From: Fred
[mailto:ftonetti@xxxxxxxxxxxxx]
Sent: Thursday, February 10, 2005
2:20 PM
To: amibroker@xxxxxxxxxxxxxxx
Subject: [amibroker] OT: Re:
Technical Vs technofundumental trading
It's too bad this study apparently ended in 2000
as it would have
been interesting to see the results since then
forward as well.
--- In amibroker@xxxxxxxxxxxxxxx,
"seneca_kw" <seneca_kw@xxxx> wrote:
>
> Duke,
>
> Thanks for the interesting link. I
hadn't seen that study
before.
> It shows that a combination of TA and FA can
be successful, but it
> doesn't quite answer the question that I had
in mind.
>
> Take the example of a simple
reversion-to-the-mean system: buy
when a
> stock closes below the lower Bollinger Band
and exit N days
later.
> Does adding a fundamentals screen help?
To test this, I'd divide
> stocks into at least five categories, from
the lowest-rated
> fundamentals to the highest. Then I'd
test each category using
the
> same system paramenters. Ideally, the
results should be worst for
> the lowest-rated fundamentals, and should
improve uniformly and
> consistently up to the highest-rated.
That would show that using
> fundamentals adds value.
>
> But even if using fundamentals increases the
profit per trade, it
> doesn't necessarily follow that you'd want to
incorporate them
into
> your system. They may decrease the
number of signals to the point
> that your overall profits are lower even
though your per-trade
profit
> is higher. In the example system, I
know that I can improve per-
> trade profits by tightening the requirements
(eg stock must close
at
> 90% of lower BB). Maybe I'm better off
chucking the fundamentals
> screen, tightening the BB requirements, and
screening the whole
> market (which is what I think the original
poster was asking).
> These are the kinds of questions that I'm
interested in
investigating.
> Wayne
>
>
> --- In amibroker@xxxxxxxxxxxxxxx,
"duke.jones" <Duke.Jones@xxxx>
> wrote:
> > Wayne,
> >
> > Here is a PDF from Charlie Kirkpatrick
which discusses a real
time
> portfolio using just three elements. Two of
which are fundamental
the
> third price momentum.
http://www.mta.org/awards/01/2001DowAwardb.pdf
> >
> > I believe fundamentals can be used to
increase the probability
of
> success (based on testing and results) but
the key is how you
measure
> success. Kirkpatrick's strategy has continued
to perform well and
has
> consistently beaten the market but you had
better be able to
stomach
> the large drawdowns. I have a enclosed pic of
real time
performance
> since the beginning of last year of the
Kirkpatrick (kirk.gif)
model.
> As you can see relative performance is great
but its a model that
> needs a trending market. Also enclosed
is a backtest of a
modified
> version (valuemo.gif) with more history.
Better equity curve and
> roughly half the risk of the market but still
large drawdowns.
> >
> > Where I have found value is using a
combination of systems with
> little multicollinearity. I would to love
tell you its made me
rich
> beyond my wildest dreams and that I only post
here for the
> intellectual curiosity however, the reality
is like all systems
mine
> is a work in progress. The good news is that
in aggreagte they do
> have an equity curve I can live with and
actually trade. Since my
> primary job is to provide research I also
like the fact that you
> don't hear about too many fund/tech systems
so perhaps where there
is
> no crowd there is more opportunity.
> >
> > OK, I have beaten the horse dead..time
to climb back into the
> shadows.
> >
> >
> > Duke Jones, CMT
> > -------Original Message-------
> > > From: "seneca_kw"
<seneca_kw@xxxx>
> > > Subject: [amibroker] OT: Re:
Technical Vs technofundumental
> trading
> > > Sent: 08 Feb 2005 05:22:44
> > >
> > > Fred,
> > >
> > > You're probably right, I just
haven't seen anyone put forward
> hard
> > > numbers to support it.
The details of the testing would be a
> little
> > > tricky. Off the top of
my head, I guess I would create a
> watchlist
> > > of stocks with top-rated
fundamentals and one with bottom-
rated
> > > fundamentals. Then I'd
run various types of trading setups
with
> each
> > > watchlist and see if the
differences in the results were
> > > statistically significant.
