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New Nightly Patterns rules set results!

September 10, 2018

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:

new nules monthly spy

And here is the 5% margin Emini (20X leveraged) version monthly double digit returns

on invested equity:

new rules monthly ES

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)

new rules spy drawdowns


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  1. Alex Argyros permalink

    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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