New Nightly Patterns rules set results!
I’ve been spending months thinking how to increase Nightly Patterns trading frequency without experiencing extreme drawdowns.
As we deal with futures (20X leverage or 5% margin on Emini contracts) drawdowns on capital used as margin can be very high.
Instead on using the Odds Map very selective approach, I tried to make a more rough trade selection. The equity curve above shows strong returns, about 400% from SPY inception, trading SPY. Can you imagine expoiting Emini futures leverage?
This is the most robust set of rules:
Take a LONG trade when there are MORE than 5 bullish patterns triggering and NO bearish patterns triggering.
Take a SHORT trade when there are MORE than 2 bearish patterns triggering and LESS than 3 bullish patterns triggering.
Here are the numbers:
Profit Factor = 2,96
% of winning trades = 69%
# of trades (since 1993) = 1908
# of trades per year = 76
# of trades per month = 6,36
Trade frequency rised from 5 to more than 6 trades per month. But what I like most are the following monthly returns on SPY, which are definitely better than my previous approach, last 5 years of live performance included. I know, I know, this is only a backtest and not a live trading results sheet.
But I think they are robust enough.
Here is the simple SPY version returns on invested equity:
And here is the 5% margin Emini (20X leveraged) version monthly double digit returns
on invested equity:
Lastly, I want to make you focus on the 71% monthly drawdown on 2009, it was about 80% measured daily. Very high, that’s why traders need a cash reserve trading futures.
It means traders only have 20% of cash reserve left to face further drawdowns (not so much), with current 50% invested equity/50% of cash reserve rule. Globally it was 40% drawdown on total Nightly Patterns dedicated capital.
To be prudent I think to raise the current 50%/50% equity/cash ratio at least to 60%/40% equity/cash new ratio for aggressive traders, and to 70%/30% equity/cash for prudent traders.
So on total Nightly Patterns dedicated capital:
max % daily drawdowns = 32% (aggressive traders – 40% invested equity)
max % daily drawdowns = 24% (prudent traders – 30% invested equity)
This is the price to pay for these new strong double digit returns! You can look at the SPY daily % drawdowns chart (drawdown on Emini margins must be leveraged by 20x)
Marco Simioni
NIGHTLY PATTERNS - Overnight Trading 
Hi Marco, The new rules are very exciting. Thank you for your hard work. One small point: you write “And here is the 5% margin Emini (20X leveraged) version monthly double digit returnson invested equity:” before both of the return tables. The first table, if I understand correctly, is a backtest of your overnight system using SPY, not ES. Take care, and thanks for your dedication.Alex
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Hi Alex! Thank you very much for the note! You’re right! I’ve already corrected the post!
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