Remember our simplest trend following strategy in Zorro Trader? We were trading the SPY, and we used a moving average of a certain length (50 days) as our trend indicator. When the price crossed above this moving average, we closed any short positions and entered a long position. When the price crossed below the moving average, we closed any long positions, and entered a short position. We made an Annual Return of 3% with a Sharpe Ratio of 0.27, which makes this a poor trading strategy. The equity curve of the strategy is in the picture above, and it does not look too good.
by Algo Mike
Experienced algorithmic and quantitative trading professional.