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Hi Sidney,
In my experience, this kind of occasional whipsaw at turning points
is simply a characteristic of many swing-trading systems. You
realize, I'm sure, that you cannot program every loss out of your
system, without running the danger of curve-fitting it.
Is it a profitable system anyway?
As a trader, I'd say, without hesitation, that you would not want to
go long on retest of the highs (between the two short signals). That
bar absolutely is death. So you need to write some exceptions into
the system, perhaps -- although again you can curve-fit to trouble.
However, both those bars at the second top, where price opens high
and cannot hold, closing down on the day, are strong signals which
direction is the path of least resistance. It's just churning on
moderately high volume.
Also, at any possible turning point ... taking a step back out of the
market and letting it clarify itself is never a bad thing.
Another option would be, the moment you think trend might be breaking
down, reduce new position size by 1/2 or even 2/3. Getting whipsawed
on half once in a while is quite tolerable if your main trend signals
are consistently turning profits.
Taking some losers is part of the business of course. There are no
systems that don't book them. If the system's losers wreck the
system, then the system needs a real close look. Tweaking it may not
help so much. It may be that the philosophy behind the system simply
isn't profitable.
Yuki
Saturday, April 7, 2007, 7:12:19 AM, you wrote:
SK> I have a system where there tends to be whipsaws at transition
SK> points between Long and Short. If there has been an uptrend and
SK> the system is long when a change occurs where it should go short
SK> there are a few bars of confusion where the system goes
SK> short/long/short/long and the finally short again for the move
SK> down. A similar thing is happening when the system need to
SK> transition from short back to long.
SK> The first thing I thought of is to suppress new trades for a few
SK> bars after the first trade of these little groups of whipsaws.
SK> Some sort of BarsSince last trade as a filter. That may work,
SK> but I am not sure how to code that as there seems to be 4 cases
SK> of possible transitions, also multiple buys/sells tend to confuse
SK> the picture. How would I code that?
SK> Is there a better way to accomplish the task?
SK>
SK> Any help is appreciated
SK> Sid
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