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Let us examine a difficult case, a loosing trading system like the 10-
MA crossover
PER=10;
Buy=Cross(C,MA(C,PER));
Sell=Cross(MA(C,PER),C);
Settings : buy/sell at +1Open, commission 0.5%, all stops disabled
[since Jan2002 only 14/100 N100 stocks were profitable]
Can we improve the miserable equities of this system ?
The Virtual Close has good news.
A. Buy ONLY when the stock outperforms the market
PER=10;
Buy=(Cross(C,MA(C,PER)) AND C>VirtualClose);
Sell=Cross(MA(C,PER),C);
The result is impressive: 76/100 stocks improved their final Equity.
The improvement is a function of PER with the following interesting
rate
PER________IMPROVED EQUITY
10_____________76/100
20_____________63/100
30_____________53/100
40_____________57/100
B. Buy ONLY when the stock underperforms the market
PER=10;
Buy=(Cross(C,MA(C,PER)) AND C<VirtualClose);
Sell=Cross(MA(C,PER),C);
The research had another surprise :
PER________IMPROVED EQUITY
10_____________82/100
20_____________80/100
30_____________82/100
40_____________71/100
Now the technical details:
Explore the N100 market for the n=1 last quotations:
Value=Foreign("~SUMRSI","C")/Foreign("~Count","V");
WildPer = 14;ExpPer = 2 * WildPer - 1;
AUC = EMA( Max( C - Ref( C, -1 ), 0 ), ExpPer );
ADC = EMA( Max( Ref( C, -1 ) - C, 0 ), ExpPer );
x = (WildPer - 1) * ( ADC * Value / (100-Value) - AUC);
RevEngRSI = IIf( x >= 0, C + x, C + x * (100-Value)/Value );
VirtualClose=RevEngRSI;
OUTPERFORM=C>VirtualClose;
UNDERPERFORM=C<Virtualclose;
PER=40;
T=DateNum()>1020101;
Buy=T*Cross(C,MA(C,PER));
Sell=T*Cross(MA(C,PER),C);
e1=Equity();
Buy=T*(Cross(C,MA(C,PER)) AND UNDERPERFORM);
Sell=T*Cross(MA(C,PER),C);
e2=Equity();
Filter=E2>E1;
AddColumn(E1,"20MA CROSSOVER EQUITY");
AddColumn(E2,"20MA IMPROVED EQUITY");
Repeat the exploration using
Buy=T*(Cross(C,MA(C,PER)) AND OUTPERFORM);
instead of
Buy=T*(Cross(C,MA(C,PER)) AND UNDERPERFORM);
in the 15th line of above code.
Interesting ?
Dimitris Tsokakis
--- In amibroker@xxxxxxxxxxxxxxx, "Dimitris Tsokakis" <TSOKAKIS@xxxx>
wrote:
> When there is a resistance [horizontal] line we use to Buy with the
ascending cross and Sell with the descending cross.
> A 20-bar Moving average is a more natural Support/Resistance to
apply a similar trading logic.
> Many cross signals are false and it would be better to introduce
more safe criteria to find out the "useless" signals.
> The virtual close, described at
> http://groups.yahoo.com/group/amibroker/message/42156
> may offer some solutions to separate valid from invalid signals.
> Let us follow the recent MSFT example.
> In the left pic. you will notice the descending 25 crosses [red
candles] match well with underperformance MSFT periods.
> This property will give interesting Sell signals A0, A1, A2 and A3.
> We also see 3 Buy signals B0, B1 and B2.
> Looking at the respective Vitrual close chart, we will accept B0,
when MSFT outperforms the market and has its own momentum.
>
> Of course the 25 line was a crude "average" price for the last MSFT
months.
> A better approach comes when we replace the 25 line with a more
natural 20-bar moving average.
>
> Points A0 and A1 are reliable Sell signals because
> a. we see a descending cross and
> b. MSFT underperforms the market.
>
> Point B0 is a weak buy signal because
> a. we see an ascending cross, but
> b. MSFT still has poor performance related to the whole market
>
> Point B1 is our interesting Buy signal, because
> a. we see an ascending cross and
> b. MSFT now is a leader, it outperforms the market and will go up
even without the Market impulse !!
>
> Using the Virtual Close we may evaluate initial Buy/Sell signals of
a MA crossover system, instead of following them automatically.
> Some of them are interesting and may give profits, some other are
weak and it is better to skip them.
> Virtual close and the arising out/under performance may be combined
with various trading systems, in order to evaluate the Buy/Sell
signals.
> Stocks do not move independently, the have a market feed-back,
sometimes they go up just because the market gives a positive bias
> [look at the characteristic B2 on the left pic.
> The market is bullish, MSFT still underperforms the market and just
follows a weak uptrend.
> This movement has not enough momentum and it will not go far...]
> Dimitris Tsokakis
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