AQTIS - Mean Reversion (Results and Performance)
We are excited to present the latest delivery of our Mean-Reversion strategy.
In this presentation, we will showcase two key points: Performance based on Tier 2 signals, and the performance we would have achieved by implementing these strategies in our portfolio.
Intro
In our previous presentations, we showcased our methodology for achieving the results from backtesting and leveraging data analysis to obtain our trading signals.
We also explained what mean reversion is and how we incorporated it into our trading system.
If you haven't already, please visit these links before proceeding further:
Tier 2 Signals - Local top and bottom
We will be showcasing the results of the strategy based solely on Tier 2 signals, which are the clearest signals that our system can detect.
This means that the threshold has been exceeded or that there is a significant confluence of different signals.
Usually a successful Tier 2 signal leads to a reversal in the market. So it can be considered as a local top and local bottom trigger.
Backtesting Results - Ethereum
Asset: Ethereum [ETH/USDT]
Strategy: Mean Reversion - Tier 2 Direction: Long Only
Time frame: 4H and 1H as entry confirmation - Tier 2
Quantitative Stats - ETH Long Only - Tier 2
ETH
Start 2022-01-01 00:00:00+00:00
End 2023-04-20 12:00:00+00:00
Period 474 days 16:00:00
Start Value 100.0
Min Value 99.88012387532484
Max Value 147.67576042533824
End Value 147.67576042533824
Total Return [%] 47.675760425338225
Benchmark Return [%] -46.774772716144206
Total Time Exposure [%] 1.3342696629213482
Max Gross Exposure [%] 100.0
Max Drawdown [%] 7.318677604253895
Max Drawdown Duration 1 days 16:00:00
Total Orders 22
Total Fees Paid 0.5528756100625978
Total Trades 11
Win Rate [%] 45.45454545454545
Best Trade [%] 9.738263736263777
Worst Trade [%] -1.237562637362636
Avg Winning Trade [%] 9.738263736263757
Avg Losing Trade [%] -1.237562637362627
Avg Winning Trade Duration 0 days 20:00:00
Avg Losing Trade Duration 0 days 08:39:59.999999999
Profit Factor 5.999363228210165
Expectancy 4.334160038667109
Sharpe Ratio 1.657100771825905
Calmar Ratio 4.776269771635748
Omega Ratio 2.370804824936766
Sortino Ratio 3.954674021379835
Visual statistics and ETH Chart:
Strategy: Mean Reversion - Tier 2 Direction: Short Only
Time frame: 4H and 1H as entry confirmation - Tier 2
Quantitative Stats - ETH Short Only - Tier 2
ETH
Start 2022-01-01 00:00:00+00:00
End 2023-04-20 12:00:00+00:00
Period 474 days 16:00:00
Start Value 100.0
Min Value 92.6630937744173
Max Value 116.14540736071513
End Value 116.14540736071513
Total Return [%] 16.145407360715126
Benchmark Return [%] -46.774772716144206
Total Time Exposure [%] 2.387640449438202
Max Gross Exposure [%] 101.91390902254629
Max Drawdown [%] 7.336906225582694
Max Drawdown Duration 138 days 04:00:00
Total Orders 26
Total Fees Paid 0.5256246763885943
Total Trades 13
Win Rate [%] 30.76923076923077
Best Trade [%] 6.775176576576604
Worst Trade [%] -1.242442642642653
Avg Winning Trade [%] 6.775176576576593
Avg Losing Trade [%] -1.242442642642632
Avg Winning Trade Duration 1 days 13:00:00
Avg Losing Trade Duration 0 days 13:46:40
Profit Factor 2.418502796487625
Expectancy 1.241954412362701
Sharpe Ratio 1.1627852652224437
Calmar Ratio 1.6625148253671274
Omega Ratio 1.514681185853207
Sortino Ratio 2.217436408714173
Visual statistics and ETH Chart:
Backtesting Results - Bitcoin
Asset: Bitcoin [BTC/USDT]
Strategy: Mean Reversion - Tier 2 Direction: Long Only
Time frame: 4H and 1H as entry confirmation - Tier 2
Quantitative Stats - BTC Long Only - Tier 2
BTC
Start 2022-01-01 00:00:00+00:00
End 2023-04-20 12:00:00+00:00
Period 474 days 16:00:00
Start Value 100.0
Min Value 99.88012387532484
Max Value 131.4351632369238
End Value 131.4351632369238
Total Return [%] 31.435163236923813
Benchmark Return [%] -37.5510705778075
Total Time Exposure [%] 0.8426966292134831
Max Gross Exposure [%] 100.0
Max Drawdown [%] 4.506049367598434
Max Drawdown Duration 1 days 12:00:00
Total Orders 12
Total Fees Paid 0.27189334408730087
Total Trades 6
Win Rate [%] 66.66666666666666
Best Trade [%] 7.7426589410589814
Worst Trade [%] -1.2375626373626247
Avg Winning Trade [%] 7.742658941058961
Avg Losing Trade [%] -1.2375626373626218
