7 Free Trading Systems and Their Returns From The Last 13 Years

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This excerpt from the free trading systems is for educational purposes only and is not to be interpreted as trading or investment advice.  See Terms Of Use here.

Free Trading Systems And Their Results

Here are seven free trading systems for you to look at and compare over the last 13 years.  Their rules are fully disclosed, and you can see their return, maximum drawdown and equity curve here as well.  They are not intended to be used directly – rather seeing these should give you ideas and a good basis for creating your own trading system.

UPDATE: See the updated, out of sample test results here, from two years later!

All systems began with a starting equity of $50,000.  The actual buys and sells were done at open the day after the trading signal, simulating an EOD trading system you could scan at night if you worked full time.  The position sizing used was five percent of total equity in each trade, with a maximum of 20 open positions at any one time.  Check them out, and don’t forget to leave a comment in the section below!

Trading System 1: Highest High Trading System

This trading system uses the “Highest High” of the last “x” days function.

The entry criteria is:

  • Buy on a close above the Highest High of the last 85 days.
  • Sell on a close below the Lowest Low of the last 35 days.
  • Index Filter:  The All Ordinaries must be over its 100 day Moving Average to buy.

The results from January 2000 to August 2013 were:

  • Average Annual Return:  23.51% p.a.
  • Maximum Drawdown:     21.50% p.a.
  • Win Percentage:             44.38% p.a.
  • Amount of Trades:         347
  • Ending Capital:              $833,000

Click the pictures below to enlarge – Equity, Drawdown, and Profit Distribution:

HHV_Equity     HHV_Drawdown     HHV_ProfitDist

 Here is the article on how to code the Highest Highs Trading System in Amibroker.

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Trading System 2: Moving Average Channel Trading System

This trading system uses a “Moving Average Channel”.

The entry criteria is:

  • Buy on a close above the upper band of a 170 day Moving Average Channel.  The band is set to 10% above the moving average.
  • Sell on a close below the 170 day Moving Average itself.
  • Index Filter:  The All Ordinaries must be over its 100 day Moving Average to buy.

The results from January 2000 to August 2013 were:

  • Average Annual Return:  23.49% p.a.
  • Maximum Drawdown:     28.58% p.a.
  • Win Percentage:             41.18% p.a.
  • Amount of Trades:          408
  • Ending Capital:               $882,000

Click the pictures below to enlarge – Equity, Drawdown, and Profit Distribution:

   MAC_Equity     MAC_Drawdown     MAC_ProfitDist

Here is the article on how to code the Moving Average Channel system in Amibroker.

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Trading System 3: Bollinger Band Trading System

Although Bollinger Band trading systems have been around for decades in various forms, this particular version was made famous by legendary Australian trader Nick Radge in his book “Unholy Grails”.  If you have not got a copy of this book, I highly recommend you get one.

The entry criteria is:

  • Buy on a close above the upper band of Bollinger Band – 3 deviations of a 100 day Moving Average
  • Sell on a close below the lower band of a Bollinger Band – 1 deviation of a 100 day Moving Average
  • Index Filter:  The All Ordinaries must be over its 75 day Moving Average to buy.

The results from January 2000 to August 2013 were:

  • Average Annual Return:  26.29% p.a.
  • Maximum Drawdown:     25.44% p.a.
  • Win Percentage:             51.16% p.a.
  • Amount of Trades:          303
  • Ending Capital:               $1,196,000

Click the pictures below to enlarge – Equity, Drawdown, and Profit Distribution:

     BBO_Equity      BBO_Drawdown      BBO_ProfitDist

Here is the article on how to code the Bollinger Band Breakout trading system in Amibroker.

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Trading System 4: Moving Average Crossover Trading System

This trading system is based on the first trading system ever created, and used in many variations since.  It is a simple moving average crossover.

The entry criteria is:

  • Buy when a 60 day Moving Average closes above a 90 day Moving Average.
  • Sell when a 60 day Moving Average closes below a 90 day Moving Average.
  • Stop Loss: 10 Percent Initial Stop Loss.

