A Commodity Futures Trend Strategy Combining MACD and Dow Theory

Summary

This research describes a systematic trend-following strategy for commodity futures. It first uses MACD crossings, filtered by cumulative distance relative to ATR, to classify rising and falling trends. It then revises those classifications when price extremes contradict the prior trend, using highs and lows to identify turning points. A Dow-style trend filter compares successive swing highs or lows, and trades are opened when this filter agrees with the revised MACD direction. The study also describes dynamic contract selection, volatility-based leverage, equal allocation across qualifying markets, and execution at a later five-minute VWAP.

The report presents historical backtest results from 2012 onward, including after-cost annualized return, Sharpe, and drawdown statistics, plus a comparison of a four-strategy CTA portfolio. It reports that combining the filters improved stability and that results were relatively insensitive to higher transaction costs in the tested range. These are historical findings, not guarantees. The authors note model and market-regime risks; performance also depends on contract-roll adjustments, liquidity filters, cost assumptions, and parameter choices.

Key ideas

• MACD crossings filtered by cumulative distance relative to ATR provide the initial trend classification.
• Price extremes can revise MACD trend states when they break levels from the preceding opposite trend.
• Successive highs and lows define a Dow-style trend filter that confirms trade entries when it agrees with the revised trend.
• The system selects eligible futures markets dynamically and adjusts leverage using ATR and realized volatility.
• Reported performance comes from historical backtests and depends on execution, costs, and continuous-contract data treatment.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.