Avg Winning Trade Duration 0 days 17:00:00
Avg Losing Trade Duration 0 days 14:00:00
Profit Factor 12.424241573218666
Expectancy 5.239193872820639
Sharpe Ratio 1.7121457256904902
Calmar Ratio 5.191087523268826
Omega Ratio 2.743770461401981
Sortino Ratio 3.8956663141861343Visual statistics and BTC Chart:
Strategy: Mean Reversion - Tier 2 Direction: Short Only
Time frame: 4H and 1H as entry confirmation - Tier 2
Quantitative Stats - BTC Short Only - Tier 2
BTC
Start 2022-01-01 00:00:00+00:00
End 2023-04-20 12:00:00+00:00
Period 474 days 16:00:00
Start Value 100.0
Min Value 99.87992391511689
Max Value 139.0891724311755
End Value 126.13458886736541
Total Return [%] 26.13458886736541
Benchmark Return [%] -37.5510705778075
Total Time Exposure [%] 4.248595505617978
Max Gross Exposure [%] 101.35060188367164
Max Drawdown [%] 9.313869180018502
Max Drawdown Duration 59 days 08:00:00
Total Orders 18
Total Fees Paid 0.438430096262101
Total Trades 9
Win Rate [%] 33.33333333333333
Best Trade [%] 10.783986186186205
Worst Trade [%] -1.242442642642638
Avg Winning Trade [%] 10.783986186186196
Avg Losing Trade [%] -1.2424426426426292
Avg Winning Trade Duration 3 days 22:40:00
Avg Losing Trade Duration 1 days 09:20:00
Profit Factor 3.705638919722854
Expectancy 2.9038432074850498
Sharpe Ratio 1.7739793543657596
Calmar Ratio 2.0986641374897204
Omega Ratio 1.6376388665226116
Sortino Ratio 3.260219179523079Visual statistics and BTC Chart:
Backtesting Results - Solana
Asset: Solana [SOL/USDT]
Strategy: Mean Reversion - Tier 2 Direction: Long Only
Time frame: 4H and 1H as entry confirmation - Tier 2
Quantitative Stats - SOL Long Only - Tier 2
SOL
Start 2022-01-01 00:00:00+00:00
End 2023-04-20 12:00:00+00:00
Period 474 days 16:00:00
Start Value 100.0
Min Value 98.6442919464781
Max Value 137.4205136770219
End Value 133.8278273489755
Total Return [%] 33.82782734897549
Benchmark Return [%] -86.63430991881403
Total Time Exposure [%] 1.7907303370786516
Max Gross Exposure [%] 100.0
Max Drawdown [%] 7.3583903123377095
Max Drawdown Duration 161 days 08:00:00
Total Orders 64
Total Fees Paid 1.5745816676533666
Total Trades 32
Win Rate [%] 43.75
Best Trade [%] 3.751449350649389
Worst Trade [%] -1.237562637362644
Avg Winning Trade [%] 3.7514493506493647
Avg Losing Trade [%] -1.2375626373626212
Avg Winning Trade Duration 0 days 07:25:42.857142857
Avg Losing Trade Duration 0 days 05:33:20
Profit Factor 2.2048786581846382
Expectancy 1.057119604655485
Sharpe Ratio 1.6918653408907294
Calmar Ratio 3.413104569087299
Omega Ratio 1.9443266886186004
Sortino Ratio 3.964486532003033Visual statistics and SOL Chart:
Strategy: Mean Reversion - Tier 2 Direction: Short Only
Time frame: 4H and 1H as entry confirmation - Tier 2
Quantitative Stats - SOL Short Only - Tier 2
SOL
Start 2022-01-01 00:00:00+00:00
End 2023-04-20 12:00:00+00:00
Period 474 days 16:00:00
Start Value 100.0
Min Value 97.83002196010906
Max Value 122.74285734519718
End Value 119.71238781905714
Total Return [%] 19.71238781905714
Benchmark Return [%] -86.63430991881403
Total Time Exposure [%] 3.125
Max Gross Exposure [%] 101.85635494352117
Max Drawdown [%] 6.260529115636652
Max Drawdown Duration 89 days 04:00:00
Total Orders 22
Total Fees Paid 0.4790774961979561
Total Trades 11
Win Rate [%] 27.27272727272727
Best Trade [%] 9.781783783783782
Worst Trade [%] -1.2424426426426436
Avg Winning Trade [%] 9.781783783783782
Avg Losing Trade [%] -1.2424426426426314
Avg Winning Trade Duration 3 days 01:19:59.99
Avg Losing Trade Duration 0 days 17:00:00
Profit Factor 2.7769665762593347
Expectancy 1.7920352562779245
Sharpe Ratio 1.0602601901453077
Calmar Ratio 2.3700986034364324
Omega Ratio 1.375170944742756
Sortino Ratio 1.8791222850605571Visual statistics and SOL Chart:
Backtesting Results - Binance Coin
Asset: Binance Coin [BNB/USDT]
Strategy: Mean Reversion - Tier 2 Direction: Long Only
Time frame: 4H and 1H as entry confirmation - Tier 2
Quantitative Stats - BNB Long Only - Tier 2
BNB
Start 2022-01-01 00:00:00+00:00
End 2023-04-20 12:00:00+00:00
Period 474 days 16:00:00
Start Value 100.0
Min Value 98.6442919464781
Max Value 164.88511344467943
End Value 164.75535873087478
Total Return [%] 64.75535873087479
Benchmark Return [%] -36.26749550394928
Total Time Exposure [%] 1.9311797752808988
