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If we look the last 15 dramatic CSCO minutes, it was easy to jump
from 13.32 to 13.20. Since it is ~1%, it is hard to loose 1% when the
whole target is ~5%. If you accumulate such percentages in a longer
period [more than 50 trades], Sell at close may give quite false
backtesting indications.
DT
--- In amibroker@xxxxxxxxxxxxxxx, "DIMITRIS TSOKAKIS <TSOKAKIS@xxxx>"
<TSOKAKIS@xxxx> wrote:
> Sometimes it is easy to sell at close.
> Look for example at yesterday´s CSCO. The more you could wait, the
> best for the final price.
> But, it is not always. We often see a quick sell-off the last 10-15
> min and we loose the high price. In this case, waiting for a come
> back is catastrophic, especially if your target is some 5%. The bad
> news is that the next day open may be a gap down...
> After hours is always better, when available.
> DT
> --- In amibroker@xxxxxxxxxxxxxxx, Yuki Taga <yukitaga@xxxx> wrote:
> > Hi Jim,
> >
> > Tuesday, February 11, 2003, 3:59:28 AM, you wrote:
> >
> > JH> Your system will get a high return on account because there
is
> no
> > JH> trade delay set "SetTradeDelays(0, 0, 0, 0);". You are buying
or
> > JH> selling at the close on the same day the trading signal is
> > JH> generated. Which would not be possible in real life. You can
not
> > JH> trade at the close after the close.
> >
> > You can, and I do sometimes, but it certainly has pitfalls that
> would
> > need to be addressed by any system that you would test this way.
> >
> > The main problem is that some signals will be ambiguous just
prior
> to
> > the close. Maybe the bid-ask will actually be straddling the
signal
> > price, or jumping around on both sides of it. You would have to
> make
> > a guess to take such a trade (the back tester would not be
guessing
> > of course), and sometimes you will get caught making the wrong
> guess.
> > When you compound this inherent problem with a large basket of
> > stocks, such a system really becomes unworkable. You simply cannot
> > monitor and execute just prior to the close on a large basket with
> > many ambiguous signals.
> >
> > At times, however, and especially with very small baskets of
stocks,
> > there is going to be no ambiguity. You are going to know there
is a
> > signal prior to the close, with almost zero probability of that
> > signal coming off by the close. My experience with short-term
> > systems and trading suggests that these signals should be taken,
> > because they are more profitable and less risky then waiting for
the
> > subsequent open.
> >
> > I think that to test such a system, however, and to have the test
> > anything close to reality, you need at least 2 things:
> >
> > 1) a rather small basket of stocks -- small enough to execute
> > properly just prior to or on the close (would have to be only a
> small
> > handful, I would suggest)
> >
> > 2) back test only for those signals that would be unambiguous,
i.e.,
> > your back test would only take signals x percent 'deep' into the
> > signal area, signals that would have an extremely low probability
of
> > canceling out before the close
> >
> > Depending on how deep (unambiguous) you require the signal to be
for
> > purposes of back testing, you could end up with a system that
might
> > actually trade *better* in practice than it back tests (wouldn't
> that
> > be a refreshing change?). ^_^ The reason is that you could
require
> > a very deep signal for back testing, deeper than you think you
would
> > actually need in real trading. So your back tested system would
> > likely take fewer trades than you would take in reality if you
set
> it
> > up this way. The caveat of course is whether there would be a
marked
> > performance difference between the 'deeper' signals and the ones
you
> > might take in practice that you would be programming your back
test
> > to ignore. Further back testing might shed some light on the
> > probabilities there, however.
> >
> > Such a system is a problem, but I don't think we can dismiss these
> > systems out of hand. I sure don't think you can test them
> > realistically on even 50 stocks, however, or on even half that
many.
> >
> > Best,
> >
> > Yuki
> >
> > mailto:yukitaga@x...
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