@CavaliereVerde I don't agree with the article I think that the article may be using a simple ECT implementation and it can be improved to make it profitable. I have to admit that some of my tests doesn’t work with ECT, so may be there is some overfitting here, but I do equity curve trading and usually the drawdown is reduced.
Instead of a simple moving average, I use a LowPass filter that responds faster. Also, the problem appears when the system goes sideways, there are loses due to enter/exit trading. So it is important to check the LowPass curve to check if it is falling or not. If LowPass curve is flat, ECT shouldn’t be done. If LowPass curve is falling, then I’d say it is safe to stop trading. So, when the curve starts to go again up, as we’re in a valley (LowPass not falling) we’ll be in the market. In this way we won’t miss the initial run-up when the curve starts to go up.
I attach two (small backtest duration) examples. The first one without ECT gets a 69% return, and the second one using ECT gets a 206%. You can see how the equity curve is clearly better in the ECT system, and it stops the bleeding in bear markets. I designed this for crypto (as you can guess for the returns), but probably it will work also in other markets.