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Scott,
i take this part of the message of superfragalist:
"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."
Exact this was the reason for me to develop a monte carlo simulation
tool (as an additional tool for system tests with e.g. Metastock),
which takes the system tester results and simulate possible future
scenarios. So you can see easily the dependencies between percentage
winners, profits and losses per trade and the trading frequency on
one side and the expactions of future profits and possible drawdowns
on the other side.
There is a freeware version, which works for EOD:
http://www.zentrader.de/download.html
I've also downloaded the english version of Zen Monte Carlo
Simulator v3 freeware into the files section of this usergroup.
Try it!
good luck,
zentrader
--- In Metastockusers@xxxxxxxxxxxxxxx, "superfragalist"
<jackolso@xxxx> wrote:
>
> 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
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