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The talk of coin tosses brings up again the issue of whether entry
strategies actually have any significance. I've just started with TradeSim,
and I was startled by the implication that the choice of entry system has
little or no impact on system performance.
To quote from the manual: "Substituting your entry system with a random
entry such as the outcome of a coin toss will make very little difference in
the net profitability of your trading system. In fact, using a random entry
such as a coin toss will most likely improve system performance provided you
have chosen a good position sizing strategy because more trades will be
taken compared with using a deterministic trading strategy."
That's kind of a challenge for technical analysis. It implies that
investment performance is all about portfolio structure and risk management
and that entry rules harm more than they help. It also implies that positive
outcomes for particular entry systems or indicators,(pick up any copy of
Technical Analysis of Stocks and Commodities), are the result of selective
or inadequate testing, rather than being real.
What do you guys think?
Andrew
-----Original Message-----
From: Jose [mailto:josesilva22@xxxxxxxxx]
Sent: Saturday, May 15, 2004 3:07 AM
To: equismetastock@xxxxxxxxxxxxxxx
Subject: Re: [EquisMetaStock Group] Event "Cancelled - Open Cost" in
Enhanced System Test
Chance of getting all heads or tails in:
5 coin tosses in a row: 3.125% (0.5^5)
7 coin tosses in a row: 0.78125% (0.5^7)
50 tosses, chance of getting:
a single run of 5 coin tosses in a row: approx 27.2%
a single run of 7 coin tosses in a row: approx 5.4%
jose '-)
--- In equismetastock@xxxxxxxxxxxxxxx, "rvalue1" <rvalue1@xxxx> wrote:
> I have been using 80% of equity for a while and it works fine. It
> shows a lower return because only 80 % of your equity is invested
and
> the final return is a percentage of your account. That keeps me more
> realistic on my expectations of what I would make..
> Another interesting thing..On flipping a coin with a 50% probability
> of success, what do you think are the odds of getting 5 tails (bad
> trades in a row out of 50 trades) in a row? Very high - like over
> 70% with a Monte Carlo simulation; per Schaeffer. That shows the
> importance of money management and sticking to a system for the long
> haul and not giving up after a few consecutive bad trades in a row..
> I flipped a coin 25 times and got 7 tails in a row, and eventually
10
> Heads out of the 25 flips.
> --- In equismetastock@xxxxxxxxxxxxxxx, "jose_locatelli"
> <jmlocatelli@xxxx> wrote:
> > Tom
> >
> > I followed the recommendations in your document, and it seems that
> my
> > system is now testing well.
> >
> > Thanks again,
> > J Locatelli
> >
> > --- In equismetastock@xxxxxxxxxxxxxxx, "Tom Sprunger"
> > <tlsprunger@xxxx> wrote:
> > > Andrew, J Locatelli,
> > >
> > > Some of your questions and problems should be covered in the doc
> > below
> > > posted in the Files section on this group.
> > >
> > > Sprunger Guide to MS ver8.doc
> > >
> > > Go read it carefully.
> > >
> > > The v8/9 testers have a broker module. Equis attempted to make
it
> > > "realistic". Yeah, right. Like anyone actually trades like
> this.
> > >
> > > When the tester gets a signal it calculates the number of shares
> to
> > buy and
> > > passes it to the broker. The broker places the trade if there
are
> > > sufficient funds etc. Otherwise it cancels it.
> > >
> > >
> > > Considered : means a signal has been generated.
> > > Placed: means an order was sent to the broker for a specific
> > number of
> > > shares based on the price on the bar the signal was generated
and
> > the equity
> > > being used
> > > Open: means the broker put the order in. If on a buy, you will
> get
> > filled
> > > if the price is lower than on the bar the signal was generated,
> > otherwise
> > > you will not.
> > > Executed: means the order was filled
> > > Cancelled - open cost: means the order was not filled because
the
> > price on
> > > the next bar is more (for a buy) than the price calculated on
the
> > signal bar
> > > Cancelled- Position Limit: means the order was not filled
> because
> > you had
> > > the max number of position already open
> > > Cancelled - Zero Size: means you did not have enough equity to
> buy
> > 1 share
> > >
> > > There may be some others.
