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Chuck,
Thanks for the thorough reply. You more or less confirmed in a
general way the areas in which I thought you'd be concentrated. I of
course was not looking for a piece of AFL but rather what your
philosophical approach was more or less to market timing and stock
selection.
Fred
--- In amibroker@xxxxxxxxxxxxxxx, "Chuck Rademacher"
<chuck_rademacher@x> wrote:
> Fred,
>
> 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.
>
> 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.
>
> 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.
>
> 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".
>
> 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.
>
> 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.
>
> Cheers
> -----Original Message-----
> From: Fred [mailto:fctonetti@x...]
> Sent: Sunday, April 13, 2003 5:08 PM
> To: amibroker@xxxxxxxxxxxxxxx
> Subject: [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@x...]
> > 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
> >
> >
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