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Lack Of Direction But No Lack Of Profit – Our Trading System Performance In August


The month of August was characterized by a lack of direction across many of the major stock market indices. Despite any notable trend, several of our premium trading strategies were able to profit and put in a solid month of results.

Bar Strength, our ETF mean reversion system, entered into a total of 10 trades in August winning seven with an average profit per trade of 0.41%. The total monthly return was 1.73% with a drawdown of only -2.85%. This equates to an annualized return of 22.44% and risk-adjusted return of 40.53%.

  • Net: 1.73%
  • Win Rate: 70%
  • CAR: 22.44%
  • MDD: -2.85%
  • RAR: 40.53%
profitable trade in VNQ.
A profitable swing trade in VNQ in August. Chart from Amibroker.

All of our trading strategies use minimal leverage and optimisation and are therefore left open to further individual interpretation and improvement.

Another ETF strategy, ETF Pullbacks, also had a strong month. The system entered into a total of 16 short-term trades winning 12 of them for a win rate of 75%. The total monthly return was net 1.82% with a drawdown of only -1.58%. This equates to an annualised return of 23.71% and a risk-adjusted return of 61.12%.

Note: ETF Pullbacks is now available in both Amibroker and Quantopian code format and is provided in the course materials for enrolled members.

  • Net: 1.82%
  • Win Rate: 75%
  • CAR: 23.71%
  • MDD: -1.58%
  • RAR: 61.12%
A profitable swing trade in VNQ in August. Chart from Amibroker.
A profitable swing trade in QQQ in August. Chart from Amibroker.

Contained in HTS 1, our Overnight Reversal system also had a good month. This system attempts to find short-term reversals in S&P 1500 stocks.

Overnight Reversal requires careful execution but is capable of solid performance in the right conditions. The system placed 8 trades in August with a win rate of 50%. The winners outweighed the losers giving a net profit of 1.25% before any leverage with a maximum drawdown of 0nly -1.23%.

  • Net: 1.25%
  • Win Rate: 50%
  • CAR: 15.78%
  • MDD: -1.23%
  • RAR: 188.87%

Finally, our premium volatility course The Big Volatility Short has not given any trading signals since early June.

You might think the system was underperforming but that is not the case.

Rather, our system is simply waiting patiently for the next jump in the VIX and will not be fooled into selling volatility at the compressed levels we have seen recently.

There exists a significant upside risk to volatility products which could cause ruin if the right approach is not taken. Many volatility traders are ignoring these risks but The Big Volatility Short teaches how to trade volatility the safe and best way.

In fact, The Big Volatility Short is well placed to execute on the next big volatility event which is likely to occur sooner rather than later.

That concludes our short round-up for August. Marwood Research also includes many other strategies that we have not evaluated here. If you are interested in any of our trading strategies, education and courses make sure to visit: