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I'm glad you caught the money market thing. A lot of people on here
haven't figured that one out. What's worse is how it calculates the
money market return. I wish my brokerage did it the same way.
In terms of Roy's newsletter, it's a must have. The code works in
almost all versions of MS, but MS8.0 and above for sure. You'll find
so much stuff in there that you can incorporate into your systems,
you'll be surprised and pleased. If I had had Roy's newsletter when I
first started trading I would have gotten off to a much, much faster
start.
Regarding slippage, it is a function of many, many things. My slippage
has gone way down as I said, but on some types of stocks like
partnerships, etc it can still add up.
You have to be day trading to enter at the closing price of the signal
bar. Even then it's hard to do.
Most of the time you're going to enter and exit with a 1 bar delay.
I never use the open price when I calculate my trade profits. I
usually buy two hours after the market opens. On an EOD basis, I would
use limit orders to accomplish the same thing that I do waiting for a
couple of hours.
Something around 1500 shares is not a large number of shares. Fills
are pretty easy at that size. Since I'm usually a big block trader, I
normally buy much more than that. I look at the hourly volume to give
ma an idea of how fast the execution will occur, how much slippage I'm
likely to get and how much my order size might bother the market
price. My Level II shows me all the block trades and I watch those
also. ETFs are different from normal stocks, MLP's are different,
REITS are different. Each class of stock has it's own characteristics.
You can test limit orders to see how they impact your profits.
Right now if your system is that sensitive to slippage, you may have
trouble making money with it consistently.
I always try to have a pretty good spread of profit on winners against
loses on losers so I have room for the variables that come with making
a trade. Unfortunately when it comes to trading I just can't get the
human error out of it. In addition, I have to interact with other
humans, some of whom were just indicted. When a couple of humans get
in the transaction then nothing is ever defined by a set of equations.
We can get close, but it's not perfect.
I've seen plenty of systems with a high percentage of winners, but the
profits were so razor thin, the systems weren't likely to trade well
in live trading.
Another thing you need to do is to look at how profits are spread
among your trades. If you're depending on a couple of big winners for
all most of your profits, you need to check the data to see if splits
or other such events are screwing with your numbers. Big profits on a
few stocks worked fine in 2003, there was some in 2004, but in 2005
and 2006 you're going to have trouble finding the home runs. So how
much do you make from singles.
So many questions, so little time.
It ain't easy. If it were everybody would be doing it. Well, there are
a lot of people trying to do it. They just ain't making any money.
--- In Metastockusers@xxxxxxxxxxxxxxx, "Scooter" <mariani@xxxx> wrote:
> Super,
> Thanks for sharing your experience, again.
>
> I am using 0 for the money market percentage. I learned that one
early on. I
> was bouncing off the walls when I ran an early system test with it
set to
> 3%. When I finally realized what was happening I went from making
millions
> to losing my butt.
>
> I am a little concerned about the sensitivity of slippage. I am
using 0 for
> slippage and $10 for entry and exit commissions. When I put in a .02
> slippage for both buy and sell my system goes into negative territory. I
> enter at the close on the signal bar and exit at the open after an exit
> signal. On paper I have been entering just below the close price and
exiting
> at or a little above the open price. I am not sure how realistic this is
> based on the number of shares I am trading, average 1500. I am trying to
> make sure the stocks I trade are fairly liquid.
>
> Once I graduate from paper to real, Roy's newsletter is on top of my
list of
> purchases. I am wondering how handicapped I will be with MS8.0 using
Roy's
> information?
>
> Scott
> -----Original Message-----
> From: Metastockusers@xxxxxxxxxxxxxxx
> [mailto:Metastockusers@xxxxxxxxxxxxxxx]On Behalf Of superfragalist
> Sent: Saturday, April 16, 2005 11:03 PM
> To: Metastockusers@xxxxxxxxxxxxxxx
> Subject: [Metastockusers] Re: System Tester Results Comparison with
> Explorer
>
>
>
> Roy's newsletter has methods for figuring out the type of market
> you're in.
>
> The rotation issue is one of no conviction. Stocks are pulling back
> and leadership is changing. However, the new leadership only lasts a
> day or two. This is the hardest kind of market there is to trade in.
> The market has done that a couple of times.
