ADX and Parabolic SAR: does it work?
The ADX is meant to say how strong a trend is, and Parabolic SAR is meant to say when it has turned. Both are default choices in trend-following tutorials.
The rule we tested. Daily crypto bars, long and short, as implemented. The ADX rule opens a position on a +DI/-DI cross while the ADX(14) reads above 25 and keeps it only while the ADX stays above 25 and the DI order has not flipped. Any ADX reading of 25 or below returns it to flat, so the commonly taught exit below 20 never comes into play (the setting exists, but the 25 test fires first). The other rule follows each Parabolic SAR flip with the standard 0.02 start, 0.02 step and 0.2 maximum.
- ADX(14)>25 filter with +DI/-DI cross (18 crypto pairs (BTCUSDT, BNBUSDT, XRPUSDT, ADAUSDT, …)), 2017-08-18 to 2025-03-14, costs 0.10%–0.17% per side: −70.6 pts/yr vs the benchmark across 452 completed trades, unadjusted p=1.000, BH-adjusted q=1.000: did not beat the benchmark.
- Parabolic SAR flip trend-follow (18 crypto pairs (BTCUSDT, BNBUSDT, XRPUSDT, ADAUSDT, …)), 2017-08-18 to 2025-03-14, costs 0.10%–0.17% per side: −51.5 pts/yr vs the benchmark across 3,027 completed trades, unadjusted p=1.000, BH-adjusted q=1.000: did not beat the benchmark.
These versions did not pass these tests. crypto pairs −70.6 pts/yr vs the benchmark (unadjusted p=1.000, BH-adjusted q=1.000); crypto pairs −51.5 pts/yr vs the benchmark (unadjusted p=1.000, BH-adjusted q=1.000). None cleared Tickfloor's Benjamini-Hochberg q<0.10 bar once weighed against every other rule tested alongside it. This describes the tested implementations, the costs and the benchmark stated here, not every version of the rule. These are historical diagnostics, not validation under Testing Standard v2: the backtest harness predates that standard and has not been re-run to meet it.
This is one line in a wider check: Tickfloor's research desk has run 517 strategies, most of them against an equal-weight benchmark of the same assets rebalanced daily that pays no costs (the strategies pay theirs), and after correcting for how many were tested (Benjamini-Hochberg, 598 tests), 0 passed. That does not prove no strategy works, and it says nothing about untested versions of a rule. These are historical diagnostics, not validation under Testing Standard v2: the backtest harness predates that standard and has not been re-run to meet it.
General information only. It doesn't consider your objectives, finances or needs. Tickfloor holds no financial services licence and never places trades.
Do ADX and Parabolic SAR strategies work?
These versions did not pass these tests. crypto pairs −70.6 pts/yr vs the benchmark (unadjusted p=1.000, BH-adjusted q=1.000); crypto pairs −51.5 pts/yr vs the benchmark (unadjusted p=1.000, BH-adjusted q=1.000). None cleared Tickfloor's Benjamini-Hochberg q<0.10 bar once weighed against every other rule tested alongside it. This describes the tested implementations, the costs and the benchmark stated here, not every version of the rule. These are historical diagnostics, not validation under Testing Standard v2: the backtest harness predates that standard and has not been re-run to meet it.
What exact rule did Tickfloor test?
Daily crypto bars, long and short, as implemented. The ADX rule opens a position on a +DI/-DI cross while the ADX(14) reads above 25 and keeps it only while the ADX stays above 25 and the DI order has not flipped. Any ADX reading of 25 or below returns it to flat, so the commonly taught exit below 20 never comes into play (the setting exists, but the 25 test fires first). The other rule follows each Parabolic SAR flip with the standard 0.02 start, 0.02 step and 0.2 maximum.
Is this financial advice?
No. This measures a publicly claimed strategy rule, not a recommendation. General information only, not personal advice.
See the full numbers on the Social media chart patterns, Trend following family pages, or the full method and every result.