Have you ever heard about it?
Probably not and I am not surprised as it is not well known method, despite the fact it is the method that is at least partially uses by every algorithm trader. Its testing does not even have to be demanding.
Let’s look at it as it is good to know what’s going on and what it can bring to us.
What is a meta strategy?
We all know what a strategy is – it’s a description of how we enter the trade, with what kind of money management, etc. Meta strategy is basically similar, but we do not trade certain currency pair, eg EUR/USD or GBP/USD, but the strategy itself.
Meta strategy is therefore a strategy for trading strategies.
But it’s used also by big companies which are dealing with algorithm trading and it’s a very interesting topic that brings results.
How can a meta strategy look like?
There are several models how to work with them. One of the more frequent one is that we trade with the strategy only if the equity goes from bellow through the lower Bollinger band and once it crosses the upper Bollinger band, we are terminating the trading.
Another method that most of us are partially using is to turn off the strategy when it goes through the max drawdown. Another method is for example to not-trade if the equity is below the lower Bollinger band.
The last mentioned filter does not necessarily have to improve the results, as they can be practically the same. But its advantage is that it protects us from major draw downs.
How to test a meta strategy?
There are several options. Some are more complex, such as excel, matlab, etc. Some are easier, like QuantAnalyzer software, where you have the Equity control function even in the free version.
Just upload a strategy (MT4 backtest, Tradestation, StrategyQuant or from other platforms) and you can work with them. It contains 5 models and if you are missing something, you can program it as the QuantAnalyzer is an open platform.
How looks the strategy changed so it does not trade if the equity goes below the lower Bollinger Band?
If you want to try the free version of QuantAnalyzer, you can register here.