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1987issue C021-5

Relative strength evaluation under competing optimization criteria

A nearby Treasury bond futures simulation from December 2, 1980 through December 1, 1985 scored relative strength, momentum, and dual moving-average procedures against five separate objectives. Rules chosen for average winning trade or average losing trade produced only a few completed turns.

  • System optimization scores one full trading procedure against a single stated objective and keeps only the parameter set that ranks first on that objective.
  • When the search targeted average winning trade, a 16-day relative strength index with a buy level of 24 and a sell level of 96 produced only three trades in the five-year sample.
  • Parameter sets chosen to minimize average losing trade for a 6-day momentum rule, the high-low oscillator, and a 6-day relative strength index each produced only a few trades over the same window.
  • Editorial view: treat the evaluation as a test of the objective that selected the parameters, and publish that objective, the search grid, and the trade count beside any reported result.
Entries in this reading3 entries
System optimization85 readingsCurrent trackMomentum strategy103 readingsRelative Strength Index186 readings

What the evaluation tested

The archive workflow asked whether a relative strength index or a related momentum procedure still looked active after system optimization scored it against more than one objective. The relative strength index was a bounded oscillator built from ordered closes over a chosen lookback and then turned into long, short, or flat signals with separate buy and sell thresholds. The momentum strategy was a complete entry, exit, and abstention procedure that compared a lookback price change with buy and sell thresholds and held the resulting position for the system horizon. Dual moving-average rules were enumerated on the same sample so each indicator procedure could be optimized separately.

How the bond series was built

The evaluation simulated nearby long-term U.S. Treasury Bond futures from December 2, 1980 through December 1, 1985. The nearby-contract-roll stayed on the front futures listing and switched on the first trading day of the expiration month. Simulated fills were taken at the open, and each completed turn was charged a 100-dollar commission. Because of thirty-seconds-encoding, prices quoted in 32nds were converted to decimals before indicator and trade calculations so a one-tick advance would not be treated as a large noncontiguous jump.

The search grids

Dual moving-average rules were enumerated over 266 combinations by stepping the short average from 2 to 15 days by ones and the long average from 6 to 60 days by threes. Momentum rules were enumerated over 5,000 combinations by stepping lookback days from 6 to 20 by twos, raising the sell threshold from 100 to 604 by 21s, and lowering the buy threshold from -100 to -604 by 21s.

Five separate objectives

Each indicator procedure was optimized separately against five criteria: total profit, short-side profit, long-side profit, average winning trade, and average losing trade. System optimization scored one full trading procedure against a stated objective and kept the parameter set that ranked first on that objective alone. The optimization criterion was that single statistic.

Trade counts under two criteria

When the search targeted average winning trade, a 16-day relative strength index with a buy level of 24 and a sell level of 96 produced only three trades in the five-year sample. Parameter sets chosen to minimize average losing trade for a 6-day momentum rule, the high-low oscillator, and a 6-day relative strength index each produced only a few trades over the five-year window.

Trade counts when T-bond parameters were chosen to minimize average loss

Optimizing the 1980–85 nearby T-bond test for the smallest average losing trade left momentum, the high-low oscillator, and RSI almost idle (five, two, and one completed turns, all winners), while the dual moving-average and %R rules stayed in nearly every session and accumulated large losing-trade counts. The bars are the completed, winning, and losing trade totals printed in the source table for that single objective.
Optimizing the 1980–85 nearby T-bond test for the smallest average losing trade left momentum, the high-low oscillator, and RSI almost idle (five, two, and one completed turns, all winners), while the dual moving-average and %R rules stayed in nearly every session and accumulated large losing-trade counts. The bars are the completed, winning, and losing trade totals printed in the source table for that single objective.U.S. Treasury Bond futures · nearby daily · 1980-12-02T00:00:00.000Z to 1985-12-01T00:00:00.000Z

Fills were at the open with a $100 round-turn commission on the nearby Chicago Board of Trade T-bond contract, rolled on the first session of the expiration month. Under this objective a 6-day momentum, the high-low oscillator, and a 6-day RSI each recorded only winning trades.

