a bit against the grain.

It’s a mean-reverting strategy, meaning you will buy low and sell high. The level used here as a trigger also refers to the previous session.

So, we buy at the lows reached in the previous session and sell at the highs reached in the previous session.

It isn’t easy to develop a successful strategy, especially in the last period, with an asset as abrupt as the Nasdaq in terms of its mean reverting behavior. Still Simone was able to exploit the characteristics of this market.

We won’t open new trades every session. In fact, there are some filters that relate to the operating time window, which was chosen quite well and aligned with the type of this mean-reverting strategy, and also, pattern-based filters, so recurring price movements, which help to make the performance of this strategy less volatile and therefore less abrupt.

Let's take a close look at the equity curve. Equity is outstanding, both the long side and the short side. As you can see, you gain nothing in the first phase, but the important thing is that you don’t lose in this phase.

Why do I say that? Because the strong bullish trend that there has always existed on this underlying means it’s much easier to go long and bet on a rise rather than a fall.

Nevertheless, it’s important to hold both sides because, should the nature of the market change, namely, go from being a strongly bullish market to a downtrend, we have seen it recently in 2022, the short side will start to perform and make up for the shortcomings of the long side.

Let's also take a look here at the average trade, which is quite large. The Nasdaq is a rather abrupt underlying asset, so costs can also be high. However, a $400 average trade is definitely good.

Finally, I want to talk about the performance that we’ve had in the last three years.

We’re talking about over $100,000, even when you factor in the cost of fees and slippage for a strategy that has performed well in a bullish market in 2021, a strongly bearish market in 2022, and a market that had ups and downs in 2023.

So, it’s really a very good strategy. Congratulations to Simone and good luck to all the participants next month.

Conclusion

Well, if your goal is to learn how to independently create trading strategies on your own, like the ones we have just seen, then you have come to the right place.

While you learn, you too can enter this contest dedicated exclusively to Unger Academy students and have a chance to win a €1,000 Amazon voucher each month.

Finally, I want to remind you again of the big news I mentioned at the beginning of the video, which is the Unger Strategy Club.

You can see what this service is all about by visiting www.ungerclub.com.

Also, if you click on the link below, which you’ll find in the description as the first comment on the video, you’ll be redirected to a page where you’ll find really valuable resources.

Not only will you find the contest rules there, but you can also book a free consultation with one of our tutors who will give you all the information you need to enter this contest and join the Unger Academy.

Thank you for your attention and see you in the next video with more operational insights on trading. Goodbye for now and see you next time.

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‌Strategy of the Month (November): The Winner is a Reversal on Nasdaq Futures!

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