• arque algo trader

Backtesting the Price Pullback Strategy

Updated: May 30, 2020

Let’s look at another strategy – the Price Pullback strategy!

Trade setup:

Fast Moving Signal – 10 Day MA Slow Moving Signal - 200 Day MA

Go Long – When,

Daily Close stays above 10 Day MA for more than 15 days

Current Close is below 10 Day MA and above 200 Day MA

Exit Long – After ‘n’ days

Do you think this could be a profit-making idea?

Turns out the Price Pullback strategy is a moderately profitable one. Take a look at the Equity Curve from its back-testing reports.

Still, it’s too early to give up on this strategy. Do you have any ideas that’ll help us improve it? Leave your thoughts in the comments section.

The Drawdown graph of the Price Pullback Strategy shows the other side of the coin.

We think the Equity and Drawdown Curves would give us a better picture if the value for ‘n’ was optimized. Let’s check out the back-testing reports after we do that, and see.

We next optimize the value for ‘n’ (turns out it should be 45). Check out the changes in curves after we back tested and improved the strategy!

Any thoughts on further optimizing this?

After adding a point-based target profit to our basic price pullback strategy, we’ve been able to up the game!

Here are the curves from the back-test reports of our much-improved strategy.

Let’s try adding a percentage-based target profit and see what the back-testing reports have to say about that!

One look at the differences between these charts tells you that we’ve improved the strategy by a lot. Unlike adding a stop loss, optimizing values and adding a percentage-based target profit mechanism to the original strategy has helped.

With back-testing, come a number of insights that can help us in improving a strategy.

Do you also have trading ideas that you’re not sure about? Let us know if you would like our help to back test and optimize it.

#backtobasics #trading #algotrading #backtesting #optimization #profit #equity #drawdown #options #strategy #pricepullbackstrategy

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