It does seem as if every time I open my junk mail folder I get another invocation to partake of yet another magic trading system. I should note that this sort of thing has been around forever, the only thing that changes is the vehicle which alters in order to capitalise on whatever topic is hot. Or whatever is perceived to be magical. With the need for a magic system foremost in my mind I wondered how long it would take me to build a magic system that could trade the major Local ETF – STW.
Lets just say the kettle hadn’t had time to boil by the time I was finished. The results of the system are shown below.
The rules are simple – entry is a new 52 week high and the exit is a new 52 week low. The figures above represent buying and selling on the opening of the week immediately following the generation of the signal. You will note that I have been profoundly lazy since I have not included any money management in the analysis. These are effectively block trades – you buy a chunk on the signal and then wait for a signal in the opposite direction. If I get some free time I might be a little bit more sophisticated in my analysis but I just wanted a proof of concept to see what sort of results would be generated by being very blunt and letting the market do the work. But you will notice there is nothing magical nor particular sophisticated about this. As I have said before any robust trend following method will work with any instrument.