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Apples
and Oranges Ken. Perhaps we can make a Nectarine! If you choose a basket of
stocks based on a given criteria then testing that basket over 10 years may well
hold no significance. Lets use a simple filter.
<SPAN
class=352231516-06022003>
<SPAN
class=352231516-06022003>C>10;
<SPAN
class=352231516-06022003>ma(v,50)>100000;
<SPAN
class=352231516-06022003>
Lets
consider that this is the criteria for our initial scan/selection. Where were
the conditions 1-2-5-10 years ago? If the conditions were not met just 1 year
ago would we have selected the stock for use in our system? If not then what is
the value of testing its results 2-5-10 years ago? With this approach you
would need to test that the conditions were in fact met X years ago then
test forward using your selection criteria to exit when necessary. This insures
that you would not be testing stocks that in RT you would have no intention of
trading.
<SPAN
class=352231516-06022003>
You
may wish to be careful with your Optimization. The challenge is to find a good
range of settings with out risking a curve fit, other wise the system will not
likely trade in the same manner as it tests.
Jayson
<FONT face=Tahoma
size=2>-----Original Message-----From: Ken Close
[mailto:closeks@xxxxxxxx]Sent: Thursday, February 06, 2003 11:10
AMTo: amibroker@xxxxxxxxxxxxxxxSubject: RE: Stock
Selection was: [amibroker] Re: NDX / QQQ - Can it be traded
?
<SPAN
>Jayson: your
advice is very good as well as comprehensive….I am still left unsettled as to my
approach.
<SPAN
>
<SPAN
>Lets say my
indicator/system is relatively short term in nature (lookbacks are somewhat
short). But, I want to employ some of the principles that Fred talked
about namely to be sure I optimize over a long period so various market
conditions are captured). [I know the argument that the nature of the
market changed on <SPAN
>3/1/2000<FONT
color=navy face=Arial size=2><SPAN
> and therefore
optimizations should be done after that point---I tend to want to be more
conservative and capture conditions on both sides of the peak]. Also, a
system that optimizes to good performance across that period seems a more
conservative and “robust” system. Witness Freds model of results in his
“spectacular” system—the equity curve kept going up and was smooth as the system
passed over 3/1/2000,
<SPAN
>
<SPAN
>As I said previously,
the optimization process is a lengthy one, so my approach is to do all of what
you said below in other scans (I pull out of TC2000 many of the conditions you
talk about below). This is my selection watchlist. Then, I do not
want to / can not take the time to run optimizations on 300 or 800 stocks so I
want a screening approach that has a good probability of finding stocks that
“resonate” with my system. Then, I will optimize these
stocks.
<SPAN
>
<SPAN
>I still have to try DTs
approach and probably alter it to conform a little more closely with my
system. Another approach is that if I have for example some trigger levels
in my model…..while these might optimize out to extremes for individual members
(think about RSI crossing 30 and 70), then my screening formula might set a
standard trigger of crossing 50 either way. Stocks that do “well”
against the 50/50 cross should do better when optimized to exact levels.
Stocks that do poorly against the 50/50 cross will still do poorly when
optimized. Don’t you think this is a correct way of looking at
it?
<SPAN
>
<SPAN
>Thanks for the
help. Any further comments on the above point?
<SPAN
>
<SPAN
>Ken
<SPAN
>
<SPAN
>-----Original
Message-----From: Jayson
[mailto:jcasavant@xxxxxxxxxxxx] <SPAN
>Sent: Thursday, February 06, 2003 10:24
AMTo:
amibroker@xxxxxxxxxxxxxxx<SPAN
>Subject: Stock Selection was: [amibroker]
Re: NDX / QQQ - Can it be traded ?
<SPAN
>
<SPAN
>Ken,
<SPAN
>I agree with Dimitris.
To select a basket of stocks you must first select an indicator or method/style
to trade them with. If your System/style is trend following then selecting
a basket that trends strongly (up or down) is critical. The indicators that
you read that tend to behave for trending conditions tend to fail
miserably in consolidations. The reverse is true for Rolling stocks. You can use
simple methods to begin the process such as 20 and 50 ma or slope of either.
Many use a floor of price such as c>10 or 15 or whatever. Volume is certainly
a major consideration since without liquidity the trade may be too challenging.
Volatility is also something to consider and to compare to your trading style.
Do you (can you) stomach the wild rides of stock like BEAS whose current ATR is
>7% of the current price (today moved nearly 8% on the open!!) or are you
more comfortable trading in the 3-5% range? Some like to add fundamental
criteria. Though not easily accomplished within AB there are data suppliers (QP
and TC2000 to name a few) that make such an initial screen very easy. Add your
own criteria to pare down your initial universe to a more workable number. A lot
of my work revolves around Sector Rotation. Determining where the money is
flowing in or out can help you to further refine your list. I think Ara is also
working in this area and may wish to add some of his thoughts.
