Strategy styles
Five ways to trade futures, and what the record says
Each style rests on a premise about how prices move. Each page sets out what the research record found when that premise was tested, and what it takes to test your own version of it.
- ScalpingHolds of seconds to minutes, a few ticks at a time. The style where costs are the whole story.Screener: bars from 1 minute to a week
- Trend followingEnter with the move, cut losers fast and let winners run. It needs moves that persist.
- Mean reversionFade a move that has gone too far and bet on the snap back. Easy to fit, hard to prove.
- BreakoutTrade the break of a range: the opening range, the session high or low, a recent channel.
- Swing tradingHold for days to weeks, and compete with simply holding the market.Screener: bars from 1 minute to a week
Scalping
Holds of seconds to minutes, a few ticks at a time. The style where costs are the whole story.
Screener: bars from 1 minute to a week
Trend following
Enter with the move, cut losers fast and let winners run. It needs moves that persist.
Screener: bars from 1 minute to a week
Mean reversion
Fade a move that has gone too far and bet on the snap back. Easy to fit, hard to prove.
Screener: bars from 1 minute to a week
Breakout
Trade the break of a range: the opening range, the session high or low, a recent channel.
Screener: bars from 1 minute to a week
Swing trading
Hold for days to weeks, and compete with simply holding the market.
Screener: bars from 1 minute to a week
What every style has to clear
The style changes the premise, not the test. Whatever the idea, it has to clear its costs at the stop it actually uses, a bar that rises as the horizon shortens. It has to beat random entries of the same count and holding period, which most long-biased ideas cannot do. And it has to exist outside the era it was found in, counted against every variant that was tried on the way to it.
The method page sets out the full gate stack. The position size calculator shows what costs are in R at your own stop, and the deflated Sharpe ratio calculator shows what counting the variants does to a backtest.
An idea in any of these styles
Describe it in a sentence. Ideas on bars from one minute to a week go straight through the screener's seven gates and come back with a verdict, usually in 15 to 25 seconds; holds shorter than a minute are not screened here.