[Dogpile]

Thought it might be fun to track a mechanical strategy that looks highly interesting and do it as a journal here. I am not a mechanical trader -- but I definitely think there are some interesting aspects to mechnical trading.

This strategy is one from Art Collins book: "Beating the Financials Futures Market"

The strategy that I really want to investigate is from Chapter 41 and called 'The Continuous 66 Percent Momentum System'
(coded in the appendix as 41.3)

The book uses a 9-day range for its triggers. I prefer a 5-day range. Here is the Tradestation code for it (to be run on a daily chart):
--------
vars: mp(0),hc(0),lc(0),xx(0),a a(0);
hc=highest(h,5)-c;
lc=c-lowest(l,5);
if hc>lc then xx=hc;
if hc<lc then xx=lc;

mp=marketposition;
if mp<1 and hc>lc then buy next bar at o of tomorrow+(0.66*lc) stop;
if mp=1 and barssinceentry>0 then sell next bar at entryprice-(1.32*xx) stop;
if mp>-1 and lc>hc then sell short next bar at o of tomorrow-(0.66*hc) stop;
if mp=-1 and barssinceentry > 0 then buy to cover next bar at entryprice+(1.32*xx) stop;
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essentially, the strategy is fading the daily trend while using some momentum off the opening price to potentially capture a new short-term daily trend.

We just began the December futures contracts so I will try to do this for the life of that contract. I will explain the entries as they come.

Attached are the results for the Sep 2007 completed S&P contract. The strategy triggered 29 trades during the life of the September contract (1 was left outstanding at the end and isn't included). It produced a record of 20-9 for 69% win/loss%. Long trades produced +$2,400 in profit per contract, Short trades were +$425 profitable. Tradestation calculates a 14.125% return on account (not annualized) using a $20,000 starting balance. No costs have been attributed for trading costs and no interest has accrued on cash balances. $20 per trade in costs would amount to a -$580 cost against this result.

Note that Art Collins wrote this strategy in 2005 and it is still working today. I think there is something interesting about this style of using momentum off opening price as a trigger to capture short-term momentum while fading multi-day trends.