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I'm glad you asked. I have been using my system for almost 5 years
now and the original version has been in existence for almost 40
years. The system has 9 basic types of signals. Of these 2 of them
are day-trading signals (short-term trend following systems), but
sometimes these short-term signals becomes a good long term one. The
problem with these short-term signlals (remember I said there is only
2 out of a total of 9), is the timing. Ideally, the best entry point
is the MOO (previous day's close price), but sometimes it has
drawdowns. Becuase the signal is valid and I do not want to miss
them in case it takes off right after open near previous sessions
close price and has no drawdowns, in such cases, either I can exit my
initial entry and re-enter at a better price as predicted by the AFL
pivot points support/resistance or retain it and re-enter at the
predicted support/resistance and later exit the losing position at
break-even trade. I called it rare, because even though these types
(short-term) signals are numerous (occurs almost every day) when I
apply the filters and verify them, they get invalidated and hence
becomes rare in practice. So, I came to the conclusion that the
Martingale systems are ideal for day-trading where the usual
rule "Cut your losses short and let your profits run" does not apply
and in fact day-trading or short-term trading forces you to do just
the opposite, i.e., "cut your profits short and let your losses run
until you can re-coup it later by doubling up" the core of the
Martingale system...
rgds, Pal
--- In amibroker@xxxxxxxxxxxxxxx, "Al Venosa" <advenosa@xxxx> wrote:
> Yes, I did notice it. But it was still in the same paragraph where
it appeared as though you were endorsing martingale betting. I guess
I don't understand what circumstances would warrant its 'rare' use.
What do you mean by "...when the nature of the signal warrants it"?
In my opinion, one should choose a certain MM approach and stick to
it.
>
> AV
>
> ----- Original Message -----
> From: palsanand
> To: amibroker@xxxxxxxxxxxxxxx
> Sent: Thursday, October 30, 2003 7:25 PM
> Subject: [amibroker] Re: Managing drawdowns (was % channels)
>
>
> I agree, that is why I said I use martingale method only very
> rarely, i.e, only when the nature of the signal warrants it....
> Maybe you did not notice it or understand the significance of
it...
>
> rgds, Pal
>
> --- In amibroker@xxxxxxxxxxxxxxx, "Al Venosa" <advenosa@xxxx>
wrote:
> > Pal:
> >
> > Martingale betting will kill you regardless of your W/L ratio.
You
> mentioned trend-following systems. Such systems notoriously have
a
> winning percentage less than 50%, usually around 40-45%. So, when
you
> have a moderately large losing percentage (55 to 60% or more),
the
> probability of your experiencing 5 or 6 or 7 losses in a row is
> moderately high (0.6^6 = 4.7%). It makes absolutely no difference
> what your W/L ratio is. It could be 10:1. But if you double your
bet
> size every time you lose, you lose big time if you don't get that
one
> big 10x win inbetween. Conversely, it makes eminent sense to
increase
> your bet size as you win. After all, you can look at it as
betting
> the market's money rather than your own. If you continue to keep
your
> risk percentage constant but increase the percentage of profits
you
> risk on each trade, your winnings will compound enormously. In
other
> words, risk 1% of your capital on all bets but if your profits
> increase by, say, 10%, risk 5% of the profits plus your normal 1%
of
> current capital. You'll make big money without increasing your
real
> risk. And if you lose, you LOWER your bet size, not raise it.
That
> way, you stay in the game in case you experience a run of losses.
> >
> > Al Venosa
> > ----- Original Message -----
> > From: palsanand
> > To: amibroker@xxxxxxxxxxxxxxx
> > Sent: Thursday, October 30, 2003 6:35 PM
> > Subject: [amibroker] Re: Managing drawdowns (was % channels)
> >
> >
> > Thanks for link. Something interesting mentioned there:
> >
> > All the multitude of money management algorithms may be
divided
> in
> > two principal classes: martingale and antimartingale.
> >
> > Martingale methods state that the risk should increase as the
> capital
> > decreases. These methods are popular with traders trying to
> extract
> > profit from a series of losses or break-even trades.
