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Advantages of High Winning Percentage Systems Comparison to Long-Term Systems Intensity Long-Term |
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With a change in the exit methodology, Intensity becomes a robust long-term system that is profitable in every market sector, including stock-indices! I call this longer-term version Intensity Long-Term. Purchasers of Intensity thus get two systems for the price of one.
For the single contract testing, I assume $75 for commission and slippage. Exactly one contract is entered for each entry signal. The test period comprises the period from January 1984 through December 28, 2006.
Note that Intensity Long-Term is profitable across all market sectors, including precious metals, meats, softs, grains, and stock indices! All thirty-five markets show positive profits. Even more amazingly, at the single-contract level, the expectation is 66.3%. That is, across 35 markets, 66.3 cents was gained for every dollar risked in the back-test. Intensity Long-Term's rules are the same for all markets, both long and short trades, just like Intensity. The winning percentage across all markets was 41.7%.
The back-tested results are also very consistent across time, as shown in the table below.
The table below displays back testing results with money management applied to the 35 market portfolio listed above, risking 1% of total equity per trade, from January 1984 to December 2006.
Even after subtracting $75 for commission and slippage for each trade, the winning percentage for the back test is 41.9%. The compounded annual growth rate, a measure of average return, is 46.4%, and the maximum drawdown experienced during the test is 29.0%. The ratio of the CAGR to the maximum drawdown is the minimum acceptable return (MAR) ratio, which represents the amount gained (% return) vs. pain (maximum drawdown). Intensity Long-Term's MAR ratio for the back test is 1.60. The expectation is 35.7%, which means that for each dollar risked, the Intensity Long-Term trading system made 35.7 cents in back testing. The Kelly number is 15.9%, which represents the fraction of equity that would need to be risked per trade in order to maximize total return. The back test was performed using Trading Recipes software. The table below lists the full money-management results report from Trading Recipes.
The graph below contains the equity curve for the back test with money management applied. Notice that the account equity axis is displayed in log-scale, which allows for full visualization of the curve of Intensity Long-Term's consistent growth over the entire test period. In order for the money-management algorithm to not skip trades early in the test, start-up capital was assumed to be $500,000.
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