So let's talk automated trading strategies for 2022.

As of today, March 1st 2022, the S&P 500 which is generally agreed to be the most common index is down 6 percent year-to-date. Now the last 3 years we've seen positive double-digit returns in the market so this was sort of expected.

So what automated trading strategies are going to perform well in this market?

I have 3 that I want to showcase.

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1.) Gap down momentum strategy

When an asset gaps down X percent it generally follows that trend for the rest of the day, one of my best performing strategies year to date is a gap down momentum strategy with NASDAQ futures where if NASDAQ gaps down more than 1% it goes short, has a profit target stop loss and sells at the end of the da. You can see the out of sample real-time performance it's doing quite well so far.

This strategy doesn't trade too often usually about once a month and has a average hold time of about four hours when you're shorting especially indexes you have to be very very careful because you can get squeezed out as you know as we know indexes on average go up over time so generally when you're shorting the indexes you want a really small time horizon to get quick profits and get out because when they reverse you canget stopped out pretty pretty quickly the strategy has a profit target and stop loss attached to it and sells on market close and it's performing really well so far.

2.) Intraday mean reversion strategy with a volatility filter

Now I know that's a mouthful but basically when the price of an asset diverts from the average price or the mean price generally it returns to that price. Now if you pair that with a volatility filter where you forecast some type of volatility and only run the strategy when that forecast says true or is greater than 1 I think this can be a very powerful strategy. This is actually something I'm experimenting right now but GARCH is a common mathematical formula to forecast volatility, it's a algorithm or formula to predict volatility in financial markets / time series.

If the GARCH indicator is greater than 0.94 it's predicted that the next day is going to be volatile and maybe this is a filter you use to run a crossover strategy only when you predict that it's going to be volatile.

3.) Swing mean reversion strategy

This is a little bit different to what we just talked about where it's not intraday, it's a swing so our time horizon in terms of when how long we're holding the position is going to be a couple days to weeks. You're going to buy the asset when it's diverted from the average price maybe you could use a standard deviation or a moving average and basically hold that position until it returns to the average price and maybe attach a stop loss just to be safe this has been working really well with me for with equity index futures. On the short side it's a little bit harder generally indexes go up over time so I only run this on the buy side, commodities may benefit from short mean reversion due to their boom and bust cycles.