I have been working on a couple of automated strategies so have been staring at a lot on cumulative Profit/Loss graphs lately.
It occurred to me that the P&L plots often seem to follow trends. So I was thinking maybe one can use trendlines to know when an automated strategy is not working and should be turned off.
This kind of makes sense to me because strategies will stop working when the market goes into a phase where it is not compatible with the strategy. A mean reversion strategy in a strongly trending market for example.
Has anyone considered this or has any opinions?
I have attached a P&L graph for one of the strategies I am working on as an example. One would stop running the strategy in the middle of March and start it up again at the end of april.
Just a thought, I am interested what others think, does it seem plausible or am I way off base?