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Louis,
Our last posts crossed.
Briefly (I have to go right now but I often extend my posts at a
later time, aor in a different place, so more might pop up later)
> But even if you say this is not
> discretionnary trading, how can you backtest and really optimize or
>test a
> strategy that rely on visual and discretionary decisions?
You can't.
Nor can you defy the laws of mathematics (statistics) etc.
I am not going against the principles of system design testing and
evaluation.
I am saying I am competent enough to apply them with a limited amount
of discretion (after the systems boundaries have been established by
observation and testing).
This particular system doesn't involve otpimizing - there are no
lookbacks and nothing to optimize (that is not to say that a trader
with a highly analytical approach couldn't squeeze more out of the
trade and/or work more variations).
Market behaviour isn't going to change anytime soon - if, and when
it does, my trade will disappear from the screen.
I have backtested the fundamental trade template, that underlies the
trade (that was easy enough to do) - small things, that change on a
daily basis, can't be backtested (e.g. the data might not exist) it
might be too hard for me to do (but possible for others) or the
backtesting overheads, to go the extra mile, not worth it to me
personally).
Note: components of the system are endemic to the markets and I have
tested those thing to exhaustion in the past - now I put them
straigHt into the trade without the need to keep going over and over
the same things.
What parts of it are discretionary?
Examples:
- the setup might be there but there is not enough volatility around
so, in practise, I would sit there all day to scrape a draw or a win
(I will just pull out of the trade) - on paper it would backtest as a
small win.
- the setup doesn't look exactly the same every single day - the
underlying cause is persistent but the daily mood/individual
behaviours can change it a little or even abort it (I have to decide
if it is good to go or not, based on relative information e.g. if in
doubt I can look at something else, that I don't always look at, to
see what it is doing).
Specific example:
Australian market time, something can change dramatically in Asia and
impact on the trade I am in - in a backtest that could register as a
big loser - in reality I might have pulled out of the trade early,
based on news OR price fluctuations in the Asian markets - possibly I
would only avoid part of the extreme losses - but in reality can you
and do you backtest those things.
brian_z
--- In amibroker@xxxxxxxxxxxxxxx, "Louis Préfontaine"
<rockprog80@xxx> wrote:
>
> Hi Brian,
>
> I hope I understood your first paragraph correctly, and if it is
the case,
> then I'll do my best.
>
> Thank you for sharing your ideas. But even if you say this is not
> discretionnary trading, how can you backtest and really optimize or
test a
> strategy that rely on visual and discretionary decisions?
>
> Louis
>
> 2008/7/8 brian_z111 <brian_z111@xxx>:
>
> > Ara
> >
> > You give a lot of quiet unselfish help to others, via your posts,
so
> > a special for your (maybe not as good as an answer from Jayson but
> > still relevant I think):
> >
> > - I am working on a new 'sector' based trade, albeit with a subtle
> > creative twist (the play is based on a nuance in the markets)
> >
> > - it is an intraday trade (any old timeframe will do - not tick -
say
> > 5 minute bars but it could be 2 or 10 minutes)
> >
> > it is intraday because:
> >
> > a) I like high frequency trades for statistical (equity) smoothing
> > b) the nuance exits in RT (I didn't make it that way it is just
there
> > in the RT charts)
> > c) it stacks up at that timeframe (my comissions are 0.1% each
way,
> > slippage is a furphy and my targets are +0.5% net) i.e. the size
of
> > the moves are tradeable, which of course varies from market to
> > market, trade to trade etc - but it will work in other timeframes
> > d) it suits my personality (I want the outcome today so I can go
to
> > bed tonight for a good relaxed rest - I have my pay for the day in
> > the bank) i.e it is just a job - I go to work each day and like to
> > get the days work over and done with.
> > e) intraday manages some other risks I want to avoid (overnight
> > market risk)
> > f) I can deploy the strategy on a local platform (keep my money
in an
> > Australian account) that allows me to manage it with low 'business
> > overheads' and low stress (I don't have to hire an international
tax
> > accountant :-) )
> >
> > Keep in mind I haven't traded this one yet (this is what I am
seeing
> > in the charts - live 'testing' - IMO traders who don't, or won't,
> > believe what they are seeing are fundamentally flawed traders):
> >
> > W/L isn't so important, outside of payoff ratio, but I expect to
well
> > outperform random W/L ratios == 50/50 +_ statistical error/ so I
will
> > do better than break even W/L with payoff ratios around 1.5/1 at
the
> > least(I am being very conservative here privately I am looking at
a
> > W/L of at least 60-70% but I am not going to debate the topic).
> >
> > I expect trible figures P.A%.
