Trend reversal trading strategy “Super Trend” is designed mainly for Forex and can be used on all currency pairs on H1, D1, W1 time-frames. Its rules state that:
A trader should place a buy order when price is above 200 SMA and Super Trend Indicator changes its colour from red to green. A sell order should be placed when price is bellow 200 SMA and Super Trend Indicator changes its colour from green to red. Stop Loss equals to 1.5*ATR.
For our test, we have used a Trailing Stop which is launched after a trade has started and is modified each new 1 pip of profit. From our point of view, such approach allows to maximize profit and minimize drawdown. We have run the test for 2010.01.01-2019.07.18 using Control Points modelling on EURUSD-H4, with 1:18 leverage, without reinvestment, assuming spread equals 10 ticks, with starting balance $10,000. These are the main parameters of financial performance, that may allow you to evaluate whether this strategy worth your attention or not:
|ROI||# of trades||Winning ratio||Max. drawdown|
The following charts may give some possible insights on which filters to apply (time sessions, day of week limitation, trend strength threshold, overbought/oversold conditions, volatility range) to turn this strategy profitable should you decide to use this strategy in your investment portfolio:
1. “Super Trend” trading strategy has produces 11.9% annualized ROI during 2010–2019 years using 1:18 leverage. Maximum drawdown was 70.21%.
2. Trades were more profitable at a higher volume and have brought more losses when volume was low while trading “Super Trend” trading strategy during 2010-2019 years. High trading volume usually confirms the current trend.
3. Most profitable buy trades were opened at a Bears value less then zero, while most profitable sell trades were opened at a Bulls value more than zero, when trading “Super Trend” trading strategy during 2010–2019 years. Low power of “Bulls & Bears” indicator may indicate the beginning of a trend.
4. We have analyzed data received from the test of “Super Trend” trading strategy during 2010–2019 years and applied some filters such as ADX, RSI, Stochastic, RVI, Bears & Bulls. As a result, the profitability of the strategy has increased from 11.99% up to 51.82% and its drawdown has reduced from 70.21% to 10.77% using leverage 1:18. Reducing the drawdown has allowed us to increase the leverage up to 1:24, which in turn, has resulted in annualized ROI increase up to 72.25%!
If you decide to buy an EA, coded in accordance with the strategy and used for the test, or to make any amendments to the original strategy rules – please, feel free to contact us.
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