We were experimenting on a tsupita strategy and this equity curve came out during backtest. Straight to the trash you go! ?
Case Study: This happened because the trading system was still trying to make tsupita trades even on flat markets, resulting in both transaction fees and small losses consistently chipping away at our equity. It didn't do well during uptrend stages also as the system exits too early and will usually miss out on big moves.
Our suggestion when making strategies is to always use a filter, like Moving Averages or our proprietary vTrend indicator to first identify the market structure, if its going sideways or trending and implement the appropriate strategy. In this case, to improve performance maybe we should have included a %ATR filter so the system will only trade stocks that are trading at a certain volatility level and ignore flat movements. Back to the drawing board!
