This indicator was introduced in the article “The CAM Indicator For Trends And Countertrends” by Barbara Star in Technical Analysis of Stocks & Commodities (January 2018). The indicator is based on two well-known indicators: MACD (standard input) and the 10-day ADX.
The CAM indicator consists of four patterns:
CAM-UP: both ADX and MACD increase (i.e. an upward moving market)
CAM-PB: both ADX and MACD decrease (i.e. a possible pullback)
CAM-DN: ADX increases and MACD decreases (i.e. a downward moving market)
CAM-CT: ADX decreases and MACD increases (i.e. a counter-trend)
In this way, we can imagine four different entry strategies that a trader may choose. The exit is not specified but according to some backtesting results shown also in the same journal, a good performance is obtained if trades are closed after 12 trading days. I did the same in my backtesting. Of course, this is not an optimal solution but will still illustrate the concept.
Many traders may expect the first patter, i.e. CAM-UP, to result in the best performance. So looking at first at the stocks from S&P 500 index:
| Profit factor | 1.12 |
| Max. drawdown | -54.82% |
| Number of trades | 60743 |
| Percent profitable | 54.63% |
| Average trade | 0.48% |
| Ratio win/loss | 0.96 |
| Average time in market | 20 days |
And now, for stocks from Russell 3000 index:
| Profit factor | 1.05 |
| Max. drawdown | -54.94% |
| Number of trades | 163395 |
| Percent profitable | 53.04% |
| Average trade | 0.35% |
| Ratio win/loss | 0.96 |
| Average time in market | 20 days |
It is difficult to say that the results are good. For instance, the percentage of the profitable trades is only slightly better than 50%. Considering the fact that the win/loss ratio is actually less than 1.0, this indicates a rather poor performance. This is also confirmed by the high maximum drawdown.
Therefore I tried also the other parameters. It is interesting to note that according to my backtesting, positive results are obtained when using the third parameter, i.e. CAM-DN. This can be illustrated in the figure:
Here are the results (using NinjaTrader software using data from Kinetick) when backtesting stocks from S&P 500 index:
| Profit factor | 1.21 |
| Max. drawdown | -54.64% |
| Number of trades | 57033 |
| Percent profitable | 55.28% |
| Average trade | 0.68% |
| Ratio win/loss | 1.01 |
| Average time in market | 20 days |
And, the same when using stocks from Russell 3000 index:
| Profit factor | 1.14 |
| Max. drawdown | -53.47% |
| Number of trade | 150726 |
| Percent profitable | 54.15% |
| Average trade | 0.59% |
| Ratio win/loss | 0.99 |
| Average time in market | 20 days |
So the results are not so brilliant (see especially the very high maximum drawdown) but at least the strategy is easy to use in practice.
