New model developed

Hi,

I hope all the readers living in the Nordics enjoyed the sunny weekend... I am a bit tired after having participated in a 10km run yesterday, I managed to do it on 50 minutes which is 2 minutes better than my target... :) The big test comes next week when I will participate in a 21km run in Sweden.

In temrs of tradings, I have spent way too little time in sharing my developments and models too you for different reasons mentioned before - one being the obvious of keeping any kind of edge secret. But I thought I would try to tell you a little bit more about a model I spent quite some time on lately. Actually, I have traded on a similiar model a couple of years ago, but I now have much more data verify it (1-minute data from 2005) on so I've tried to verify my old findings which I traded on fixed income and equity indices to also work on FX... the results looks promising, please see graph below. :)

Y-axis is percentage, so 0.4 = 40%, X-axis is number of trades, meaning on average one trade per day since 2005. Blue line is without comissions and slippage while it is included for the the red line.

It is a very simple short-term trend-follwing model... The concept is based on the same principles as one of my favorite-traders used/uses, Toby Crabel. It is based on volatility break-outs, meaning that I take on a position when an asset trades above or below a certain threshold (with stops applied) and then holds it to the next time frame (usually the opening time each day).

Rules:

Long an asset if:  Price > (Opening price + Volatility threshold)
if long stop placed: entry - stop threshold

Short an asset if: Price < (Opening price - Volatility threshold)
if short stop placed: entry + stop threshold

Exit: If not stopped out the following day at open

Position sizing due to a fixed fraction of your portfolio.
...

Very simple model, but still powerful. Few people will be able to consistent trade this rules day in and day out due to its simplicity... So, I actually don't mind sharing it and hope you find it interesing. :)

I still need to do sime more tests, increasing the time-horizon slightly in a try to reduce the costs and test on multiple assets... I have done the developments in Matlab, it is not easy to process 2 millions rows of data in Excel...

Have a lovely weekend!