We'll help you map out a plan to fix the problems in your trading and get you to the next level. Answer a few questions on our application and then choose a time that works for you.
BOOK YOUR FREE STRATEGY SESSION NOW >>In this video, we discuss the winning strategy of our June 2023 Strategy of the Month contest and two other strategies that we found particularly interesting among those submitted by participants:
-Intraday breakout (with Donchian Channel) on Gold futures (the winner of the contest!)
-Mean reverting on VIX futures
-Multiday on Nasdaq futures
The winning strategy is an excellent example of using the Unger Method™, which passed all our robustness tests with flying colors! The backtest using market data from 2010 to the present produces a smooth equity curve over the entire period.
The Strategy of the Month contest is reserved for Unger Academy® students. It rewards the participant who developed the best strategy using the Unger Method™ with a €1,000 Amazon gift card. To learn more about the contest and how to enter, click here.
Whether you are looking for insights to diversify your portfolio or want to get an idea of the strategies we teach at Unger Academy®, don't miss this video!
Enjoy! 😉
What is the Strategy of the Month Contest
Hello and welcome to this brand new video. Today we will look at the results of our June Strategy of the Month contest.
We will see which strategy won and a selection of the best among the entries we received.
We will also try to provide trading insights by analyzing the logic of these strategies, in which markets they work and how they perform.
We would like to remind you that the Strategy of the Month contest is reserved for Unger Academy students. Each month they can participate by submitting their strategy and competing for a chance to win a €1,000 Amazon gift card.
One of the coaches at Unger Academy here.
Mean-Reverting Strategy on VIX Futures
Now, let's get right into the first strategy that I'd like to show you today.
This is a strategy on the VIX Futures.
The VIX Futures is an excellent instrument for those who want to trade volatility.
And one of the best-performing tactics is to go short precisely when this instrument is rising slightly.
This index is famous for having a mean-reverting behavior.
And indeed, this strategy is based on exactly this logic.
That is, we sell a contract on the VIX Futures at the highs.
This is an overnight strategy, which means that positions are left open for multiple sessions, and then they are closed either upon reaching a profit target, or though a breakeven or a stop loss.
So the new trades will be opened near the highs of the previous session.
Let's look at a typical case, such as this one.
You can see that we sell the contract around the highs and then manage the position by closing it through a take profit, a breakeven, or a stop loss.
Let's look at the performance report of this system, which has been very consistent over time.
We have an average trade of almost $280, excluding slippage and commissions.
I want to point out that commissions are in the $2-$3 per contract range, so they are minimal.
On the other hand, slippage could cause a lot of problems with this contract.
In fact, each tick, in other words the smallest movement of this futures, is worth $50.
This means that one tick of slippage is $50, so having one tick of slippage when we enter and one when we exit a position would result in a $100 deduction on the average trade.
So, let's go through a quick exercise and add the costs. This is an exercise that we show very little of, but I want to show it to you today.
We enter our slippage in a straightforward way, by contract.
And we get a result similar to this.
230$. As you can see, the average trade has decreased very little and not by $100.
This is because we are working with limit orders.
Namely, we set ourselves to wait until the price has risen to the point where it reaches the high of the previous level, and then we sell.
Therefore, we will never enter using market-type orders, which means that the strategy can only suffer slippage with stop loss.
And we see very few because the average trade decreases very little.
As I said, this strategy shows excellent performance. Let's look at it year-by-year as well.
Even considering slippage costs, we only have one losing year.
I guarantee these numbers will stay more or less the same if you also consider the commission costs.
Multiday Strategy on Nasdaq with moving average
The second strategy I want to show you, which is no less important, is a strategy on the Nasdaq, which is the index futures of the 100 highest capitalized U.S. tech stocks.
This system works differently than the previous one. It provides orders executed when a specific condition, a particular price pattern, occurs.
And it divides the operation sharply between long and short based on a moving average.
If we are above a specific moving average, calculated based on a 60-minute time frame, we will trade long, meaning we will buy the contract.
On the other hand, if we are below that moving average, we will sell.
So, we don’t trade at the crossing of moving averages, which is a very common approach, but we only trade when specific price patterns occur and at the position of the price relative to a specific moving average.
Again, we will manage the exits using a take profit and a stop loss.
Unlike in the previous case, this strategy doesn't have a breakeven stop.
Let us get straight to the performance.
This system performed very well, especially in the last period.
It didn’t do much in the early years, but I remember that over the past years, this market responded rather poorly to this logic, let's say from 2006, 2008, through 2016.
And it only makes sense to look at this system as past of a specific date, due both to its specific nature and the characteristics that this strategy exploits.
Let's look at the metrics as well.
We have a substantial average trade well distributed between the long and the short sides.
Let's go and have a look at the equity lines as well.
The short part you see isn’t responding, actually not at all until 2016. There's a reason, as we said.
The equity long part is very promising.
Let's also go here to look at the annual gains as well.
2023 is one of the better years. In only six months, it has already brought in more than $60,000 in profits.
The best year ever is 2020, with over $120,000.
This year it might have been a bit difficult to trade all the year because of the big crash that took place in March, which caused some difficulties in trading the markets.
So, we definitely would not have taken all the profit because we would have been out of the market given the high turbulence.
However, we would have certainly taken home quite a bit from this particular, problematic year as well.
WINNING Strategy: Intraday Breakout on Gold Futures
Finally, let’s look at the winning strategy that won the €1,000 Amazon gift card for June.
This is a strategy for Gold futures.
Not a multiday strategy like the last one, but an intraday strategy.
So, we will close all positions at the end of the session.
It is a very simple breakout strategy that follows the bullish or bearish movements of the market.
The entry orders are based on the breakout of a Donchian Channel.
The Donchian Channel has already been illustrated in many of our videos, which we invite you to have a look at.
Put in simple terms, the Donchian Channel is a channel formed by price highs and lows within a specific range.
For example, we see a long entry on peaks near this area and then the trade is closed at the end of the day.
Let's take a look at the performance. Again, they are very consistent and well distributed between the long and the short sides.
We have a total of 1,500 trades, so it's an outstanding number statistically speaking.
The average trade is not particularly large, as with the systems mentioned above, but that's simply because of the nature of the system.
This is an intraday strategy where we stay in the market for a shorter time, so we should expect a smaller average trade.
But let's also take a look at the periodic returns.
If we don't consider costs, all the years are positive.
Considering the costs we would incur by trading this type of strategy, we see that 2017 would certainly go into a nice loss since it only did 87 trades, but all other years should more or less hold up.
The year 2023 doesn’t perform as well as previous years, but still, this system shows excellent robustness.
I assure you that the analysis we have done to accurately test this system's robustness has shown that it is based on very robust logic.
Conclusion
And if your goal is to learn how to independently create trading systems like the one we’ve just seen, then you have come to the right place.
While you are learning, you can also enter this contest dedicated exclusively to Unger Academy students for a chance to win a €1,000 Amazon gift card each month.
So, if you are interested, click on the link below, which will take you to a page where you can find both the contest rules and, if you'd like, book a free consultation with one of our tutors, who will give you all the information you need.
Finally, if you haven’t already, please to subscribe to our channel and leave us a Like if you are interested in these trading insights.
I will see you in our next video with more insights and ideas on systematic trading. Until then, goodbye!
We'll help you map out a plan to fix the problems in your trading and get you to the next level. Answer a few questions on our application and then choose a time that works for you.
BOOK YOUR FREE STRATEGY SESSION NOW >>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.
