16 Aug Dealing With Weird Markets
Dealing With Weird Markets
Aug. 16, 2023
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In our last Newsletter, we saw a graphic demonstration of how weird 2023 has been.
(And not just for stocks and futures, by the way.)
We saw that 2023 would’ve been a life-changing year for a simple strategy that bought the NQ.D at 11:20 ET and held through the end of the day (with an emergency $2k stoploss per contract).
Here again is what the Equity Curve for that strategy looks like from December 2022 to August 2023:
A hypothetical $10,000 account could’ve made $60,000 in profit so far.
And that was very different from 2022. This strategy lost money in ’22.
In short, strategies that had been working the previous year, or previous years, are suddenly dealing with a new animal.
Is there any way we could survive when markets dramatically change?
We can think it through.
We can use our brains.
Putting on our thinking cap, what environment would our “Buy at 11:20 AM” methodology do well in?
A very bullish one, right? Especially on the highly-volatile Nasdaq.
So, what if we only traded this type of methodology when it’s bullish?
Testing that hypothesis, we’ll move our simple system to a 15-minute chart with a 100-bar moving average filter. We’ll now only buy at 11 am when price is above the 100-bar SMA. Same emergency stoploss.
Did that help us navigate the completely-opposite markets of 2022 and 2023?
It surely did. It made a lot in weird 2023 and made a decent amount in a bearish 2022.
Even though the markets were oil and water in ’22 and ’23, trading a bullish system only at bullish times made both markets perfectly passable.
This simple system, with one logical addition, became able to navigate the weirdness.
Of course, this could just be cherry-picked display of over-optimization.
In our next Newsletter, we’ll see if this system can hold up over time (and many other market conditions).
It should not be assumed that the methods, techniques, or indicators presented in these products will be profitable or that they will not result in losses. Past results are not necessarily indicative of future results. Examples presented on these sites are for educational purposes only. These set-ups are not solicitations of any order to buy or sell. The authors, the publisher, and all affiliates assume no responsibility for your trading results. There is a high degree of risk in trading.
HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER- OR OVER-COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN.