Does Our “Crash-Proof” Strategy Beat the Market?

Aug. 9, 2024

This week we’re discussing a system that looks like it should do well in market crashes.

Why?

Because it only goes Long when momentum is clearly Long.

If the market is tanking, it won’t trade.

Did this methodology work during the Bear Market of 2022?

Yes, very well in fact.

Here are the details again for the 30M E-Mini S&P 500 BB Breakout System (ES.D):

• Long Only Entry: When price closes above the Upper Bollinger Band™ (20 length, 2.2 st dev)
• Stop Loss: $1,000 per contract
• Target: $900 per contract

But we still have two big questions.

One, did it work on the other Bear Markets?

Well, yes and no.

For the real Bear Markets of 2018, 2008, 2009, and 2000-2003, it did great:

For the fake Bear Market of 2020, it didn’t do well:

Why?

Because this sort of breakout system won’t always like sudden changes. If a market is super bullish and then a pandemic breaks out, it could already be in a trade. Quick reversals always sabotage breakout systems.

But that’s a lot of good Bear Market performance, nonetheless.

The big question is: does it beat the market?

Here’s the Curve for this system going back to 1997 and trading 1 contract each time via Portfolio Architect:

Here’s the Report for a hypothetical $15k account:

And here’s what it has to beat.

As you can see, these two are about the same.

The only difference is that our system has about half the drawdown–which, to me, makes it twice as good.

But the other advantage to system trading is that we can increase our trade size without adding any more money.

Here’s what happens when we start with $14,000 and double our trade size every time our account doubles:

This is the beginning of our hypothetical journey:

This is the end:

If we compound, $14k hypothetically turns into $373k.

And that’s way better than the market.

Talk to you soon.

Join the free Newsletter list here .

Get Robot information HERE.
Visit my Performance Page HERE.
Buy my new book HERE.
The Inevitability of Becoming Rich is HERE.
My latest YouTube video is HERE.

Disclaimer:
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.