>
> Moving averages are good for figuring out market trends. Like I said
> Roy's newsletter details more sophisticated and accurate methods of
> defining the bias.
>
> When you run your systems test, are you putting a 0 in the money
> market rate of return. The money market box can really screw up a
> systems test.
>
> You need to test your system under all four conditions. Read the post
> I did on using explorations to see how a system is going to work when
> faced with certain market issues. You'll see big changes in all
> aspects of your system statistics as the market bias switches.
>
>
>
>
> --- In Metastockusers@xxxxxxxxxxxxxxx, "Scooter" <mariani@xxxx> wrote:
> > John,
> > So do I run different explorations on the S&P, NASDQ, and DOW
indices to
> > identify these different periods in the overall market? I think I
> can use
> > MA's for Up and Down Trends but I will have to do some research on
> > developing an Exploration for price consolidation/small pull back
> and price
> > consolidation/pull back with rotation.?
> > Thanks, Scott
> > -----Original Message-----
> > From: Metastockusers@xxxxxxxxxxxxxxx
> > [mailto:Metastockusers@xxxxxxxxxxxxxxx]On Behalf Of John
> > Sent: Saturday, April 16, 2005 9:41 AM
> > To: Metastockusers@xxxxxxxxxxxxxxx
> > Subject: [Metastockusers] System Tester Results Comparison with
> Explorer
> >
> >
> >
> > Scott, If you are going to confine your trading to a specific
> > universe, say the 217 symbols, then it is reasonable to run the
> > exploration tests on only those symbols.
> >
> > You don't need to optimize again for about a year. However,
the most
> > important aspect of making money is knowing how the system
performs
> > under the different market conditions.
> >
> > Many systems test very well because they perform good in up
trends.
> > When you remove the up trend the system is a disaster.
> >
> > You should pick historical periods for the explorations where the
> > overall market was in an up trend, down trend, price
> > consolidation/small pull back and price consolidation/pull
back with
> > rotation. The latter is the most difficult to trade.
> >
> > Most of the time those historical periods should last at least
a month
> > for them to be long enough to influence the performance of your
> > system. Run explorations on 10 days out of the period and see
how many
> > stocks the system finds each day on average, define your trading
> > rules, open the charts, apply your trading rules and see how
many of
> > the candidates you would actually have bought. (If you want to
see how
> > it works mechanicall, buy them all.)
> >
> > Check the buys and figure out how many made money and how much
money
> > they made. It's very difficult for someone to look at chart
history
> > and not pick and choose trading rules that match the
performance of
> > the stock. You should write down the trading rules and force
yourself
> > to apply them exactly.
> >
> > If you keep good history, you should see all of your statistics
> > change, often dramatically, in the different market
conditions. You
> > may find that you only want to trade your system in up trends.
Okay,
> > no problem. Learn to define an up trend and trade away.
> >
> > There is no such thing as a system that works in all market
> > conditions. There are no specific trading rules that work in all
> > market conditions. There is no one psychological set of
circumstances
> > that exist in all market conditions. The systems tester won't
define
> > how your system and you react to these things.
> >
> > The MS systems tester is really poor at calculating drawdowns.
Most
> > people would be shocked to learn how many losers in a row their
> > winning system is going to encounter. In addition, most systems,
> > especially those written by inexperienced people, find far too
many
> > trades for one human being with a reasonable capital account
to take.
> > So how many do you take, and how much does your picking and
chosing
> > impact the systems test results? If you don't take all the
trades the
> > tester recommends, then you aren't going to achieve the
results the
> > system tester did.
> >
> > The average trader can not make 2500 trades a year. They don't
> > multiply the average trades per symbol by the number of symbols
> > they've tested to see how many trades they would have to make
a year
> > to trade on a mechanical basis. On an EOD basis, a trader has
to make
> > 10 trades per day every day to hit 2500 a year. Ain't going to
happen.
> >
> > There are all kinds of other issues, too many to discuss in a
post.
> > Most system tester results aren't worth the paper they're
written on
> > because they have nothing to do with real life. Very few
people can
> > trade a mechnaical system totally mechanically. The drawdowns
are too
> > large, the trades can't be executed automatically without human
> > involvement and the normal trading account would be churned
too much.
