ScaleTrade just launched V1.6 of their flagship algorithm, and it's beating the market by 11.91%. Here's all you need to know.
If you’re unfamiliar with the concept of algo trading, check out our other story, ‘Breaking Down Your Objections to Trading Algorithms.’ If you don’t want to do that, just know that trading algorithms are computer programs that use math and statistics to tell you exactly when to buy, short, or exit a stock trade. Pretty cool, right?
ScaleTrade, a trading technology startup, trying to pioneer the Quantitative Trading as a Service (QTaaS) industry. Learn more about that here.
The ScaleTrade team just launched V1.6 of their flagship ScaleTrade algorithm. The company also builds highly customized trading tools for professional-level traders.
Their most recent algorithm has been forward testing (fancy way to say trading live, instead of just a backtest) from January 6th to January 27th, 2023.
ScaleTrade’s V1.6 algorithm generated a +16.42% return vs. the S&P 500’s +4.51% return.
Drawdown has also been minimal, staying at less than 1.2% maximum drawdown (a fancy way of saying the furthest it has fallen at once).
Previous versions of the ScaleTrade algorithm have also beaten the market over more extended periods of time and had strong total profit, win ratios, and profit factors. However, sometimes we observed sharp drawdowns and gap downs as a result of the algorithm’s logic.
The primary focus of V1.6 was to help limit larger drawdowns in the performance by making entries and exits more reactive and fast-acting.
As a result, the backtest statistics improved significantly with reduced drawdowns and maintained the strong total profit, win ratios, and profit factors from V1.5.
For our forward test, we traded AMZN, AAPL, NVDA, and TGT, entering with 25% of the total cash value (starting at $100k) for each trade.
I know what you’re thinking: Yes, Jan 6 - Jan 27 is not a very long forward testing window. We will continue to forward test and monitor V1.6’s performance.
We have also run backtests for 6-year, 2-year, and 1-year periods on the four stocks we’re trading which can be found here.
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