From: seneca_kw
[mailto:seneca_kw@xxxxxxxxx]
Sent: Thursday, February 10, 2005
1:54 PM
To: amibroker@xxxxxxxxxxxxxxx
Subject: [amibroker] OT: Re:
Technical Vs technofundumental trading
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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