> >
> > Let us review an application of martingale in roulette. We
bet 1$
> on
> > a color and every time we lose, we double the bet. Next time
> after we
> > win, we start at 1$ again. If we lose 10 times in a row,
which
> may
> > happen with a probability of (19/37)^10 or 0,13%, we'll have
to
> bet
> > $1024 to win $1. Since in such a case the expected
profit/risk
> ratio
> > is disastrously low, it is often supposed that martingale
methods
> may
> > not be used in trading. But, one should keep in mind that in
> popular
> > trend-following methods:
> >
> > 1) profits are usually 2-3 times larger than losses
> >
> > 2) series of small losses or break-even trades are typically
> > interspersed with large profits
> >
> > So martingale methods in our opinion deserve a serious study.
> >
> > I found this to be very true. Typically my trades have
either a
> > series of small losses or more commonly break-even trades
> > interspersed with hugh gains which dwarfs these series of
small
> > losses or break-even trades, but I use martingale method only
> very
> > rarely, i.e, only when the nature of the signal warrants
it....
> >
> > rgds, Pal
> > --- In amibroker@xxxxxxxxxxxxxxx, "Fred" <fctonetti@xxxx>
wrote:
> > > For those who have an interest in a variety of MM
techniques
> here's
> > a
> > > short course in a lot of what's out there ...
> > >
> > >
> >
>
http://www.tsresearchgroup.com/en/articles/public_20020402010706.php
> > >
> > > --- In amibroker@xxxxxxxxxxxxxxx, "Fred" <fctonetti@xxxx>
wrote:
> > > > Nice try ... As far as what trading system he used and
> whether or
> > > not
> > > > it was viable, how would I know. As far as what MM
> techniques he
> > > > used, again how would I know except for the fact that it
> seems to
> > > say
> > > > one of two things, either his stuff doesn't work as
> demonstrated
> > in
> > > > his book or he didn't think well enough of it to use it
as
> > opposed
> > > to
> > > > using something else. As far as your other reference
goes,
> your
> > > > either part of that group in which case you should have
> > understood
> > > > the reply I made and it should have made some sense or
you
> aren't
> > > in
> > > > which case you don't have a clue as to what you are
referring
> to.
> > > >
> > > > --- In amibroker@xxxxxxxxxxxxxxx, "MarkF2"
<feierstein@xxxx>
> > wrote:
> > > > > "LOL, right ..."? What simulation software did you
use?
> No
> > > > answer?
> > > > > I didn't think I'd get one. You don't know what you're
> talking
> > > > about
> > > > > unless you've run extensive MCS on these methods with
> numerous
> > > > systems
> > > > > and compared them side by side. I've tested Van
Tharp's
> stuff
> > and
> > > > > would agree that it works. But there's stuff in Jones'
> book
> > that
> > > > > produces better risk/reward curves. BTW, what he did
with
> his
> > own
> > > > > account (assuming what you say is true) is irrelevant.
How
> do
> > you
> > > > > *know* that he did it "using his own methods?" Did he
have
> a
> > > viable
> > > > > trading system to begin with? Did he follow it? If so,
> which
> > > money
> > > > > management method from his book did he use and did he
> follow
> > > that?
> > > > > Your humble opinion, lol? This from the guy who banned
> Tomasz
> > > from
> > > > > his group, lol! Look Fred, if you've got nothing
better to
> do
> > > than
> > > > > sit there and try to start a flame war, please do it
with
> > someone
> > > > > else. Because you simply don't know what you're
talking
> about
> > on
> > > > > this. Have a great day.
> > > > >
> > > > >
> > > > > --- In amibroker@xxxxxxxxxxxxxxx, "Fred"
<fctonetti@xxxx>
> wrote:
> > > > > > LOL, right ...
> > > > > >
> > > > > > IMHO Van K. Tharp's writings on this topic are more
on
> target.
> > > > > >
> > > > > > And in all honesty I'm not surprised that Jones
traded
> his own
> > > > > account
> > > > > > (s) into 90+% DD's using his own mehtods.
> > > > > >
> > > > > >
> > > > > > --- In amibroker@xxxxxxxxxxxxxxx, "MarkF2"
> <feierstein@xxxx>
> > > > wrote:
> > > > > > > Well you didn't do it correctly. What simulation
> software
> > did
> > > > > you
> > > > > > use?
