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Scott,
if I may add a few words of advice also,to those the other members of the
forum gave you,let me tell you this:
I've also passed through the stage of testing indicators,geometrical
patterns,combination of indicators,etc.Please do yourself a favor and throw
all of them into the waste's basket where they belong......
A good system is not defined by the percentage of the winning trades.It's
defined by the edge that is giving you.You must be able to define that edge
and use it consistently in your favor.No lagging indicators and no patterns
that are time frame depended will give you that edge.The truth is the
price.Nothing else.....
A good system is the one that makes money.The good system will be defined by
your trade management rules.I can use a simple moving average system and
make money and you can use all the BS sold around (fractals,Gann,neuronic
networks,etc) and still lose money.Learn to read the charts.Find something
that works independently of time frames.It doesn't really matters what the
market is doing.What matters is your position related to the current
price.Choose 1-2 financial products and stick to them.Don't scan every night
thousands of stock trying to find the next home run.Pull consistently money
out of the market and don't give it back.And,most important of all,don't
ever believe that you can buy a system and become rich.The reason they are
selling you this system is because they can't make money out of it.That's
why they put all those disclaimers on it.Be clever.
----- Original Message -----
From: "superfragalist" <jackolso@xxxxxxxxxxx>
To: <Metastockusers@xxxxxxxxxxxxxxx>
Sent: Sunday, March 13, 2005 8:46 AM
Subject: [Metastockusers] Scott---Building a Profitable System
>
>
> Read this entire Charlie Wright article from beginning to the end. In
> the later parts he shows you how to develop a system. His simple
> system trades very well.
>
> http://www.elitetrader.com/tr/index.cfm?s=17
>
> To help you understand more about what you are doing, read a few
> systems development books. I recommend reading all of them. But you
> can start with books written by Kaufman, Stridsman and others. I've
> learned more about trading from systems development books than the pop
> books written by the "guru's" who don't trade much at all.
>
> The percentage winners is really not the problem. The bigger issues
> are the profit per winner vs loss per loser, the frequency of trading
> and the drawdowns.
>
> Roy's newsletter is about to start a series of articles written by
> traders that will describe how they trade and what MS tools they use.
> You could benefit from that a lot.
>
> www.metastocktips.co.nz
>
> You could also benefit from the back issues of MSTT which explain how
> to use the systems tester, etc.
>
> I've developed a number of systems and it's not very hard to do.
> What's hard to do is to learn when to use each of the systems. No
> single system works well in all market conditions. That's a really big
> mistake people make.
>
> I have a couple of systems for up trends, down trends, sideways
> typical and sideways with rotation. Each one has a different
> expectancy and different values for P/L ratios etc.
>
> After I use the system to find high probability trades I fiter the
> charts through my best computer--the one in my head. In general that
> improves the ratio of winners to losers by about 50%. In other words
> if my system has a 50/50 ratio, my evaluation of the charts improves
> the ratio to 75/25, and often better.
>
> Can you reduce the chart evaluation to a mechanical system---no. You
> need experience to evaluate the charts, especially in the four
> different market conditions.
>
> A very simple and very profitable method of trading is simply to use a
> prefiltered list based on TA, momentum and fundementals--the valueline
> T1 stocks, the IBD list or the S&P neural fair value list.
>
> Use a moving average of any type, and one simple indicator like the
> IFT of the RSI (Roy's newsletter). Buy the momentum stocks on one or
> two of those lists whenever they're above the MA and the IFT, if it's
> above it's thresholds. That's all you have to do to make money.
>
> That being said, 98% of the want-to-be traders want to do exotic
> explorations of 3000 stocks a night for patterns, breakouts or other
> crap they can't even define muchless find. Of course they're going to
> have 40% or 50% winners when the market is in an uptrend. When the
> other three conditions exist they're only going to have 20% winners.
>
> If the market is in an up trend advancing stocks always lead declining
> stocks, so a monkey could throw darts at a copy of the wall street
> journal and wind up picking 50% winners.
>
> Trade from the defined lists, learn to read the charts of the momentum
> stocks so you can tell when the momentum is likely to continue--there
> aren't any indicators that are going to tell you that any better than
> your eyeball after you've looked at something around 1000 momemtum
> stock charts.
>
> There are simple methods to use in all four market conditions. I think
> Roy will have articles about the methods in up coming newsletters.
> There isn't the time or space to post everything every newbie should
> know--not to mention having to repeat it one hundred times.
>
> Start with the Charlie Wright articles and work your way up.
>
> We are in a sideways market with rotation or a slight downtrend with
> rotation. That's the worst market there is to trade in so buckle up.
> On Friday, I saw some signs that the rotation might be about to stop.
> If it does, I'll determine what kind of market we have after that and
> then use the appropriate system. This is good time to read because
> without a lot of experience you aren't going to be making any money
> right now anyway in this kind of market. Maybe after August.
>
> If you don't believe me regarding market conditions, here's a simple
> test. Set up the explorer to find stocks that have gone up two days in
> a row. Run it everyday for the last two weeks and see how much over
> lap there is between the lists on a daily basis. For this test,
> confine your lists to the S&P 500, 400 and 600. That's 1500 stocks.
> Now if you can't find many stocks that have gone up two days in a row,
> and with lists that overlap, it's time to read a book and stop trading.
>
> Have fun!
>
>
>
>
>
>
>
> --- In Metastockusers@xxxxxxxxxxxxxxx, "Scott Mariani" <mariani@xxxx>
> wrote:
>> O.k.
>> I have been building system test after system test, trying several
> different combinations of indicators. Since I use EOD data I have
> given up on getting accurate exit values. I get a bunch of high losses
> which I attribute to the EOD data not exiting until the close.
>>
>> I assume the object of a system test is to have more winning trades
> than loosing ones? I have resorted to adding one optimization so I can
> look at the overall system performance on a total $$ basis. The only
> problem with this is that with the exits being what they are, my
> losses are humongous. I have been trying to find a system that is
> better than 50/50 but have yet to stumble on anything that yields more
> winners than losers.
>>
>> How do others go about analyzing system tester results?
>> Thanks, Scott
>
>
>
>
>
>
>
>
>
>
> Yahoo! Groups Links
>
>
>
>
>
>
>
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