“VAREA REX I” is a system developed by AlgoReturns. VAREA represents a novel approach to both discretionary and non-discretionary trading by creating robust, proprietary data structures and parameters constructed using an augmentation of the Market ProfileTM methodology. Because the methodology is data intensive, and computationally complex, it yields more robust information than simple, linear OHLC price information.
VAREA REX I is a range extension system identifying setups which precede a period of increased volatility and directional movement and then monetizes those subsequent moves automatically.
Although VAREA REX I is a new system, it is expected to exhibit the following characteristics: a 60% or better accuracy rate , a profit factor of around 3:2, expected drawdowns of 40% or better. Summary results from hypothetical back testing are provided in the “Summary” section. Detailed and tabulated hypothetical back testing results are available on the “Performance” section. 2-3 signals are expected per month, and trades are held on an average of 5 days. The algorithm has been tested on 15 years of historical data. Accuracy, profit factor and drawdowns are approximations and do not include the effect of commission and slippage. The minimum lot size is 3 with increments in multiples thereof. Algorithm runs on a “hands-free” + “expert overlay” mode starting with taking real-time price feeds from futures exchanges and ending with order communication to futures broker. Developer is expected to make an annual update to the algorithm to reflect realized experience.
Results shown below are updated till Sept. 2020. 2005 data is for the last quarter only. All results are rounded to the nearest integer. Important notes and commentary regarding these tables are available in “Notes” section.[table “” not found /]
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Accuracy, profit factor and drawdowns are approximations and do not include the effect of commission and slippage.[table “” not found /]
Drawdown assumptions do not include the effect of commission, slippage and any additional capital required by your broker.
Developer notes and commentary on Tables 1-3 are provided below.
Algorithm has been backtested on 15 years of data at 5min intervals on regular and after-hours trading periods. Prices are continuously adjusted on the most liquid ES contract prevailing at the time. All trade orders are of the “Market Order” type and assume immediate execution. Slippage and commissions are not included in the price. Results have been rounded to the nearest integer for presentation purposes. The number of days between two consecutive signals could be less than 10 days. On such occasions, the algorithm will assume that client has sufficient margin money to hold additional lots as required. The algorithm assumes no reinvestment of gains or losses. The algorithm is reliant on data quality of historical prices and does no additional quality checks/corrections on the historical data. The algorithm has been trained on an industry standard data provider (Trade Navigator from Genesis Technologies).
The percentage of winning trades to total number of trades is 221/344 or about 64% taking the entire history into consideration. The profitability ratio which is expressed as the ratio of gains to absolute value of losses is $570,963:326,973 which reduces to 1.74:1. Max drawdown is expressed as the sum of 2 consecutive worst months – which evaluates to -$26,116 observed during Nov-Dec of 2018. Using a suggested capital of $65,000 (which is 1.80 x $12,000 x 3), the maximum drawdown evaluates to approximately 40% of suggested capital.
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