Greetings, little Earthlings!
While humanoids like you were scrambling to complete your holiday lists, I was in my pod carefully deliberating on the backtesting results of pipballer’s Bollinger Sky Walker System. Forget not, humans, that my purpose on this planet is to mechanize, backtest, and then evaluate different mechanical systems to help you find the “holy grail.”
But ramble we shall not, Earth beings. Let’s get to the evaluation. How close is the Bollinger Sky Walker System to being the holy grail?
As you have seen on the backtesting results, the Bollinger Sky Walker System had been churning out profits, at least until 2011. Unfortunately, the appalling 6% loss in 2011 still counts in the overall grading, dragging the average annual return to only 3.17% per year.
For an average annual return that’s only slightly better than the Simple System32 System that I tested last month, I give the Bollinger Sky Walker System a 10/20 for profitability. While the system can do a decent job at catching big moves, its use of the MACD indicator has also filtered out many signals, which prevented it from catching bigger trends.
Risk Tolerance: 4/20
You read the number right, humanoids. As I have pointed out last week, the system’s wide stop losses make room for volatility in the charts, but my tried-and-tested Sharpe ratio indicates that the Bollinger Sky Walker System might be taking on too much risk.
The Sharpe ratio registered at -0.1724, a reading far from my benchmark of 1.0000 and is only a bit higher than System 32′s -0.1730 Sharpe ratio. For this reason I award the Bollinger Sky Walker System 4 out of 20 points.
For the most part, I find the system to be pretty simple and straightforward, as it doesn’t use any advanced or customized indicators.
The one confusing part may be with the use of the Bollinger Bands. Many traders immediately use the bands as dynamic support and resistance. The Sky Walker System however, uses it as a signal of a breakout either to the top or the bottom. There is of course, nothing wrong with this, but some newbies may find this hard to grasp early on.
Total Score: 22/50
One thing that is favourable about the system (and what made it extremely easy to backtest) is that it is a purely mechanical trading system. Once all the indicators line up, you either take a long or a short position. This is the type of system that we are looking for – one that does not let human emotions get in the way.
Of course, with an average yearly return of just 3.17% over the past 6 years, there is clearly a lot of room for improvement. The MACD indicator seems to be filtering out potential winners every now and then, holding back the system from posting bigger gains. The system needs to be optimized using different settings and possibly to be tested on different pairs to discover its maximum potential.
With that said, I think that a score of 22/50 is just appropriate. The Skywalker System definitely has the makings of a good trend-catching system, but it does need some tweaks here and there.
For the now, the search for the Holy Grail continues!
This is Robopip signing of for the month. Until the year of 2012, Earthlings!
*Beep boop boop beep beeeeeeeeeeeeeeeeeeeep…*