Backtesting Popular Strategies from Youtube #1
Debunking Fake Gurus’ Strategies from Youtube
Hey guys, I am starting a new thread here where I will be backtesting popular strategies taken from YouTube. There are so many people teaching you how to read different indicators and how to base trading strategies on them. From Stochastic RSI, MACD, Bollinger bands, MFI, and CCI, to some more advanced custom indicators made in Tradingivew. They combine them in all possible ways and try to find the secret souse, but I am always skeptical about such things.
People are presented with deceiving examples where the conditions are met and the price goes in the predicted direction and they state they test it for 100 trades or so and declare staggering results.
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That’s why I decided to develop their ideas into a trading bot and run them through my sophisticated backtester in Python. That way you will be able to see transparent results with full statistics on the performance of the strategy.
Today’s strategy will be based on the Moving Average Convergence Divergence indicator or also known as MACD. We will combine it with a 200-period simple moving average. The MACD will be our trigger whereas the 200 SMA for confirming the trend. You can check the strategy video here.
Conditions for Long:
- Going Long: we want the macd line to cross over the signal line and be under 0. Also, we want the price to be above the 200 moving average so that we always take long trades in an uptrend.
- Going Short: for short we want the exact opposite. Macd line cross under the signal line and that cross to have happened above 0 plus the price to be below the 200-SMA.
We will do a one-year backtest on the 1H timeframe of Bitcoin (BTCUSDT).
For the sake of the example, we will conduct two iterations with different R:R ratios. The first will be 1:2 (i.e 2% take profit and 1% stop loss) and the second one is 1:1.
Backtest Results from 1:2 Risk:Reward
Our Start date is 10–10–2021 and End date is 10–10–2022
As we can clearly see the strategy lost cumulatively 9.2% at the end of the year. We also suffered a pretty big drawdown at one point maxing at -23.4%
The Sharpe ratio is -0.36 with annual volatility of 15.4%.
Overall we can see that the strategy performed poorly and lost us a tenth of our portfolio.
Backtest Results from 1:1 Risk:Reward
Everything is exactly the same here, however the take profit is 1% and the stop loss is 1% as well.
We can see that the strategy preformed better with this exit logic, however it still lost us money. We got -4.4% cumulative returns with annual volatility of 11.6%. The Sharpe ratio is -0.21 with max drawdown of -17.9%
Conclusion
Overall we can see that the strategy is losing money in both scenarios. I think this is a way too simple and basic logic for a strategy to actually work and make money.
Whenever you come across a video or publication make sure you always do your due diligence and don’t trust fake gurus and traders that share with you a winning strategy so easily.
If you like such content and want see more popular strategies debunked make sure to subscribe so you don’t miss the next one!
Also if you have any particular strategy in mind that you want me to backtest, please do share it in the comment section and I will do an article covering it.
Thank you all and see you in the next one!
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