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Thanks
Superfagalist(icexpialidocious),
I will print and read the article start to finish.
I will again consider Roy's newsletter. I know it is a bargain.
Since I can't get accurate results its really hard
to compare profit per winner vs loss per loser. Looking at the system test graph
there is significantly more area under the 0 line than above it. The frequency
of trades is known, average of 1.5 per 250 bars. Drawdowns are
unknown.
I will concentrate on determining trends. When
people talk about determining market trend are they talking about the trend of
the equity itself, the index the equity resides in, or a consensus amongst
indices?
Thanks, Scott
----- Original Message -----
Sent: Sunday, March 13, 2005 1:46
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
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