The rules
Trade each pair in the direction of its six-month move, inverse-volatility weighted.
- Universe
- EURUSD, GBPUSD, AUDUSD and NZDUSD
- Bars
- daily
- Position size
- Inverse-vol
- Rebalance
- month-end
Results
| Measure | Orbital re-test | Published | SPY, same days |
|---|---|---|---|
| Window | Not re-tested | 2010-2025 | — |
| Total return | — | −27.28% | — |
| CAGR | — | −1.97% | — |
| Sharpe | — | −0.59 | — |
| Discounted Sharpe | — | — | — |
| Max drawdown | — | −29.4% | — |
| Win rate | — | — | — |
| Profit factor | — | — | — |
| Trades | — | — | — |
Rebuild it in Orbital
Paste this into Orbital Chat. The Strategy Developer builds the workflow and asks before it runs any backtest.
Closest Orbital version: the currency ETFs FXE, FXB and FXA stand in for EURUSD, GBPUSD and AUDUSD, and NZDUSD is dropped because no US-listed ETF tracks it. Orbital sizes each position once, at entry, from that ETF's own volatility, so the total floats instead of staying at 100%, and every position is closed each month and reopened a day later at its new size.
Trade the currency ETFs FXE, FXB and FXA on daily bars. On the first trading day of each month, close every position, and the next day go long each ETF whose 126-day return is positive and short each whose return is negative. Size each position by its annualized volatility, the standard deviation of its last 63 daily returns times the square root of 252: 25% of equity for an ETF at 10% volatility, scaled inversely (12.5% at 20%, 50% at 5%), between 1% and 100% of equity. Use a margin account so it can sell short and hold more than 100% in total. Backtest the last 10 years with $100,000.
Why it was not re-tested
Spot FX. Orbital's backtester covers US stocks and ETFs.
Sources