Channel Backtest Example -- China A-Shares ETF ASHR

Apr 05, 2019 in Backtest | Channel

Channels are a good, simple supplement that offer an ABSOLUTE look and can be used in conjunction with other RELATIVE studies. Wider channels give your trade room to work. Tighter channels will cause some whipsaw losses. If you are bullish on an ETF based on a range of factors, then running a skewed channel might be a good idea --- ie, run the exit (Sell channel) at 0% but a buy at just 60%... This allows you to get in quickly while still offering room for the investment to work. This study uses a simple 67% / 33% buy/sell trigger with a ~6 month lookback (26-weeks means you will trade usually on a Friday -- if holiday then Thursday). Entries and exits only occur on the close of the last day of the week (Fridays) allowing for easy monitoring. Note that this look has trades that have lasted a while. This is because the sell rules will allow a fair bit of movement before exiting.

Finally, because a channel uses a percentage,  it may be easier to see the trend in the ETF than othewise.   An uptrend is defined by higher lows and higher highs.    A downtrend is defined by lower highs and lower lows.   The channel is a another tool to have to see and understand what is happening in the market.

 

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