<SPAN
>
<SPAN
>IMO this type of
selection process offers insight into what is most likely to work in the short
term. Testing a basket selection using this type of approach over a long period
(years) may not yield the desired results because the above criteria is
constantly in motion. However if you find that your system or approach tends to
work well under those conditions then choosing stocks that meet a given criteria
can yield impressive results. Consider this a method of optimizing. Instead of
optimizing the settings in a group of indicators so that the results test well
on a given set of stocks, over a given time frame you are instead
selecting a given universe that tends to do well with a given set if indicators.
<SPAN
>
<SPAN
>Regards,
<SPAN
>
<SPAN
>Jayson
<SPAN
>-----Original
Message-----From: DIMITRIS
TSOKAKIS <TSOKAKIS@xxxxxxxxx> [mailto:TSOKAKIS@xxxxxxxxx]<SPAN
>Sent: Thursday, February 06, 2003 5:50
AMTo:
amibroker@xxxxxxxxxxxxxxx<SPAN
>Subject: [amibroker] Re: NDX / QQQ - Can it
be traded ?
<SPAN
>Ken,<FONT face="Courier New"
size=2><FONT
face="Courier New">I will try to describe an objective method I often use to
select <FONT
face="Courier New">stocks.First of
all it depends on the indicator/system you use [since I have
not yet any ...holy grail
available]Let us suppose you want
to use the smoothed MeanRSI as a general <FONT
face="Courier New">indicator and you want to find "good"
applications.The DEMA(MeanRSI,45)
is a quite smooth and descriptive oscillator for <FONT
face="Courier New">^NDX market.If
you could buy at troughs and sell at peaks [with some zig period
around 20] you would have one of
the best performances for this
Market indicator. Does it suites to ANY stock? <FONT
face="Courier New">Certainly not.<FONT
face="Courier New">Run the <FONT
face="Courier New">f=Foreign("~SUMRSI","C")/Foreign("~COUNT","V");F=DEMA(F,45);z=20;<FONT
face="Courier New">Buy=TroughBars(f,z)==0;Sell=PeakBars(f,z)==0;Short=Sell;Cover=Buy;<FONT
face="Courier New">from, say, May1, 2000 till now and see the top gainers [NTAP,
JNPR, CIEN etc] and the top loosers
[FHCC, PDCO, ESRX etc]Since
Peak/Trough system is, as you know, unrealistic, try to replace
it with a closest
approximation.For smoothed
oscillators a 2-level system is really interesting.<FONT
face="Courier New">Try something like<FONT
face="Courier New">f=Foreign("~SUMRSI","C")/Foreign("~COUNT","V");<FONT
face="Courier New">X=45;//Optimize("X",45,35,50,5);<FONT
face="Courier New">F=DEMA(F,X);<FONT
face="Courier New">x1=Optimize("X1",42,38,44,1);//buy
level<FONT
face="Courier New">x2=Optimize("X2",56,55,60,1);//sell
level<FONT
face="Courier New">b1=Cross(f,x1);b2=Cross(x1,f);//no need to be fanatic with
the type of cross, the system knows
better<FONT
face="Courier New">s1=Cross(f,x2);s2=Cross(x2,f);<FONT
face="Courier New">nb=Optimize("nb",1,1,2,1);<FONT
face="Courier New">ns=Optimize("ns",1,1,2,1);<FONT
face="Courier New">nSH=Optimize("nSH",1,1,2,1);<FONT
face="Courier New">nCO=Optimize("nCO",2,1,2,1);<FONT
face="Courier New">Buy=IIf(nb==1,b1,b2);Sell=IIf(ns==1,s1,s2);<FONT
face="Courier New">Buy=ExRem(Buy,Sell);Sell=ExRem(Sell,Buy);<FONT
face="Courier New">Short=IIf(nSH==1,s1,s2);Cover=IIf(nCO==1,b1,b2);<FONT
face="Courier New">Short=ExRem(Short,Cover);Cover=ExRem(Cover,Short<FONT
face="Courier New">The good performance of JNPR in the theoretical Peak/Trough
project [around +1000% with 4/4/0
success] leaves room for good
optimization results[sometimes
better than the "ideal" model: there are MANY combinations
better than +1000% for
JNPR]The bad performance of ESRX
means that this stock need some other <FONT
face="Courier New">treatment. The
same optimization confirms the ESRX conclusion : It is better not
to trade this stock, since the most
profitable combinationis the 0
trades !Of course, this method is
not always accurate, but it gives good <FONT
face="Courier New">advices for the first selection.<FONT
