Use the 5 or 30 minute periodicity continuous data available here, or any of the EOD data, keeping in mind that volume data is required. The AFL is set to Futures Mode and you will need to change that to back test using share data.
The 5 and 30 minute back tests were done using data from 1 January 2010 up to and including 31 March 2013. To save processing time the optimizations were only done with 30 minute data, but the AFL can be used on any periodicity.
Initial capital is set to R 100,000, margin is at R 20,000 and only 1 ALSI contract is traded throughout the back test. No allowances for trade commissions or other costs are included.
Trading Tactic 1 - Back Test
In this case the most basic
Volume Zone Oscillator
trading tactic was used: Trading Tactic 1:
- Go short if the VZO crosses +40 (VHigh) from above.
- Go long if the VZO crosses -40 (VLow) from below.
- Traded as an always-in system, alternating long and short and staying in the market overnight.
- Do not use profit or loss stops.
30 Minute Periodicity Results - Back Test
5 Minute Periodicity Results - Back Test
Trading Tactic 1 - Optimization
The results for the standard
Volume Zone Oscillator
tactic are dismal. An optimization follows to see if improvements to the parameters can be made. All the optimization code is in the Amibroker AFL, please run your own optimization before deciding on a set of parameters to use.
The results below are only a summary of what can be achieved. The best performing set of parameters are shown rated by either the highest net profit or the best CAR/MDD (Compound Annual Return / Maximum System Drawdown). Also included is a third option set to consider.
30 Minute Periodicity Results - Optimization
As you can see the system performance using the 30 minute periodicity can be so significantly improved that the system becomes viable for use. The maximum drawdowns are still large and further testing is needed for better risk control. The low number of trades is a good feature.
Trading Tactic 2 - Optimization
For the second test a Moving Average of the VZO was used instead of the actual VZO, all other options remain static. The AFL includes Buy/Sell options for both tactics as well as profit and loss stop options.
30 Minute Periodicity Results - Optimization
There are many other options for using the Volume Zone Oscillator. Experiment with the provided AFL and Swordfish indicator to find a system that suits your trading profile. Back test results may not be repeatable in live trading, always test your trading tactic thoroughly before committing trading capital.