> >
> > The energy overheads of the trade are low (no extensive number
> > crunching etc) - I can run on visual/manual trading with only an
> > alert (so I can relax around the house and the alert will call me
> > back to the screen if needs be).
> >
> > Note: it is not tick trading so I don't need the big guns
(AB/IB/ATR)
> > and I don't have any sweat on my brow with every pixel of price
> > movement).
> >
> > The process is:
> >
> > a) start off the Aus day by looking at a few intraday charts
> > (overnight/previous days) - around 5 will do it (sector orientated
> > charts/component stocks etc)
> > b) the charts DICTATE the trade
> > c) wait for the Aussie open
> > d) visually confirm the setup as it unfolds (no scanning, no
> > formulas - I know in advance which underlying I am on)
> > e) take the trade (the underlying can be a stock/sector/index and
the
> > instrument can be anything that works with the trade - some
> > instruments work better than others based on
> > availabilty/liquidity/carry costs/comissions etc but the strategy
> > remains the same)
> > f) mentally 'set' a target and stop (some discretion comes into it
> > based on the charts)
> >
> > Note - to an onlooker it seems like discretionary trading but it
> > isn't (the 1000's of hours of study, backtesting, evaluation
studies,
> > discussions on evaluation in this forum, experience etc all go
into
> > it - I am not dependent on software/platform - if the trade
doesn't
> > demand a particular platform or software I don't use it just for
the
> > sake of it - KISSam or Sally) - I believe in the power of the mind
> > and 'work' to train the trading mind - once it is trained why get
in
> > front of it?
> >
> > How many trades per month?
> >
> > - the strategy is flexible, especially if the trader is flexible
> >
> > One example:
> >
> > - it can be all over in 1/2 hour from market open
> > - the best setup isn't there every day so if I don't push it then
the
> > trade is say three opens week * ave 0.5% P/L per trade
> >
> > Of course there are so many other markets/instruments etc .
> >
> > I could drink a lot of coffee and trade 24 hours non-stop (re-nter
> > later in the day or after the opening trade is over go to another
> > underlying that is still in setup etc and re-enter the market or
> > wait for the next market to open and play again)?
> >
> > brian_z
> >
> > --- In amibroker@xxxxxxxxxxxxxxx <amibroker%40yahoogroups.com>,
> > "akaloustian" <ara1@> wrote:
> > >
> > > Jayson,
> > >
> > > You have a very interesting system!
> > >
> > > I am curious how you use it and what kind of results you get...
> > >
> > > Decision making process... number of trades per month.... win
> > > ratio... etc.
> > >
> > > Ara
> >
> > >
> > >
> > >
> > >
> > >
> > > --- In amibroker@xxxx, "Jayson" <jcasavant@xxxx> wrote:
> > > > All;
> > > >
> > > > A great deal of my work revolves around sector analysis. I
like
> > to
> > > select
> > > > stocks whose sectors are strong or advancing. one way to
gauge a
> > > sectors
> > > > strength is to measure its components closing price against
> > > previous prices.
> > > > I like to use 25 day new highs as my gauge. The enclosed scan
( !
> > > sector
> > > > analysis) creates a list of 13 composite symbols. One for each
> > of
> > > the 12
> > > > sectors plus one of the entire universe under study. By
default
> > the
> > > > composites will be stored in group to 253.
> > > >
> > > > To run the scan first choose a universe of stocks. your range
> > > should equal
> > > > one day. On a large universe your initial scan will take a few
> > > minutes.
> > > >
> > > > to view the composites I use a market Strength indicator (CMF
or
> > > your
> > > > favorite) as well as the custom indicator, Sector View. this
> > > indicator
> > > > produces a smooth oscillator in histogram form. readings
above 0
> > > indicate
> > > > market strength, below zero indicate weakness. The number
> > > indicates the %
> > > > of stocks within a given sector that have reached new 25 day
> > highs
> > > or Lows.
> > > > in my bottom pane I have a simple line plot and include volume
> > for
> > > the
> > > > sector.
> > > >
> > > > The resulting tab should look something like this....
> > > >
> > > >
> > > >
> > > > I have collected this data with XL for over year and found to
be
> > > very
> > > > useful. AB makes my life so much easier! there may very well
> > > > be a more efficient way to calculate these composites, I'm
open
> > to
> > > any
> > > > suggestions or improvements. btw a simple exploration of group
> > 253
> > > will
> > > > provide a snapshot of RS by each sector. Those falling above
> > > ~Universe are
> > > > out performing, those below are under performing. I hope some
of
> > > you may
> > > > find this useful.
> > > >
> > > > Regards,
> > > >
> > > >
> > > >
> > > > Jayson
> > >
> >
> >
> >
>
------------------------------------
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