The results from January 2000 to August 2013 were:

  • Average Annual Return:  27.73% p.a.
  • Maximum Drawdown:     33.97% p.a.
  • Win Percentage:             42.97% p.a.
  • Amount of Trades:         768
  • Ending Capital:              $1,347,000

Click the pictures below to enlarge – Equity, Drawdown, and Profit Distribution:

      MACross_Equity     MACross_Drawdown      MACross_ProfitDist

Here is the article on how to code the Moving Average Crossover trading system in Amibroker.

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Trading System 5: Sell In May And Go Away Trading System

This is the old adage of “Sell in May and Go Away, and don’t come back ’til Labour Day”.  Another market “truism” is the Santa Claus Rally, which is supposed to start in November each year.

The entry criteria is:

  • Buy in November, provided the stock is above its 150 day Moving Average.
  • Sell everything in May and go away.

The results from January 2000 to August 2013 were:

  • Average Annual Return:  9.19% p.a.
  • Maximum Drawdown:     31.37% p.a.
  • Win Percentage:             67.57% p.a.
  • Amount of Trades:          259
  • Ending Capital:               $165,000

Click the pictures below to enlarge – Equity, Drawdown, and Profit Distribution:

      May_Equity      May_Drawdown      May_ProfitDist

 Here is the article on how to code the Sell In May and Go Away trading system in Amibroker.

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Trading System 6: Leap Of Faith (Trading Gaps) Trading System

The Leap of Faith trading system uses the age old technique of price gaps, with a little added code to ensure price is moving in the direction we want.

The entry criteria is:

  • Buy when the low of todays bar is higher than the high of yesterday’s bar (a gap), and the close is greater than the opening price.   Price must also be above its 50 day Moving Average.
  • Sell when the high of todays bar is lower than the low of yesterday’s bar (a gap), and the close is lower than the opening price – OR below its 100 day Moving Average.
  • Index Filter:  The All Ordinaries must be over its 150 day Moving Average to buy.

The results from January 2000 to August 2013 were:

  • Average Annual Return:  24.75% p.a.
  • Maximum Drawdown:     23.29% p.a.
  • Win Percentage:             41.30% p.a.
  • Amount of Trades:         1942
  • Ending Capital:              $1,013,000

Click the pictures below to enlarge – Equity, Drawdown, and Profit Distribution:

  Gap_Equity      Gap_Drawdown     Gap_ProfitDist

Here is the article on how to code the Gap trading system in Amibroker.

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Trading System 7: Moving Average Up, Moving Average Down Trading System

Using the “Ref” function in Amibroker, you can refer to previous bars of the same signal.  This trading system uses Ref to tell us if a Moving Average is pointing up, or pointing down.

The entry criteria is:

  • Buy when the 125 day Moving Average is greater than the 125 day Moving Average from 25 days ago.
  • Sell when the 125 day Moving Average is lower than the 125 day Moving Average from 25 days ago.
  • Index Filter:  The All Ordinaries must be over its 100 day Moving Average to buy.

The results from January 2000 to August 2013 were:

  • Average Annual Return:  33.24% p.a.
  • Maximum Drawdown:     30.29% p.a.
  • Win Percentage:             43.70% p.a.
  • Amount of Trades:         270
  • Ending Capital:              $2,482,000

Click the pictures below to enlarge – Equity, Drawdown, and Profit Distribution:

  MAup_Equity      MAup_Drawdown     MAup_ProfitDist

Here is the article on how to code the Moving Average Up and Down trading system in Amibroker.

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If This Has Helped You, Please Leave A Comment

The aim of these posts is to help people find their own method for trading and investing, and then to code it if they want to, but also to have enough information to avoid the hundreds of market sharks and under-handed (or under-educated) advisors out there.  Knowledge is power, but it is even more powerful if you take it and make it your own.

I would love to know how you’ve used these ideas, or modified them to suit your own needs.  Please leave a comment in the section below.