> >
> > Individuals are poor choices for mechanical trading. Hedge
funds and
> > other money managers are good choices for mechanical trading.
How many
> > individuals could watch 50% or more of their trading account
vanish
> > and keep believing in the system and keep trading it?
> >
> > It takes a number of years of experience to put together a
system that
> > has good numbers and is also rational from the perspective of
being
> > able to trade it in live trading. The vast majority of traders
would
> > have made more money using the buy and hold techniques defined
in The
> > Four Pillars of Investing than they would have from trading some
> > system they created in a system tester or got from a guru.
> >
> > I'm not even sure a systems tester should come with a program
like MS.
> > I often think you shouldn't be able to buy the tester module
until you
> > have 3 or more years of trading experience, and then I might
have a
> > trader demonstrate they can make at least 5 successful trades
using a
> > moving average--sort of like a driver's license test.
> >
> > Have fun with the explorer!
> >
> >
> >
> >
> >
> >
> >
> >
> >
> >
> > --- In Metastockusers@xxxxxxxxxxxxxxx, "Scooter"
<mariani@xxxx> wrote:
> > > Super,
> > > I re-ran the system test on 10 years of data again (Thanks again
> > Dusant). I
> > > ran them from Jan 1 to Dec 31 of each year. Out of the 800+
symbols
> > I have
> > > in my group I narrowed the list to 467 that had history back to
> 1995. I
> > > uploaded the spreadsheet up to the files area.
> > >
> > > In the 1995-2004 Worksheet you will find my summary. On the far
> right I
> > > calculated the winning percentages for each symbol. In the
bottom
> > right cell
> > > I calculate the number of symbols that had a 80% or better
hit rate.
> > I came
> > > up with 218 securities. I will re-run my criteria on those 218
> only and
> > > report my results.
> > >
> > > Do you think it is reasonable to run the explorer only on the
> 218 best
> > > candidates? I would guess that I would re-run this exercise
every
> > quarter or
> > > so to keep the symbols fresh.
> > >
> > > Scott
> > >
> > >
> > > -----Original Message-----
> > > From: Metastockusers@xxxxxxxxxxxxxxx
> > > [mailto:Metastockusers@xxxxxxxxxxxxxxx]On Behalf Of
superfragalist
> > > Sent: Friday, April 15, 2005 1:34 AM
> > > To: Metastockusers@xxxxxxxxxxxxxxx
> > > Subject: [Metastockusers] System Tester Results Comparison with
> Scott's
> > > system
> > >
> > >
> > >
> > > Since we're having fun with numbers, I ran a comparison of
> part of a
> > > system I saw that Roy is publishing in his newsletter next
month
> > > against the system results Scott published for us. Scott's
results
> > > look good.
> > >
> > > I used Scott's criteria, $20,000 in equity, 100% in. All
> trades are on
> > > the open after the signal so that's a one bar delay.
(Scott didn't
> > > tell me what he was doing with the entry/exit.) Roy's is a
> long only
> > > system. I don't know if Scott's is long only or both long and
> short. I
> > > ran Roy's on the S&P 500 and did not eliminate losing stocks.
> Oh, I
> > > almost forgot. I didn't optimize it. Scott's is optimized.
> > >
> > > Scott's dates are 4/13/xxxx to 4/13/xxxy Normally I won't
> test across
> > > skewed dates, but I wanted good comparisons so I used Scott's
> dates.
> > >
> > > Roy's Scott's
> > >
> > > 2004/5 $500.965 $139,048
> > > 2003/4 $613,302 $234,187
> > > 2002/3 $17,897 $106,714
> > > 2001/2 $198,010 $158,116
> > > 2000/1 $75,173 $(-29,693)
> > > 1999/0 $219,871 $290,114
> > >
> > > If you guys are interested in seeing how this works, get a
copy of
> > > Roy's next newsletter. The code for this part of the system
> will be in
> > > there. Since Roy is having other trader's write articles,
> maybe Scott
> > > would be willing to share his system in Roy's newsletter also.
> I would
> > > read about it, and play with it.
> > >
> > >
> > >
> > >
> > >
> > >
> > >
> > >
> > >
> > >
> > >
> >
>
--------------------------------------------------------------------------
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> > >
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> > Service.
> >
> >
> >
> >
> >
> >
>
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>
>
>
>
>
>
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