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Chuck,
Regarding the applicability of Russell 2000 for timing, I agree. RUT
has always had the most price persistance with the least noise of the
standard choices. There are some other almost unknown ones that are
interesting to use but of the ones that are at least fairly well
known, RUT is usually at the top of my list to play with.
I would agree that AB offers good development potential and will have
even more so once it gets a few more features/bug fixes that relate
to portfolio handling and results reporting.
Fred
--- In amibroker@xxxxxxxxxxxxxxx, "Chuck Rademacher"
<chuck_rademacher@x> wrote:
> Oops... I didn't mention market timing.
>
> MOST of my systems do not use market timing since MOST of my funds
are
> required to be either "dollar" or "beta" neutral. So, I need to
be (more
> or less) equally long and short at all times in those funds.
Timing is not
> an issue for those funds.
>
> However, I do have funds that are exclusively based on market
timing. I
> can tell you that I MOSTLY use the Russell 2000 for that timing
purposes.
> Not because there is some logical reason for doing so. The Russell
just
> seems to work best with my systems. As to how the Russell 2000
is used
> for timing... just about anything works well. Either a dual-EMA
crossover
> or a simple "direction of single EMA". Sometimes I use one index
for
> entering and either one of two for exiting.
>
> I also didn't mention "pairs" trading. I've been working on this
for a
> couple of years without much success due to extensive processing
time
> required. AmiBroker is going to make it much easier to develop and
test
> pairs trading systems and I'm happy to work with anyone interested
in
> developing something that will work. I have to tell you that funds
> specialising in pairs trading have not done well (on average) over
recent
> months. So, who am I to think that I can do something that they
are not
> able to do? I am in daily contact with several hedge fund
managers who are
> concentrating on this aspect of neutral trading. It's on the back
burner
> (for me) at the moment, but always a thought or two given to it
every day.
> -----Original Message-----
> From: Fred [mailto:fctonetti@x...]
> Sent: Monday, April 14, 2003 4:05 PM
> To: amibroker@xxxxxxxxxxxxxxx
> Subject: [amibroker] Re: Real-world trading (specifics for Fred)
>
>
> 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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