If you trade using quantified, rules-based strategies, you may have noticed that your system performance fluctuates over time. Perhaps you’ve even analyzed those fluctuations to see if there’s any correlation between the strategy’s performance and certain market factors.

The fact is that many strategies perform differently depending on the market regime. One solution to that problem is to simply have a market “circuit breaker” that turns the strategy off at certain times. For example, you might have a rule that says, “only take new stock trades when the S&P 500 closes above its 200-day moving average”. Sometimes, that may be all you need.

But some strategies can benefit from adjusting the rules based on something more elaborate than a simple on/off switch. For example, a mean reversion strategy might perform better if you use a relatively small entry limit when the market is in a non-volatile up trend, but a larger entry limit when the market is in a volatile down trend. Building strategies that adapt to different market regimes is the focus of our Adaptive Trading Strategies course. After completing this course, you can:

The Adaptive Trading Strategies course is brought to you by Matt Radtke, who also authored the Custom Back Tester and Rotational courses available on AlvarezQuantTrading. Matt and I have been collaborating for nearly a decade, and his training courses are top-notch.

If you’ve ever considered building strategies that can adapt to market conditions in real time, I strongly encourage you to check out this course so that you can learn the techniques you’ll need to make the task easier.

As always, helpful code templates will serve as an excellent guide whether you’re building from scratch or modifying existing AFL.

Good quant trading,

Cesar