> > > > > > >
> > > > > > > --- In amibroker@xxxxxxxxxxxxxxx, "Fred"
> <fctonetti@xxxx>
> > > wrote:
> > > > > > > > Yes I have which is why I said I must be one of
the
> > ignorant
> > > > > ones.
> > > > > > > >
> > > > > > > > --- In amibroker@xxxxxxxxxxxxxxx, "MarkF2"
> > > <feierstein@xxxx>
> > > > > > wrote:
> > > > > > > > > Have you read and tested the stuff in his book,
or
> are
> > you
> > > > > just
> > > > > > > > making
> > > > > > > > > a typically provocative comment?
> > > > > > > > >
> > > > > > > > > --- In amibroker@xxxxxxxxxxxxxxx, "Fred"
> > <fctonetti@xxxx>
> > > > > wrote:
> > > > > > > > > > Ryan Jones ? OMG ... I must be one of the
> ignorant
> > ones.
> > > > > > > > > >
> > > > > > > > > > --- In amibroker@xxxxxxxxxxxxxxx, "MarkF2"
> > > > > <feierstein@xxxx>
> > > > > > > > wrote:
> > > > > > > > > > > Hi Leo!
> > > > > > > > > > >
> > > > > > > > > > > Let me elaborate. Although I wouldn't put
$.02
> on
> > a
> > > > > > *simple*
> > > > > > > > > > > Martingale or anti-Martingale method of
money
> > > > management,
> > > > > I
> > > > > > do
> > > > > > > > think
> > > > > > > > > > > that the latter is certainly viable while
the
> > former
> > > is
> > > > > > not.
> > > > > > > > How to
> > > > > > > > > > do
> > > > > > > > > > > better? I'd recommend reading The Trading
Game
> by
> > > Ryan
> > > > > > Jones
> > > > > > > > *and
> > > > > > > > > > > then running simulations* of the tradeoff
> between
> > > > equity
> > > > > > growth
> > > > > > > > and
> > > > > > > > > > > drawdown for the various methods *for your
> trading
> > > > > > systems*. I
> > > > > > > > > > > developed my personal favorites after
reading
> this
> > > book
> > > > > but
> > > > > > > > everyone
> > > > > > > > > > > needs to look at their own curves from
their
> own
> > > > > > simulations for
> > > > > > > > > > > themselves to see what suits them best.
This
> is a
> > > > > tedious
> > > > > > > > project
> > > > > > > > > > and
> > > > > > > > > > > not much fun, but well worth the effort in
my
> > > opinion.
> > > > > > BTW, if
> > > > > > > > you
> > > > > > > > > > > look at the reviews of this book on amazon,
> there
> > are
> > > > > some
> > > > > > > > > > *incredibly
> > > > > > > > > > > ignorant* ones by people who obviously
didn't
> take
> > the
> > > > > time
> > > > > > to
> > > > > > > > dig
> > > > > > > > > > in
> > > > > > > > > > > to the material and do their homework which
to
> me,
> > is
> > > > > > running
> > > > > > > > > > > simulations on all of the methods. I have
and
> > trust
> > > > me,
> > > > > > lol,
> > > > > > > > > > there's
> > > > > > > > > > > good stuff in this book.
> > > > > > > > > > >
> > > > > > > > > > > Best Regards,
> > > > > > > > > > >
> > > > > > > > > > > Mark
> > > > > > > > > > >
> > > > > > > > > > > --- In
amibroker@xxxxxxxxxxxxxxx, "leonardot19"
> > > > > > > > > > <leo.timmermans@xxxx>
> > > > > > > > > > > wrote:
> > > > > > > > > > > > Hi Mark,
> > > > > > > > > > > >
> > > > > > > > > > > > Which MM technique would you use than,
can
> you
> > give
> > > > an
> > > > > > example
> > > > > > > > > > > > please ?
