Ultimate Algorithmic Trading System

FIGURE 3.7
Source: AmiBroker
Performance of the WFO of the Bollinger Band system.
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COMPLETE TRADING ALGORITHMS
So what is the answer for a smaller account? In a similar fashion to diversifying
through markets, a trader can diversify further through trading multiple algorithms.
In a trader’s perfect world, there would exist robust trend-following, short-term
swing and day trading systems. Ones that were not closely correlated with the
others. This perfect world doesn’t exist due to the fact a robust short-term swing
system is hard to find. The ones that seem to work on a somewhat consistent basis
mostly work only on the stock indices. However, that’s not a bad thing, because
this is a very weak sector for trend followers. The best short-term algorithms that I
have come across incorporate mean reversion or pattern recognition components.
The marriage of trend following and these other types of algorithms might be
one solution. This union brings together two different algorithms, as well as two
noncorrelated portfolios.
■ Multi-Algorithm Strategy (MAS)
Mean reversion is a trading algorithm that trades in the direction of the trend but
takes advantage of a temporary countertrend move.
The most recent performance of this algorithm looks very respectable. This algorithm
utilizes the Bollinger B% indicator/function (Box 3.4). Basically, it trades in the
www.rasabourse.com