face="Courier New">Besides that, I have met many times JNPR and RFMD in the
4-digit profitable stocks, my
experience is not great, I come back to basics <FONT
face="Courier New">[CSCO 70% and BEAS 30%] quickly, I feel more safe there, but,
it is a matter of taste [crude oil
and copper futures are also interesting, <FONT
face="Courier New">but let us talk for stocks in this
group]Does it help
?Dimitris <FONT
face="Courier New">--- In amibroker@xxxxxxxxxxxxxxx, "Ken Close"
<closeks@xxxx> wrote:> DT:
can you name some additional symbols, besides CSCO and BEAS,
with<FONT
face="Courier New">> which you have seen similar success. Thanks for
sharing your>
experience.>
> Ken<FONT
face="Courier New">> >
-----Original Message----->
From: DIMITRIS TSOKAKIS <TSOKAKIS@xxxx>
[mailto:TSOKAKIS@xxxx]>
> Sent: Tuesday, February 04,
2003 3:38 AM> To:
amibroker@xxxxxxxxxxxxxxx>
Subject: [amibroker] Re: NDX / QQQ - Can it be traded ?<FONT
face="Courier New">> >
Herman,> An annual system %
return 100%-120% is reasonable for many QQQ <FONT
face="Courier New">> systems from Jan2000 till now.<FONT
face="Courier New">> [Suppose always buy, sell, short, cover at +1Open, 0.5%
commission > and disabled
stops]> I would be surprised
indeed to see a double return. >
Above 200%-250% we may find some other popular stocks, but not
QQQ, <FONT
face="Courier New">> AFAIK.>
I come to believe there are some "functional" limitations for QQQ
> curve to exceed the annual
150%.> This conclusion is after
MANY tests for various trading systems, <FONT
face="Courier New">> optimised or not.<FONT
face="Courier New">> This is a reason I prefer CSCO or BEAS for example,
their curves are
> more "profitable" and more
flexible.> Of course I [almost]
always speak for medium speed systems [not <FONT
face="Courier New">more > than 6
trades per year]> It is more
than 8 months I did not trade a single QQQ share, I <FONT
face="Courier New">would > be
glad to come back to my old favorite, but for a better than 180%
> annual
return.> This is my experience,
I hope it hepls somehow...>
Dimitris > --- In
amibroker@xxxxxxxxxxxxxxx, "Herman van den Bergen" <FONT
face="Courier New">> <psytek@xxxx> wrote:<FONT
face="Courier New">> > Well Fred, the real values to use when estimating
whether a trading
>
system> > is practical have
never been answered on this list. You are a <FONT
face="Courier New">> trader, I am<FONT
face="Courier New">> > still mostly a tinkerer, so I respect your opinion.
As a rule I >
discard> > systems that do
not survive my "acid test" of 0.5%. This allows <FONT
face="Courier New">my > to
fumble> > placing the trade,
allows for some over-optimization, slippage, <FONT
face="Courier New">> slow data,<FONT
face="Courier New">> > and even for some
commission.> >
> > There ought to be a
formula based on parameters like volume, <FONT
face="Courier New">> volatility and<FONT
face="Courier New">> > price, to gives us a working estimate. Places that
have lots of >
trading> > histories could
crunch that out in seconds. Would be interesting <FONT
face="Courier New">to > have
a> > poll on
this.> >
> >
Herman.> >
> > -----Original
Message-----> >
From: Fred <fctonetti@xxxx>
[mailto:fctonetti@xxxx]>
> Sent: Monday, February 03, 2003 4:03
PM> > To:
amibroker@xxxxxxxxxxxxxxx>
> Subject: [amibroker] Re: NDX / QQQ - Can it be traded
?> >
> > <FONT
face="Courier New">> > Herman,<FONT
face="Courier New">> > >
> Let's use today as an example and assume you are going to trade
> QQQ<FONT
face="Courier New">> > after you make a decision on where NDX
closes ...> >
> > At 4:00 PM
QQQ was as at 24.50> >
> > Between there
and 4:15 QQQ got as high as 24.54 and as low as <FONT
face="Courier New">> 24.48>
> or 0.16% over and 0.08% under as
EXTREMES.> >
> >
Thomas,> >
> > I'm not quite
ready to toss it on the scrap heap yet. I just <FONT
face="Courier New">> started>
> playing with it.<FONT
face="Courier New">> > >
> > >
> > <FONT
face="Courier New">> >
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