> > > > > > > > > > > >
> > > > > > > > > > > > Kind regards
> > > > > > > > > > > > Leo
> > > > > > > > > > > >
> > > > > > > > > > > >
> > > > > > > > > > > > --- In
amibroker@xxxxxxxxxxxxxxx, "MarkF2"
> > > > > > <feierstein@xxxx>
> > > > > > > > > > wrote:
> > > > > > > > > > > > > Neither of these is a technique I'd put
> $.02 on,
> > > > > quite
> > > > > > > > easily
> > > > > > > > > > > > > demonstrated by bootstrapping
> representative
> > > trades
> > > > > > while
> > > > > > > > > > applying
> > > > > > > > > > > > > them. Every time I mention simulation
> > everyones'
> > > > > eyes
> > > > > > glaze
> > > > > > > > > > > over,
> > > > > > > > > > > > but
> > > > > > > > > > > > > if you're not using it for position
sizing
> or
> > > money
> > > > > > > > management
> > > > > > > > > > or
> > > > > > > > > > > > > whatever you want to call it, you're
flying
> > blind.
> > > > > > > > > > > > >
> > > > > > > > > > > > > --- In
> amibroker@xxxxxxxxxxxxxxx, "palsanand"
> > > > > > > > <palsanand@xxxx>
> > > > > > > > > > > > wrote:
> > > > > > > > > > > > > > Dave,
> > > > > > > > > > > > > >
> > > > > > > > > > > > > > There is a good link I came across:
> > > > > > > > > > > > > >
> > > > > > > > > > > > > >
> http://www.arbtrading.com/moneymanagement.htm
> > > > > > > > > > > > > >
> > > > > > > > > > > > > > I like the Anti-Martingale and
Martingale
> > > > (doubling
> > > > > > up)
> > > > > > > > > > systems
> > > > > > > > > > > > to
> > > > > > > > > > > > > > manage drawdowns. I would use a
> combination
> > of
> > > > > these
> > > > > > > > systems,
> > > > > > > > > > > so
> > > > > > > > > > > > > > that when I'm losing money I would
use
> > > Martingale
> > > > > > system
> > > > > > > > and
> > > > > > > > > > > when
> > > > > > > > > > > > > I'm
> > > > > > > > > > > > > > finally making money with the final
> position,
> > I
> > > > > would
> > > > > > be
> > > > > > > > > > > > > > automatically switched over to Anti-
> > Martingale
> > > > > > system,
> > > > > > > > but
> > > > > > > > > > may
> > > > > > > > > > > > most
> > > > > > > > > > > > > > likely exit losing positions at break-
> even
> > > price.
> > > > > I
> > > > > > would
> > > > > > > > > > > double
> > > > > > > > > > > > > up
> > > > > > > > > > > > > > only when I get stronger signals
verfied
> by
> > > OB/OS
> > > > > > > > conditions
> > > > > > > > > > in
> > > > > > > > > > > > the
> > > > > > > > > > > > > > subsequent session, so that my system
of
> using
> > > > > 3BSMA
> > > > > > for
> > > > > > > > the
> > > > > > > > > > > next
> > > > > > > > > > > > > > session is temporarily suspended. It
> does
> > take
> > > > > > usually
> > > > > > > > about
> > > > > > > > > > 3
> > > > > > > > > > > > > days
> > > > > > > > > > > > > > for a trend-change to fully develop.
I
> would
> > > not
> > > > > > double
> > > > > > > > up
> > > > > > > > > > > beyond
> > > > > > > > > > > > > 3
> > > > > > > > > > > > > > consecutive days, because if you are
> wrong 4
> > > times
> > > > > in
> > > > > > a
> > > > > > > > row,
> > > > > > > > > > > most
> > > > > > > > > > > > > > likely the market is starting a new
trend
> in
> > > the
> > > > > > opposite
> > > > > > > > > > > > direction
> > > > > > > > > > > > > > and will go against you and so better
to
> > exit.
> > > I
> > > > > > have
> > > > > > > > done
> > > > > > > > > > this
> > > > > > > > > > > > > many
> > > > > > > > > > > > > > times, as I find it impossible to
> optimize my
> > > > entry
> > > > > > > > points.
