Nordic Traders: Our Backtested Systems

Publicerad: 25. mars 2022

In the Nordic Traders Telegram channel we are trading a number of different strategies which are backtested, and in some cases we have traded these strategies for years. In the channel, we only trade the best of the strategies we develop.

In the following, we will describe some our strategies. The list is not exhaustive, but it will give you a good idea of how we are trading. It is a combination of day trading and swing trading strategies.

  1. Trading Earnings Suprises

This strategy is based on an algorithm which triggers a buy signal when a company publish a good earnings result, and subsequently the market reacts very positively. In our tests, which have also been confirmed by live trading, trading these signals yields a significant edge. We have run this test in the last 15 years on the US stock index SP 500, and the results are as shown on the graph below.

In this experiment, we bought stocks, based on the algorithm, and the performance is shown with the orange graph. As a benchmark, we have purchased the SP500 index in similar quantities and at the same times as the shares have been purchased.

The result is a clear overperformance almost every year in this period. This strategy is not immune to the stock market’s general downturns – e.g. in 2008 and 2020 – when trading the strategy. The returns of 2020 very still very positive though. So it has some correlation with the overall stock market, which we try to mitigate by trading other strategies that are not correlated with development of the overall stock market.

In 14 out of 16 years, trading this strategy, you would have experienced better results with strategy than you would by investing in the general index. Below, the results of the test can be seen, year by year.

Via Machine learning we have fine-tuned the parameters of the system, and the goal is to obtain the highest risk-adjusted return over a long period. Typically, the trades are long swing trades with a time horizon of approximately 4 months. Trades have historically had a winning rate of 67%, with the average winning trade being 1,41 times larger than the average losing trades.

2. Dip buying in SP500

For several years, we have been trading a dip buying strategy in SP500, which have adding good and steady returns over the years with a relatively lower drawdown than the general stock market.

So while the overall strategy performs only slightly better than a buy and hold strategy in SP500 historically, it does it with much lower volatility and drawdown, which means that you would have avoided losing large amounts in 2008 and March 2020 if you had been trading the strategy.

3. Momentum buying stocks

Based on a momentum strategy we have developed an algorithm that scores all stocks with weighted momentum scores, and subsequently scores them on a scale of 1-10 and give us the ticker symbols of these stocks.

The scores a calculated based on different periods of momentum as well as a “cooldown” period, given the stock time to make a pullback, while we are waiting to make the trade. The output looks like this and can be used to picking the best stocks.

4. Finding “home run trades”

For a longer period we have backtested some breakout strategies which are originally developed by the Swedish trader Kristjan Kullamägi. He has been very succesful with his trading strategies and now have a net worth north of 85 mio. USD. While Kullamägi is trading this strategy in a discretionary way, we have aimed to put it on a fixed formula and given it our own touch, and added our own rules and parameters. The results of this strategy have been astounding.

Below you will see how we have tested various stop-loss strategies to optimize the performance of the strategy. Surprisingly, one of the best ways to trade it, is to use a fast exponential moving average as stop loss. This only leads to a hitrate of 43,8% of winning trades. However the average win is 2,33 larger than the average loss which makes the strategy very profitable as it tends to find “home run” trades, i.e. trades that can be very larger winners. Some of best trading strategies in fact have win rates of 50% or less – what is important is that the average winning trade is much larger than the average loss.

Follow our trades at the Nordic Traders Telegram channel.

Risk Warning: Any use of information provided in this channel, for example a specific investment or trade made because of this channel’s content, is made at your own risk. Nordic Traders cannot be held responsible for results potentially caused by the fact that a reader or user has used the information presented here differently. All trading involves risk. Trade only with capital you are prepared to lose. Past performance is no guarantee of future returns. The content of the channel has an educational purpose and should not be considered as investment advice. Trading in cryptocurrencies is not suitable for all, as cryptocurrencies can have extreme fluctuations in price. Your capital may be at risk. Generally, leveraged products described on this website are not suitable for everyone. You should not trade capital that you cannot afford to lose, and seek advice if you do not understand the risks. Nordic Traders may in certain cases receive commission and/or payment and/or benefits for advertisements from the trading platforms mentioned on the page. All info is subject to errors and changes. It’s always up to the reader to stay updated, and do their own research. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 65%-75% – of retail investor accounts lose money when trading CFDs with our partner broker. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Copyright (c)

Spread the love