Max Gross Exposure [%] 100.0
Max Drawdown [%] 5.99459245470119
Max Drawdown Duration 122 days 16:00:00
Total Orders 28
Total Fees Paid 0.7030879141849811
Total Trades 14
Win Rate [%] 50.0
Best Trade [%] 8.74046133866138
Worst Trade [%] -1.2375626373626416
Avg Winning Trade [%] 8.74046133866136
Avg Losing Trade [%] -1.237562637362627
Avg Winning Trade Duration 0 days 20:34:17.142857142
Avg Losing Trade Duration 0 days 10:51:25.714285714
Profit Factor 7.0697375725012455
Expectancy 4.625382766491057
Sharpe Ratio 2.2631841554995678
Calmar Ratio 7.807883682903895
Omega Ratio 2.6826227082952383
Sortino Ratio 6.009964865773867Visual statistics and BNB Chart:
Strategy: Mean Reversion - Tier 2 Direction: Short Only
Time frame: 4H and 1H as entry confirmation - Tier 2
Quantitative Stats - BNB Short Only - Tier 2
BNB
Start 2022-01-01 00:00:00+00:00
End 2023-04-20 12:00:00+00:00
Period 474 days 16:00:00
Start Value 100.0
Min Value 98.50733635825132
Max Value 111.44796091544166
End Value 105.96003939591525
Total Return [%] 5.960039395915246
Benchmark Return [%] -36.26749550394928
Total Time Exposure [%] 6.144662921348314
Max Gross Exposure [%] 104.23828435516967
Max Drawdown [%] 11.611360540735875
Max Drawdown Duration 258 days 20:00:00
Total Orders 26
Total Fees Paid 0.5402946163470237
Total Trades 13
Win Rate [%] 30.76923076923077
Best Trade [%] 6.775176576576598
Worst Trade [%] -2.2446450450450466
Avg Winning Trade [%] 6.775176576576591
Avg Losing Trade [%] -2.2446450450450293
Avg Winning Trade Duration 4 days 01:00:00
Avg Losing Trade Duration 1 days 10:39:99
Profit Factor 1.2792151167085688
Expectancy 0.4584645689165565
Sharpe Ratio 0.39744367154842464
Calmar Ratio 0.3920495470979846
Omega Ratio 1.0942431608431202
Sortino Ratio 0.5875643579541538Visual statistics and BNB Chart:
Cumulative Performance
We will show the performance of our strategy when applying our Long-Only and Short-Only strategies in a compound approach. Also, we are adding the Tier 2 signals to the compound to show the final System performance.
How is our performance calculated?
Let's do an example with our ETH performance.
Firstly, we are plotting our Long-only and Short-only performance. And we are doing a compound of both performances. The result is the 'Long and Short cumulatives' metric.
Then, we are doing the same with the Tier 2 strategy. And the result is 'Long and Short + Tier 2 cumulatives' metric.
Finally, we are applying the cumulative maths to join both metrics and to get 'Long and Short Tier 1 + Tier 2 cumulatives'.
And this is the final result, showing all the metrics in the same plot:
Cumulative Performance - Results
Ethereum - System performance
Strategy | Tier 1 | Tier 1 + Tier 2 | Holding |
Returns | 293.23% | 479.22% | -46.78% |
Bitcoin - System performance
Strategy | Tier 1 | Tier 1 + Tier 2 | Holding |
Returns | 235.80% | 375.10% | -37.55% |
Solana - System performance
Strategy | Tier 1 | Tier 1 + Tier 2 | Holding |
Returns | 416.50% | 647.45% | -86.63% |
Binance Coin - System performance
Strategy | Tier 1 | Tier 1 + Tier 2 | Holding |
Returns | 242.80% | 394.53% | -36.27% |
Conclusion - The Power of Mean Reversion
The strategy was designed to take advantage of mid-term market inefficiencies and generate alpha by exploiting the tendency of prices to revert to their mean over time. By using a combination of technical indicators and quantitative models, we were able to identify the most promising trading opportunities and capture the majority of the price swings.
Our optimized mean reversion strategy using Tier 1 signals for AQTIS, generated a average cumulative return of 297.08%.
By adding Tier 2 signals, the average cumulative return increased to 474.08%, which outperformed the average benchmark holding return of -51.80%.
These returns are not effective returns as liquidity utilization and other factors might lower that, though we can conclude that a >300% strategy while market has been going down is an extremely good performance.
Moreover, our strategy demonstrated lower drawdowns and time exposure compared to the benchmark, indicating that it is more efficient and risk-averse. This gives us the confidence to expand our trading horizons and move on to breakout trading strategies.