> > > > > > > > > > But
> > > > > > > > > > > > > the
> > > > > > > > > > > > > > safest course is to wait for the
actual
> > > > > Trend-change
> > > > > > > > signal
> > > > > > > > > > > > > verified
> > > > > > > > > > > > > > by OB/OS conditions, then you may
never
> have
> > to
> > > > > > double up
> > > > > > > > but
> > > > > > > > > > > you
> > > > > > > > > > > > > may
> > > > > > > > > > > > > > miss some signals. This may sound
crazy
> for
> > > some
> > > > > but
> > > > > > it
> > > > > > > > does
> > > > > > > > > > > seem
> > > > > > > > > > > > > to
> > > > > > > > > > > > > > work for me especially with the AFL
pivot
> > > points
> > > > to
> > > > > > > > predict
> > > > > > > > > > the
> > > > > > > > > > > > > Next
> > > > > > > > > > > > > > bar approximate High/Low of Day and
> > appropriate
> > > > > > position
> > > > > > > > > > sizing.
> > > > > > > > > > > > > >
> > > > > > > > > > > > > > Regarding whether your system has
stopped
> > > working
> > > > > or
> > > > > > not,
> > > > > > > > it
> > > > > > > > > > is
> > > > > > > > > > > > > hard
> > > > > > > > > > > > > > to say. I would try to improve the
> system
> > > > > > performance
> > > > > > > > using a
> > > > > > > > > > > > > system
> > > > > > > > > > > > > > of filters, stops and walkforward
> testing.
> > > > Easier
> > > > > > said
> > > > > > > > than
> > > > > > > > > > > > done...
> > > > > > > > > > > > > >
> > > > > > > > > > > > > > Regards,
> > > > > > > > > > > > > >
> > > > > > > > > > > > > > Pal
> > > > > > > > > > > > > >
> > > > > > > > > > > > > >
> > > > > > > > > > > > > > --- In
amibroker@xxxxxxxxxxxxxxx, "Dave
> > Merrill"
> > > > > > > > > > > <dmerrill@xxxx>
> > > > > > > > > > > > > > wrote:
> > > > > > > > > > > > > > > I've been wondering, could I trade
a
> system
> > > > with
> > > > > > 50%
> > > > > > > > > > average
> > > > > > > > > > > > gain
> > > > > > > > > > > > > > per year
> > > > > > > > > > > > > > > since '95, and max system drawdown
of
> 40-
> > 50%.
> > > > > even
> > > > > > if
> > > > > > > > I've
> > > > > > > > > > > seen
> > > > > > > > > > > > > > that in
> > > > > > > > > > > > > > > backtests beforehand, could I
really
> look
> > at
> > > > that
> > > > > > kind
> > > > > > > > of
> > > > > > > > > > > drop
> > > > > > > > > > > > in
> > > > > > > > > > > > > > my account
> > > > > > > > > > > > > > > and still believe I was doing the
right
> > > thing?
> > > > or
> > > > > > would
> > > > > > > > I
> > > > > > > > > > > think
> > > > > > > > > > > > > > it'd finally
> > > > > > > > > > > > > > > just stopped working? and if I am
able
> to
> > > > ignore
> > > > > > that
> > > > > > > > much
> > > > > > > > > > > > > > drawdown, how
> > > > > > > > > > > > > > > would I know if it really *had*
stopped
> > > working?
> > > > > > > > > > > > > > >
> > > > > > > > > > > > > > > by the half-the-gain-twice-the-
drawdown
> > > > > > tolerability
> > > > > > > > rule,
> > > > > > > > > > > this
> > > > > > > > > > > > > is a
> > > > > > > > > > > > > > > non-starter.
> > > > > > > > > > > > > > >
> > > > > > > > > > > > > > > dave
> > > > > > > > > > > > > > > Defense ... Yep or as I've said
it's
> not
> > > what
> > > > > you
> > > > > > > > make,
> > > > > > > > > > it's
> > > > > > > > > > > > > what
> > > > > > > > > > > > > > you
> > > > > > > > > > > > > > > keep. DD's are killers from lots
of
> > aspects
> > > > > not
> > > > > > just
> > > > > > > > in
> > > > > > > > > > > terms
> > > > > > > > > > > > > of
> > > > > > > > > > > > > > > what they do to your account
balance
> but
> > > also
> > > > > > what
> > > > > > > > they do
> > > > > > > > > > > to
> > > > > > > > > > > > > ones
> > > > > > > > > > > > > > > ability psycologically to trade
and
> stay
> > > with
> > > > > > systems
> > > > > > > > that
> > > > > > > > > > > do
> > > > > > > > > > > > > > work.
> >
> >
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