Strategy 12 -- An MES futures strategy
The first strategy that resulted from learning about the VIX and the VIX/SPX relationship. S11 has a profit factor of 2, a Sharpe of 2.6, a MAR, of 11.4, a CAGR of 143%, and MaxDD of -12.6%.
Disclaimer: the following post is an organized representation of my research and project notes. It doesn’t represent any type of advice, financial or otherwise. Its purpose is to be informative and educational. Backtest results are based on historical data, not real-time data. There is no guarantee that these hypothetical results will continue in the future. Day trading is extremely risky, and I do not suggest running any of these strategies live.
Power and internet outages delayed it, but it's finally here: a futures strategy that takes advantage of the VIX/SPX relationship with linear regression bands. That's right. Using a linear regression line allows us to create a simple indicator that factors in both the SPX and VIX values. It was designed to adhere to some common prop firm standards, such as limiting the number of contracts that can be used and closing trades on the same day they are opened.
It's important to note that this strategy wasn't necessarily designed to be run automatically as it is. It has no entry or exit criteria other than buying at the open and selling before or at the close. This is done partly because RealTest doesn't support testing intraday strategies, partly because it is an attempt to measure the raw edge of the strategy, and partly because prop firms do not allow overnight holds. That being said, it has some pretty good results regardless.
The strategy is designed to trade individual contracts, using continuous back-adjusted charts for timing entries. That means that if you wanted to use the order generator in RealTest and trade it exactly as designed, you can. It will print the orders correctly, allowing you to use that information to trade MES manually or to automate it using OrderClerk or your own self-rolled automated trading tools.
The Close Minus Moving Average indicator is used. For an example and explanation of this indicator, check out the previous post:
Summary Stats
Compound Annual Return: 143.93%
Max Historical Drawdown: -12.59%
Average Holding Period: 1 Day
Expectancy Per Trade: 0.13%
Win Rate: 61.76%
Profit Factor: 2.03
Sharpe Ratio: 2.67
MAR Ratio: 11.43