![]() ![]() In other words, trend-following of major currency pairs with breakouts, one entry, one exit, and stop-loss, has certain performance limitations. There is no significant improvement in performance after changes in the lookback period. The performance deteriorates for a period below 100. The highest annualized return is 5.49% for 110 days. Performance Sensitivity To Changes in Breakout Lookback Periodīelow are the results after varying the breakout lookback period from 50 to 350, in increments of 10. In 2003, the strategy was up 74.5% and the largest loss was 20.3% in 2012. There were six consecutive losing years from 2016 to 2021. Overall, the results were disappointing for the seven major currency pairs, especially after mid-2011. The win rate is 22% with a total of 522 trades.The strategy has a high skewness of 7.1.After 2014, the strategy had a large drawdown of about 57%. ![]() After mid-2011, the strategy became unprofitable.The annualized return is 4.6% at 55.6% drawdown.Trade entry: All trades are executed at the open of the next bar.Įquity Curve, Drawdown Profile, Yearly Returns, and Daily Returns Histogram Position size calculations: Based on stop-loss (ATR multiples) and maximum risk per position of 1%. Maximum positions: Seven, a mix of long and short. Strategy type: Trend-following based on 150-day breakouts, stop and reverse. ![]() Markets: AUDUSD, EURUSD, GBPUSD, USDCHF, NZDUSD, USDJPY, USDCAD We highly recommend the Norgate data service for backtesting purposes (we do not have a referral arrangement with the company.) Since the strategy had an average holding period of 78 days in the backtest period, we ignored the impact of the bid/ask spread on the performance and used the opening and closing prices of the daily data. For the backtests, we used Norgate data for the currency pairs. We backtested the classic trend-following strategy involving one entry, one exit, and a stop-loss, with seven major currency pairs. The classic trend-following with breakouts has not worked well with major forex pairs after 2015, although it has offered an exceptionally high skew. ![]()
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