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<FONT face=Arial color=#0000ff
size=2>Fred,
<FONT face=Arial color=#0000ff
size=2>
I
really hate to sound coy about my systems, as I know the various ways that such
a response can be interpreted. However, I am trading several hedge
funds using my systems and it would be a disservice to my clients to
divulge my exact methods. Having said that, I will try to answer
your questions.
<FONT face=Arial color=#0000ff
size=2>
Let me
start by telling you what I don't use. I'm not looking for a debate
here, but I've tried all of these things and I cannot get value from
them. Indicators such as Stochastics, DMI, ADX, RSI, CCI, etc. have
proven to be useless to me, over 40 years of trading. I know
many of the members in this group use some or all of those things and many
people use them successfully. I have not been able to do
so. I've spent a month trading with George Lane (inventor of
stochastics), for instance, and I've written hundreds of systems that use
stochastics in various forms to no avail. I've spent time with Don Lambert
(creator of CCI) and couldn't find value in that indicator
either. I have every book and article written about DMI, ADX,
RSI and have a disk folder full of discarded systems using those
indicators.
<FONT face=Arial color=#0000ff
size=2>
I have
to tell you (if you already aren't aware) that I approach system development
quite differently from most people. Of course, that could very well
mean that I'm doing it "wrong". I endeavour to create system(s) that
work across all stocks at all times. Many system developers create a
system, using stochastics for instance, and then apply that system to stocks
that have worked well with that system in the past. If that approach
works for others, fine. I'm of the opinion that a stock that has
worked well with stochastics for the last 27 years could stop doing so
tomorrow. I have stochastic systems, for instance, that work
extremely well if I decide which stocks to feed them. So, it's not
that I am unable to develop systems that use these indicators. As
you are aware, such systems are easy to write and test. I feel that
is equally easy to fool yourself into believing that they will work in the
future.
<FONT face=Arial color=#0000ff
size=2>
As to
what I do use... this is a bit more difficult for me to discuss. I
can tell you that my systems are aware of where the current price is in
relationship to some moving average. My systems look at (something
similar to) the Sharpe ratio of returns over the recent past and the slope of a
linear regression line and/or momentum. Other functions you will
find being heavily used in my systems include things like standard deviation and
standard error (both based on the close). Another hint for you
would be best stated in a question: "Who says that standard deviation can
only be useful in powers of two?". Many of my systems that use
standard deviation, in some form, use powers of three, four and even seven when
calculating standard deviation. I guess a mathematician would say
that using a power other then two makes it non standard. That's
exactly why I call the function "NonStandardDeviation".
<FONT face=Arial color=#0000ff
size=2>
<FONT face=Arial color=#0000ff
size=2>Relative strength (not RSI) is also a powerful tool that I use
extensively. I've done over 15 years of research using relative
strength in conjunction with two very large ($300 billion) hedge funds in the
States. One of the hedge funds I manage uses only a relative strength
approach while always being beta neutral. I use a method similar to that
used by IBD, but IBD hasn't changed their methodology (IMO) for too many
years. It's basically a multi-period relative strength, weighting
each lookback period differently. I can give you another clue
here that took many years for me to discover. However you weight the
various lookback periods, performance can be increased by treating the most
recent period negatively. The idea being that a recent, strong,
positive relative strength can very well mean a pull-back is in
order.
<FONT face=Arial color=#0000ff
size=2>
That's
all I can tell you, at least in this group forum. I am very happy to
share concepts and I may, in the process, tell you enough about what I'm doing
for you to replicate it. I'm sorry that I cannot simply give
you AFL code and I'm sorry if that sounds like I am building up my systems to be
the grail. They are not the grail, but they do produce proven,
consistent, non-spectacular, returns.
