Strategy: Volatility Compression Trade in S&P 500
Trades generated by this strategy are available to paid subscribers
This is a long-only, rule-based swing trading strategy based on volatility contraction in an uptrend pattern. The strategy logic is based on the fact that, in uptrends, most range compression patterns result in a bullish breakout.
It can be traded on S&P index ETFs like SPY, IVV, VOO, index options, or futures.
This strategy triggers near the market close and typically holds a position for four days.
To enhance the returns of this pattern, we studied its monthly and weekly seasonal performance and discovered that it tends to perform better when certain calendar conditions are met.
Volatility Compression Trade in the S&P 500, on average, executes 15 trades per year.
The P&L chart of this strategy looks as follows (SPY, no leverage, $100K account):
Strategy statistics:
Net Profit: 344.76%
Max Drawdown: 11.84%
Total Closed Trades: 277
Percent profitable: 79.06%
Profit factor: 3.603
Average # Bars in Trades: 4 [days]
Like most of our strategies, this one is also meant to be traded as part of a portfolio of diversified strategies. Due to the fact that it typically holds positions for a short period of time, it allows for good usage of working capital and fast compounding of gains.
TradeMachine subscribers receive email alerts with position updates each time this strategy enters or exits a trade. Some strategies include take-profit and stop-loss price levels.
Past performance is not indicative of future results. Results based on simulated or hypothetical performance have certain inherent limitations. All posts are subject to the disclaimer on the About page.