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Strategies / Mean reversion / Winning Market Declines

Winning Market Declines: Selling Bounces Below the 200 SMA

When price is below its 200 SMA and posts three higher closes in a row, the system sells short into the bounce. It covers as soon as a close drops below the 5 SMA.

Mean reversionShort onlySwingEUR/USD4 hours
1.33Profit factor
52,485Net profit USD
66.46%Win rate
1,130Trades
-8,260Max drawdown
46.45Avg trade

Best run of 8. EUR/USD, 4 hours, spread 1, from run pf:2026-09-24-EURUSD-4h.tsv:1.

Entry rules, short

  1. Close is below the 200 SMA

Exit rules

  2. No stop loss or target

Test conditions

PeriodUp to 2026-09-25
InstrumentEUR/USD, 4 hours
Spread1 points
Contracts1
Starting capital1,000,000
CostsSpread only. Commissions and overnight financing are not included.
BarsUp to 200,000 bars, fewer where the instrument has less history
Last tested2026-09-25
Parameters (3)
positionSize
Contracts per trade
1
trendPeriod
Short only below this moving average
200
exitPeriod
Cover when price closes below this moving average
5

Every run

Markets and timeframes tested

MarketTimeframePFTradesWin %NetMax DD
EUR/USDBest run4 hours1.33 1,13066.4652,485 USD-8,260
EUR/USD1 hour1.08 4,27264.9125,321 USD-34,246
USD/JPYDailyn/a 35066.29344,360 JPY-213,700
GBP/USDDailyn/a 33865.096,604 USD-1,676
GBP/USD4 hoursn/a 1,10667.543,642 USD-1,461
DAX 40Dailyn/a 27855.403,475 EUR-2,140
US Crude OilDailyn/a 25862.402,317 EUR-2,106
FTSE 100Dailyn/a 20362.071,946 EUR-1,069

Charts

Results by run

Above 1.0 made money, below 1.0 lost money.

The code

ProBuilder, rewritten to house standard

// ============================================================
// Winning Market Declines
// ProRealAlgos Strategy Library  |  prorealalgos.com
// Type: Mean reversion
// Direction: Short only
// Timeframe tested: 4 hours
// ============================================================

// --- Settings ---
DEFPARAM CumulateOrders = false

// --- Parameters ---
positionSize = 1          // contracts per trade
trendPeriod = 200         // short only below this moving average
exitPeriod = 5            // cover when price closes below this moving average

// --- Indicators ---
trendMA = Average[trendPeriod](close)
exitMA = Average[exitPeriod](close)
threeHigherCloses = close > close[1] AND close[1] > close[2] AND close[2] > close[3]

14 more lines: the entry and exit rules.

Setup

How to load it

  1. Copy the code with the copy button on the code block.
  2. In ProRealTime, open a chart of the instrument and timeframe you want to test, then open ProOrder > New trading system and choose "Create with programming".
  3. Paste the code, give the system a name and save it.
  4. Click "Backtest", set your own spread and position size, and run it before you consider trading it live.

Indicators used

SMA
Read this firstKnown weaknesses4 points
  • There is no stop loss, so a bounce that becomes a new uptrend is held until price closes below the 5 SMA.
  • EUR/USD 1 hour had a USD 34,246.00 drawdown against USD 25,321.00 profit, worse than its 4 hour result.
  • The profit factor of 1.33 on the best run is a modest edge, and most other runs have no profit factor recorded.
  • It only trades short, so it sits idle in long uptrends.

Questions

About this strategy

Can it be automated in ProOrder?

Yes, it is a short only system with 1 contract per trade. The rewritten code has not been compile checked.

How did it do on other markets?

All 7 other runs were profitable. GBP/USD Daily made USD 6,604.20 and DAX 40 Daily EUR 3,475.30.

What drawdown comes with 1 contract?

On EUR/USD 4 hours the maximum drawdown was USD 8,260.00 against USD 52,485.00 net profit.

Why the 4 hour chart?

It gives more setups than daily bars while filtering out much of the 1 hour noise. The 4 hour run had a better profit factor than the 1 hour run.

Related

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Slow MACD Slope

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RSI Momentum Thrust

A similar profit factor.

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Past backtest results do not guarantee future results. This is not financial advice. Curated and maintained by ProRealAlgos. ProRealTime™ is a trademark of ProRealTime SAS. prorealalgos.comStatsDocs