<FONT face=Arial color=#0000ff
size=2>
<FONT face=Arial color=#0000ff
size=2>Cheers
<BLOCKQUOTE
>
<FONT face="Times New Roman"
size=2>-----Original Message-----From: Fred
[mailto:fctonetti@xxxxxxxxx]Sent: Sunday, April 13, 2003 5:08
PMTo: amibroker@xxxxxxxxxxxxxxxSubject: [amibroker] Re:
Real-world trading (specifics)Chuck,You have
filled things out somewhat, but I guess what I was asking more
specifically was:1. What other kinds of qualifiers do you use to
decide how to limit the universe of stocks that you'll even consider some
signal for today ? and ...2. Does the system you use
employ some sort of pattern matching (Raschke's "grail" i.e ADX +/- DMI
etc. plus a pullback etc. would be an example of this sort of thing) or is
it something that is more trend of momentum oriented (MACD, Stochastic,
Linear Regression would be examples of this sort of thing)TIA,
Fred--- In amibroker@xxxxxxxxxxxxxxx, "Chuck Rademacher"
<chuck_rademacher@x> wrote:> Re: Real-world tradingThanks,
Fred Tonetti, for the comments. I will> endeavour to answer
your questions without "giving away the farm".> > First, I have
to tell you that I think my approach is different from MOST of> the
people in this group. Of course, that could mean that most of
the> others have it right!> > I would NEVER optimize
for a different set of parameters for each stock.> I'm of the
opinion that MSFT can start looking like IBM tomorrow. AOL
can> take on the look and feel of INTC next week. So, I
want to have one set of> parameters that works on ALL stocks over
at least six years of data> (preferably ten to twelve). I
end up with a set of parameters that works> over 13,000+ stocks
(active and extinct) times however many days those> stocks have
traded. The number of trades can be between 15,000 and
50,000> and gives me some feeling that the system(s) will be robust in
the future.> > The next area I seem to treat differently
than most as well. I trade fixed> size positions all
the time. My backtesting and realtime trading is always>
based on fixed position size. If I have cash, I will take as many
trades> as I can take. If I don't have enough cash to take
every trade, I will sort> the orders by "something". If
I'm not getting enough signals to use all my> cash, I will
gradually increase the bet size. AB lends itself to
this> approach, although I would like to see it more
automated. I'll give an> example:> > Let's say
I'm sitting on $100,000 cash, or will be after I close out some>
positions tomorrow. If I'm trading $10,000 per transaction,
obviously I> have enough cash to take ten new
positions. My system may generate 100> orders for
tomorrow. I will add a column to my exploration so that I
can> sort by it (or at least look at it). For simplicity,
let's say that I know> that my system works better on low price
stocks; the lower the better.> That's almost too easy, but I could
sort my buy orders by closing price and> take the first
ten. Obviously, I would have had to backtest this
premise> before trading in realtime.> > I sort by
whatever I have found (via backtesting) gives me the best results.>
Since I have other information in my data (fundamentals, etc.), I can
sort> by just about anything you can imagine.> > You
quoted me as saying that I use volume * price as one of my
filters. I> use something between a ten-day and
fifty-day average volume times the> (actual) closing price to give
me the turnover. If I'm trading $10,000, I> want the
turnover to be at least $200,000. That's not a science, just
a> judgemental ratio of my order size to the average turnover in order
to get> an easy fill (in and out).> > I hope I have
answered your questions. If not, hit me again.>
-----Original Message-----> From: Fred Tonetti
[mailto:ftonetti@xxxx]> Sent: Sunday, April 13, 2003 4:22
PM> To: amibroker@xxxxxxxxxxxxxxx>
Subject: [amibroker] Re: Real-world trading> >
> Chuck,> > I can tell from
messages that you've posted in the past that you are> thorough in
your testing ...> > Without giving away the farm as
it were I am interested in the kinds of> systems you develop and
trade, do they in general look for certain kinds of> conditions
like for example a Raschke "grail" set up or do they more belong>
to the timing of things with in the larger trend or ?>
> I think you are far beyond most here or at least me in
terms of how you go> about selecting stocks to trade beyond whether
or not they match some> pattern in a generalized way. I've
heard you speak of volume > X etc., but> I think most here or at
least I would benefit from any and all information> you'd be
willing to share about how you pare down 10,000 tradable issues>
into something more manageable on a real time basis.>
> Regards, Fred> >
> Yahoo! Groups
Sponsor>
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