A Volatility Strategy Using ATR Bands (+Backtest)

Here you can find the strategy: https://www.quantifiedstrategies.com/single-strategies-order/#Strategy_1_Swing_Trade_NasdaqS_P_500_volatility_bands

In this video, we'll be discussing an incredible volatility strategy that's been around for almost a decade and is still going strong - the ATR bands strategy. This strategy works well with various ETFs and futures contracts, and we'll be showing you how it performs and which indexes it works best on.

Historically, this strategy has performed exceptionally well on Nasdaq 100, and we'll be starting by taking a closer look at how it's performed on this index. The backtests equity curve for this strategy has a steady upward slope without any major setbacks, and the drawdowns have been moderate. The maximum drawdown occurred during the financial crisis in 2008, where it was down 18% at the most. Avoiding drawdowns is essential to reduce the likelihood of selling into a panic.

Despite only trading an average of 8 times per year, this strategy has still managed to beat buy and hold handily with 13% annual returns. This is because a trade typically lasts less than five days, and it's only invested 11% of the time, resulting in a risk-adjusted return of almost 120%. All years except a small loss in 2005 have been positive, and even in bear markets, the strategy performs just as well as in a bull market.

This trading strategy works on other indexes as well. For example, on S&P 500, the average gain is not as good as Nasdaq 100, but the backtest show that it's still impressive with a 1% gain per trade. On XLP, the ETF that tracks consumer staples, the equity curve rises linearly and has only small and short setbacks.

It's essential to keep in mind that slippage and commissions are not included in any of our backtests, but they are minimal with so few trades. If you're interested in learning more about this strategy, we have hundreds of free strategies on our website. However, we only reveal this particular strategy for a moderate fee, as we trade it ourselves and believe it's worth paying for. The strategy has three trading rules for when to buy, including one volatility rule, one price action rule, and one trend filter rule. We use one trading rule for when to sell.

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