> > >
> > > Jose, on your specific question,
> > > (Considered) at 15:50 you got a signal to buy 3494 shares
> > > (Placed) at 15:50 the order for 3494 shares was sent to the
> broker
> > to
> > > execute on the next bar
> > > (Cancelled - Open Cost) at 15:55, the order for 3492 shares was
> > opened and
> > > then cancelled because the price was higher than the price where
> > the 3494
> > > shares were calculated.
> > >
> > > You are probably using 100% of your equity, right? So at 15:50
> > when the
> > > signal was generated it divided your equity by the price on the
> > signal and
> > > came up with 3494 shares. On the next bar at 15:55, the price
> went
> > up
> > > enough that to buy 3494 shares would have taken more funds than
> you
> > had
> > > equity. So instead of just buying a share or two less, which is
> > what any
> > > real trader would do, it cancelled the entire order and you
> missed
> > the
> > > signal. No trade.
> > >
> > >
> > > Tom
> > >
> > >
> > >
> > > ----- Original Message -----
> > > From: "Andrew Tomlinson" <andrew_tomlinson@xxxx>
> > > To: <equismetastock@xxxxxxxxxxxxxxx>
> > > Sent: Wednesday, May 12, 2004 7:33 AM
> > > Subject: RE: [EquisMetaStock Group] Event "Cancelled - Open
Cost"
> in
> > > Enhanced System Test
> > >
> > >
> > >
> > >
> > > Even better, if someone has a list of the comments that appear
in
> > the orders
> > > report with explanations. None of them are documented in the
> > manual. I am on
> > > the verge of giving up on Metastock 8/9 as a platform for system
> > testing.
> > > Too many undocumented bizarre little tricks to get it to do
> simple
> > tests. I
> > > haven't done a single system test on this platform that I really
> > have
> > > confidence in. Not a basis for successful trading.
> > >
> > > (forgive my bitching. Just spent another 4 hours yesterday
trying
> > to match a
> > > simple system with Colby, with mixed results)
> > >
> > > Andrew
> > >
> > > -----Original Message-----
> > > From: jose_locatelli [mailto:jmlocatelli@x...]
> > > Sent: Wednesday, May 12, 2004 7:30 AM
> > > To: equismetastock@xxxxxxxxxxxxxxx
> > > Subject: [EquisMetaStock Group] Event "Cancelled - Open Cost" in
> > Enhanced
> > > System Test
> > >
> > >
> > > Hi,
> > > I wrote a system test and during the its simulation some enter
> > > signals are cancelled, with a "Cancelled - Open Cost" event
> reported
> > > on the Orders report, shown below. I didnīt find any reference
to
> > > this type of event in the help and in the MS8 manual.
> > >
> > > Can any of you explain what this event means? And how to avoid
it?
> > >
> > > 174 23/4/2004 14:50 5 Considered Sell 3494 Market 2
> > > Signal
> > > 174 23/4/2004 14:50 5 Placed Sell 3494 Market 2
> > > Signal
> > > 175 23/4/2004 14:55 5 Opened Sell 3494 Market 2
> > > Signal
> > > 175 23/4/2004 14:55 5 Executed Sell 3494 Market
> $2.8500
> > > Open 2 Signal
> > > 184 23/4/2004 15:50 6 Considered Buy 3492 Market
> > Signal
> > > 184 23/4/2004 15:50 6 Placed Buy 3492 Market
> > Signal
> > > 185 23/4/2004 15:55 6 Cancelled - Open cost Buy 3492 Market
> > Signal
> > >
> > > Regards,
> > > Locatelli
> > >
> > >
> > >
> > >
> > >
> > >
> > >
> > > Yahoo! Groups Links
> > >
> > >
> > >
> > >
> > >
> > >
> > >
> > >
> > >
> > >
> > >
> > > Yahoo! Groups Links
Yahoo! Groups Links
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