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BOOK YOUR FREE STRATEGY SESSION NOW >>How effective are strategies that enter the market on so-called "round numbers," or price levels approximated to multiples of 5, 10, 50, etc. points?
As you may remember, in one of our videos we explained how to use round numbers to build systematic trading strategies (you can find it here: Round Numbers - What are they? How To Exploit them with a Trading System?
The results produced by these types of strategies are very interesting, so much so that we too have decided to include them in our portfolio.
In this video we'll show you, several months later, the REAL performance of these strategies, which specifically are:
- Strategy on S&P 500 futures, multiday
- Strategy on S&P 500 futures, intraday
- Strategy on Crude Oil futures
- Strategy on Gold futures
Watch the video now to find out how much they gained and which ones performed best!
Enjoy! 😎
Hello again everyone! One of the coaches at Unger Academy here and welcome back to our usual chat about our portfolio strategies that have performed the best in the last period.
Okay, so today I’d like to show you some strategies that are part of our portfolio and that I had spoken about in one of the videos we released back in December 2021, the video on round numbers.
So what are round numbers, first of all? Well, they are price thresholds that fall within a “rounded” range, such as five, 10, 50, and so on.
Today we're going to go back to some of these strategies, of which this one (we had seen the script together). It was coded in December 2021 and basically it does nothing more than enter on the round 50-point ranges.
So, let's look at the indicator below. In the other video, we explained more about why we're going to use, for the data2, a non-backadjusted custom future.
This is because due to the rollovers, trading on round numbers in the past, namely on older contracts or adjusted expirations, would cause the backtest to be misleading. So be very careful when testing round numbers.
In this case, we'll select round thresholds, as mentioned, around 50 points. At the beginning of each session, we'll draw some lines. For example, today, if we go a little bit wide, here, you can see that the upper level will be at 3,950, and the lower level - now here you can't see it very well, but it's 3,900 because in this case, the step is 50 points.
So, it will identify two price levels, one above the opening and one below the opening, so that it's on the round level.
On crossing upwards we'll enter long, so let's see if the SP 500 could break through the 3,950. Maybe the strategy will enter. Because there are also other conditions, such as, for example, the time window, which, in this case, was left quite loose.
And then, should we instead have that a break below 3,900, here's where the strategy will enter at market.
It's a multiday strategy that will therefore keep positions open beyond the session's end.
We had left off at about this point, and the results were already very good. And you can see that even after it was developed, despite the fact that 2022 is a very difficult year so far, this strategy was able to perform in the right way.
Of course, the curve of the long trades has suffered a bit more. That's because in 2022 this underlying asset and, in general, all stocks around the world, but also bonds, saw very large downturns. So, it was certainly more complex to gain in this regard. While, on the other hand, the short side was able to make very good profits.
As mentioned before, this is a strategy that we've already seen together. It has an average trade of about $170, and this year it has managed to generate a good number of trades. This is because as the value of the underlying asset increases, reaching the 50-point thresholds becomes easier and easier to reach.
In the years in which the strategy worked a lot, such as 2020 and 2021, we had some outstanding performances while now its performing a little less well. You see, we have an average trade of about $100, while in the previous years we had $200 and $350. However, look, 2022 is still a very good year since we have a profit of around $14,000.
Let's try to go and look at the other strategies. There is another one that I had coded in 2018. It also works on the SP 500 and enters in steps of 50 points.
Since when we coded it, it had some good years, like 2019, and some bad years, like 2020. Then 2021 turned positive again, and then 2022 turned bad. In short, a strategy that judging by the equity line went up in post-development, but certainly struggled slightly more than the previous one.
In this case, the strategy will open and close its positions on the same day. So, this is an intraday strategy and so it's different from the previous one, which was multiday. Maybe it could be precisely because it is an intraday strategy, that its performance is worse than that of the multiday one.
Now let’s go and have a look at a similar strategy that also uses round numbers, but in this case on Crude Oil. The concept is the same, however in this case, we won't enter in $50 steps, because that would probably lead the strategy to make just 1 or 2 trades a year if successful. Instead we'll use $5 steps.
So, by increments of $5 here, if the market comes in from below and breaks the round number of five, then it will buy. If the market comes from above the level and breaks the round number of five, as in this case, the strategy will open a short position. When it comes instead from below the market, then it will enter long.
This strategy has also been out-of-sample for quite some time, since 2019, pretty much at this stage here. And you'll see that even post-development, especially in the last phase, incredibly the short side has worked well even though the buy and hold was not that bearish, as we've seen.
While on the other hand, the long side managed to successfully exploit the trend that came up in Crude Oil. So overall, this strategy also worked great.
But all that glitters isn't gold because we have another one that also works on round numbers and is applied to the Gold future. It was working pretty well, we had left off that it was more or less at this point, all of the period was out-of-sample.
But unfortunately, the strategy in the last period has experienced a drawdown. This doesn't mean that we'll never use the strategy again, but that most likely for a certain amount of time, until it gives positive signals, at least, let's say, six months from now, we won't operate with this strategy. So, potentially we'll limit the damage.
This strategy also enters in steps of 50 points, however, as I told you, on Gold. This is also a multiday strategy like the first one that we saw.
And so, now you guys have seen that round numbers are something that could be used by all traders, especially by us systematic traders, on different markets. We've seen very good results on the S&P and Crude Oil, but we haven’t lost hope on Gold because maybe tomorrow this strategy will be able to recover as well.
Well guys, if there is someone among you who's interested in the world of systematic trading, I suggest that you go and click the link that we will leave in the description of this video. From there you'll be able to watch a free presentation by Andrea Unger, our founder and the only 4-time world champion in real-money trading, go and get our best-selling book by just covering shipping costs, or even book a free call with a member of our team.
f you liked the video, be sure to leave us a like, subscribe to our channel, and click on the bell so you can stay updated on the release of all our new and upcoming content.
And with that, thank you so much for watching. I will see you soon in our next video! Bye-bye for now!
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.