> > >
> > > One of the problems, though,
is that you would need to test
over
> at
> > > least several years of data,
and since fundamentals are
> constantly
> > > changing, you'd have to
adjust for that somehow.
> > >
> > > Wayne
> > >
> > > --- In amibroker@xxxxxxxxxxxxxxx,
"Fred" wrote:
> > > >
> > > > You're right ... It does
SOUND good ... If you have
earnings
> data
> > > for
> > > > a few years I suggest
you test your theory of buying good
> > > fundamental
> > > > candidates on dips .vs.
buying candidates based on price
action
> > > > leading up to the dip,
preferably from at least the
previous
> dip.
> > > In
> > > > ten words or less I
think you'll find that stocks with
better
> price
> > > > action perform better
... Why ? because not only is
everyone
> aware
> > > of
> > > > the published
fundamentals and already factored that into
> current
> > > > price, but SOME are more
aware then that and that is
factored
> into
> > > > price as well.
> > > >
> > > > --- In amibroker@xxxxxxxxxxxxxxx, "seneca_kw"
> > > wrote:
> > > > >
> > > > > To my mind, this is
one of the biggest questions in
trading.
> > > Does
> > > > > including
fundamentals provide an additional edge? It
> certainly
> > > > > seems
plausible. If you're buying pullbacks, it makes
sense
> that
> > > a
> > > > > company with strong
fundamentals is more likely to
reverse
> to the
> > > > > upside than a
company with weak fundamentals.
> > > > >
> > > > > The fact that
something is plausible doesn't make it
true.
> Like
> > > > > everything, it
needs to be tested, and that's what I'd be
> very
> > > > > interested in
hearing about. Even if someone doesn't have
> > > results
> > > > to
> > > > > share, I'd be
interested in discussing ideas about HOW to
do
> the
> > > > > testing.
> > > > >
> > > > > Wayne
> > > > >
> > > > > --- In amibroker@xxxxxxxxxxxxxxx, "Claude
Caruana"
> > > > > wrote:
> > > > > > Hi all,
> > > > > >
> > > > > > I am an
Amibroker user for a few weeks now and I must
say
> it is
> > > > > about to
> > > > > > turn my
trading method 180%.
> > > > > >
> > > > > > I initially
purchased Amibroker to be able to generate
> optimal
> > > > > signals for a
> > > > > > watchlist of
around 100 stocks which I have selected
for
> their
> > > > > fundumentals,
> > > > > > however I am
finding that my results work much better
and
> more
> > > > > consistently
> > > > > > on the entire
stock universe (The 7000 tickers I have
> loaded in
> > > > my
> > > > > db) than
> > > > > > if I try
running it on any watchlists containing less
that
> 200
> > > > > tickers.
> > > > > >
> > > > > > I find that,
in general, the most reliable entry
signals
> occur
> > > > very
> > > > > > infrequently,
and hence, signals are too few and far
apart
> to
> > > > create
> > > > > > consistent
results when the basis is my 100 stock
> watchlist. If
> > > I
> > > > > try to
> > > > > > "loosen
the parameters" and get an optimal number of
> signals
> > > for
> > > > my
> > > > > 100
> > > > > > stocks, then
the system will not be as reliable as the
one
> > > > > with "tighter
> > > > > >
parameters" scanning the entire stock universe.
> > > > > >
> > > > > > Before I ditch
my fundumental approach (which quite
franky
> has
> > > > yet
> > > > > to give
> > > > > > me positve
results!) altogether and start using a
> technical-
> > > only
> > > > > system, I
> > > > > > would be very
grateful if anybody could confirm whether
my
> > > > > observation about
> > > > > > entry signals
is normal, or whether I am missing
something.
> > > > > Finally, are
> > > > > > there any of
you out there who trade using technicals
only?
> > > > > >
> > > > > > thanks for any
feedback!
> > > > > >
> > > > > > Claude
> > >
> > > Check AmiBroker web page at:
> > > http://www.amibroker.com/
> > >
> > > Check group FAQ at:
> http://groups.yahoo.com/group/amibroker/files/groupfaq.html
> > >
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> > -------Original Message-------
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