Happy trending,

– Dave McLachlan

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June 9, 2013  Tags: , , , , ,   Posted in: Amibroker, Amibroker Trading System, Articles On Building Wealth, Trading System

28 Responses

  1. Thomas Benner - August 12, 2013

    Thank you for the interesting comparison of the trading systems. How was the optimization done? Was there a seperate in-spample, out-of-sample periode?

  2. Dave McLachlan - August 13, 2013

    Hey Thomas – that is an excellent question. And the honest answer is that I have NOT done the right thing, and did not test in-and-out of sample. That’s a good lesson for me – in fact for all of us.

    While the systems themselves are intended for education – it would be prudent to see how they perform over the next year as a true out-of-sample result.

    Many thanks for your excellent comment – Dave

  3. Dave McLachlan - August 14, 2013

    Email question from reader DD:

    “… I have an idea, would you be able to add this condition to system 3 (100 BB) to Buy on a close above the Highest High of the last 85 days. So whatever occurs first.

    That would be great Id be very interested in the results. Thats if it isnt too much work to program that is 🙂 cheers …”

    Dave: Sure – we can easily try this. If you want to add alternative conditions to your Buy signal, just type “OR” and then your chosen code – like: [original signal] OR C >= HHV(C, 85) and Index >= IndexMA;

    Return stays at 26% average per year, maxDD reduces from 25% to 20%. End capital is about the same, but the ride is smoother. Beware of over-complicating systems, however – it may give decent in-sample results but fail/reduce for out-of-sample data.

  4. Johno - August 15, 2013

    Thanks Dave. Could you please explain why the results may differ greatly with the added condition in out of sample testing?

  5. Johno - August 15, 2013

    Also what RAR are you achieving on your personal system you trade?

  6. Dave McLachlan - August 16, 2013

    Hey Johno!

    Yes, of course. Do you mean with the added conditions?

    The main reason, and one Thomas Benner alluded to above, is that if we add lots of conditions to a system, and it works amazingly for in-sample data, the risk is that it has become “curve fit” to that period of time.

    Now – it may not fail every time in out-of-sample data, but the risk is certainly a lot higher, simply because conditions do change (especially in the markets!).

    Howard Bandy has two very good books on this – Quantitative Trading Systems and Mean Reversion Trading Systems – both worth their weight in gold.

    With my personal system, it is a visual-based mechanical system – not automatic. It tends to outperform the market by around 5 to 10% over the long term, which is enough for my humble needs. Last year was Dave: 34% vs All Ords: 15%.

    Any other Q’s just let me know – Dave

  7. Thomas Benner - August 19, 2013

    Hi Dave,

    you wrote
    “With my personal system, it is a visual-based mechanical system – not automatic. It tends to outperform the market by around 5 to 10% over the long term, which is enough for my humble needs. Last year was Dave: 34% vs All Ords: 15%.”

    Do you mean discretionary when you write visual based? Is there more information on your personal system on your website?

    Thomas

  8. Dave McLachlan - August 20, 2013

    Hey Thomas,

    Certainly! I wouldn’t call it discretionary – it is mechanical with specific entry and exit rules – although we may be talking about the same thing here, just with different names 🙂

    I laid out the details of it in the paid members section, but have since closed that part of the site to new members. It consisted of around 4 different, specific methods and a handful of basic principles. Nothing too fancy, but it seems to work ok for me.

    Any other Q’s, just let me know – Dave

  9. Tano - September 14, 2013

    Hi,
    How do you add the index filter to Trading System 1?
    I only get an annual return of 0.07% with 50k from 1/1/00 to 5/9/13

    Index = Foreign (“XAO”, “C”, True);
    IndexMA = Index>=MA(Index , 100);
    Buy = C>=HighestHigh AND IndexMA ;

  10. Dave McLachlan - September 21, 2013

    Hey Tano,

    Yes, that looks right to me.

    Do you also have position sizing added, taking up to 20 positions at 5% total equity in each?