Educational research material, not investment advice. Historical source context does not establish present-day performance.
2 of 51 in the Momentum strategy track
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All readings on this track · 51 readings
  1. 1984Half-cycle differencing for momentum signals
  2. 1987Relative strength evaluation under competing optimization criteria
  3. 1988Weekly MACD as a two-clock momentum confirmation stack
  4. 1989Equal-weight zero-cross from smoothed spreads
  5. 1989Testing relative-strength-index reversal rules against trend continuation
  6. 1989Smoothed three-day futures filter for index option bounces
  7. 1989Cycle-length windows for momentum, Relative Strength Index, and stochastic construction
  8. 1991Filtered rally magnitude as a bull-regime breakout
  9. 1992Constructing true strength from double-smoothed momentum
  10. 1992Constructing a double-smoothed true strength index
  11. 1993When momentum structure and breadth break together
  12. 1993Constructing double-smoothed range and momentum oscillators
  13. 1993Constructing a two-parameter relative momentum index
  14. 1993Building a bounded momentum oscillator with RSI smoothing
  15. 1993Two-speed oscillators with divergence and trendline gates
  16. 1993Constructing a relative momentum index from the relative strength index
  17. 1994Constructing daily advance-decline breadth tools
  18. 1994Building a composite regime score from monetary climate and weekly trend
  19. 1994Averaging Relative Strength Index and the stochastic oscillator into one reversal oscillator
  20. 1995Dividend-yield regression as a hold versus momentum gate
  21. 1996Jump and hold filters for long-term Treasury yield direction
  22. 1997Constructing extendedness from a 10 percent swing filter
  23. 1997A range-expansion oscillator that can refuse its own stretch
  24. 1997RSI trend permission and Fibonacci pullback rules
  25. 1998Nested midpoint construction for a range-normalized oscillator
  26. 1999Evaluating Relative Strength Index momentum with zero-line and threshold rules
  27. 1999Treat RSI and momentum as three mechanical procedures
  28. 2000Thrust strength figure from moving-average swings
  29. 2001Constructing a non-range-bound balance of market power score
  30. 2004Cleaned breadth oscillator and new-high divergence: a swing-market case file
  31. 2004Evaluating advance-issues-momentum on a fixed-symbol-basket
  32. 2004Constructing a trend filter from two adjacent high-low windows
  33. 2006A dollar-versus-commodity extreme as a regime case
  34. 2008Zero-centered stochastic bands and bracket stops
  35. 2012Evaluating engulfing momentum across hold windows
  36. 2012Staged stops as one mechanical entry and exit procedure
  37. 2012Stacking a relative-strength-index forecast, a trend filter, and long-only momentum
  38. 2013Constructing fair-value filters from averages and momentum
  39. 2014Constructing a multi-window slope divergence entry
  40. 2015Bandedge trend filter construction with inverse crossover rules
  41. 2017Opposite rules for index price and volatility momentum
  42. 2018A three-state overlay that colors a trend only after the line clears the bar
  43. 2018Half-cycle relative-strength index with a Fisher map for cyclic reversals
  44. 2018Emotion as a rule input when momentum breaks
  45. 2018Two-bar body expansion as a momentum breakout construction
  46. 2019Pair a two-day high breakout with a volume-weighted exit on the same chart
  47. 2020Building reflex and trendflex cross and extreme entry rules
  48. 2020Construct a dual-series price momentum oscillator overlay
  49. 2020A multi-timeframe stochastic as a panel of weekly voters
  50. 2020Centerline crossovers that compare index momentums
  51. 2020Multi-timeframe stochastic voting as one mechanical rule
By fieldIndicators and filters682 readingsBy year198721 readings
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