Sample strategy #1 – Short Term Reversal with Futures
Recent academic research shows that short term reversal works not only in equity market but it is also applicable with futures. Research also suggests that trading volume contains information about future market movements. This "forecastability" can be enhanced with open interest as it provides an additional measure of trading activity. Therefore this contrarian strategy is most profitable if it is implemented on high-volume low-open interest contracts.
The source paper written by Wang and Yu can be found on the following web page: http://tcnh.ntt.edu.vn/images/futures/6.pdf
Indicative performance is close to 30%. Estimated volatility isn't extra low – around 31%, but this strategy still offers an atractive Sharpe Ratio of 0.82.
Our strategy overview with extracted trading rules and hypothetical performance chart with probability bands can be accessed here: http://quantpedia.com/beta/Screener/Details/71
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