    Otherwise I’m not sure. Feel free to send me your code and results page and I can have a look if you like 🙂

    Cheers, Dave

  11. Nick - September 30, 2013

    excellent work! Would love to see more or even work with you on more – I’ve been working with the RSI recently and have been getting fairly robust returns

    cheers

  12. Dave McLachlan - October 3, 2013

    Hey Nick –

    Thanks, and no problem! Hit me up any time. I’ve been looking at the RSI as well, as a mean reversion. Getting decent results for short term trading – around 45% a year with 18% MaxDD… but 400 trades a year so brokerage needs to be cheap 😉

    – Dave

  13. Johno - October 14, 2013

    Hey Dave would you care to share your RSI system or even just an example of an rsi mean reversion type strategy? Thanks

  14. Dave McLachlan - October 15, 2013

    Hey Johno,

    Hmmm… yes. I might be able to do this. Or at least a general RSI strategy and you’ll most likely be able to figure it out from there.

    Now as soon as I have a spare second….

    – Dave

  15. Josephine Davies - December 14, 2013

    Love it

  16. Johno - February 16, 2014

    Hi Dave could you please share your mean reversion strategy with us?

  17. Johno - February 17, 2014

    Actually, would it be possible to run the back test and publish the results as you have with the above 7 systems, cheers.

  18. Dave McLachlan - February 20, 2014

    Hey Johno!

    No time to do a vid or article, but here it is below 🙂

    Nothing fancy: A close below StochK(3,3) of 16 to buy. A close above StochK(3,3) of 60 to sell. Only take trades if the stock is above its 200 day MA.

    From memory it performs well with a very smooth curve but takes a LOT of trades. Hope this helps!

    Cheers – Dave

  19. Dave McLachlan - February 20, 2014

    Just an aside – if you’re in the stage of looking for a trading system to suit you, try mixing it up and using your settings as a weekly system.

    Or even optimizing one of your current systems as a weekly system.

    The results just might surprise you. Cheers – Dave

  20. JB Kelly - May 1, 2014

    Dave
    I’m looking for a simple but effective trading system to trade foreign currencies and the dollar index. Any thoughts? BTW I used to work with Dick Donchian at Shearson!

  21. PRAKASH - December 17, 2014

    Nice Ideas Shared
    I am new to Amibroker
    Need more time to understand all things
    Thanks

  22. Ambalal - July 17, 2015

    How to backrest movingav=125 and 25 day ago plz sent code

  23. keith toghill - November 14, 2015

    Hi Dave,

    I have been using AB for years and never really got around to attempting a trading plan. Your tutorials have certainly changed that and given me a new beginning to build on. Thanks so much.
    NB: I would also like to become a member subscriber but alas, I note that you are not accepting any further member subscribers.

  24. Dave McLachlan - November 14, 2015

    Hi Keith,

    Thank you so much!

    It is true, the members area is closed for now. The majority of important stuff is all available on my site for free via the Beginners Free Course, Intermediate Free Course, and Amibroker free course, however 🙂

    Happy trending,

    Dave

  25. Alessandro - November 23, 2015

    Hi regarding the gap up system, the stock must be above it’s 50MA to trade and one sell criteria is if it falls below it’s 100MA. But what if the stock at the time of gapping is above the 50MA and at the same time below the 100MA. Would the system signal the trade?

  26. Dave McLachlan - November 23, 2015

    Hey Alessandro,

    Good catch – while it worked when I programmed it, it is clunky and sometimes sells the next day when that happens as you’ve described.

    I’ve updated it slightly to stop this – using a 150 day Moving average for both buys and sells – in the revision of these trading systems here: http://www.asxmarketwatch.com/2015/11/seven-full-trading-systems-revisited-with-completely-new-data/

    Happy trending! – Dave

  27. Alessandro D'Aquino - December 21, 2015

    Hi Dave,
    Does Amibroker give the average stock hold time for leap of faith system?

  28. Dave McLachlan - December 23, 2015

    Hey Alessandro,

    It does! I just did a test using the revisited approach – that uses a blanket 150 day Moving Average instead of the two separate ones.

    The hold time was 44 days average for winners, and 17 days average for losers.

    Happy trending – Dave

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