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Now let me understand this, you have discovered that day trading the S&P
does not work.----Original Message-----
From: TWA7663@xxxxxxx <TWA7663@xxxxxxx>
To: omega-list@xxxxxxxxxx <omega-list@xxxxxxxxxx>
Date: Tuesday, July 21, 1998 9:11 AM
Subject: Re: Why trade Futures?
>Bob,
>
>This has been a very interesting thread for me. Your situation (and the
other
>fellow) with trading stocks has been identical with mine. I stopped
trading
>stocks about 6 months ago (for all the same reasons as you) to devote full
>time, 12-14 hours per day, to write S&P systems (day and position). I have
>developed techniques to give me a more accurate picture of what real
trading
>results would have been using TradeStation. I believe most people that
>develop TS systems get historical results that are far more positive than
>reality. i.e they use day bars instead of tick bars, use a number like
>$100-200 for market and stop slippage and optimize. I have taken several
>steps to insure that I don't get sucked into overly positive historical
>results. i.e, I always use limit entries with tick data and require that
the
>price on the entry bar had at least a $.50 difference on each side ( 5 min
>bar) of the limit order to ensure that the majority of the time that I
would
>at least had a chance of getting the trade. I use 2 exits. A limit for a
>profit and a stop for a loss. I realize when you force yourself into this
>type of trading that it is much more difficult to show the best historical
>reslults; however, it is conservative because negative slippage would have
>affected you only on the stop loss. On the stop loss I use an assumed stop
>loss exit price to be the worse price on the next 5 minute bar. In
addition,
>I have developed systems that require no optimization and with as few
filters
>as possible. As you know, the more paramaters in a system the less chance
of
>replication. Again, this is not the optimal process to get great
theoretical
>statistics but it keeps me from being overly optimistic. My historical
>testing results have been very interesting........... If one were to use
the
>typical market and stop orders and use TS the way that it sucks you
in....then
>some of my systems would have results as could as any as I have seen posted
>here. However, when you use my approach discussed above, "some" of my
better
>systems are losers or mediocre at best. Please, for those reading this, I
>have already heard that my system development approach is much to
conservative
>and I don't want to start a new thread about system development techniques
nor
>do I want to discuss that further.
>
>I have rambled on here because I wanted to explain why I am considering
>markets other that the S&P. I am a guy that has literally written
thousands
>of systems and tested each on every contract (tick data) since 1987, taken
all
>kinds of precautions to ensure that my results are not overly optimistic
and
>have found it extremely difficult to create systems that make it worth
staring
>at a screen all day daytrading the S&P. I know a lot of you guys/gals will
>say that you are aware of great systems out there and I am sure there are.
>However, I have purchased systems that were described as "great" systems,
put
>them through my "conservative" test and they didn't test as well as some of
my
>mediocre systems. I am "not" a great system developer but I have hacked
away
>enough to conclude that S&P daytrading is very very tough.
>
>Bob, because of my experience with developing S&P systems and my previous
>experience with trading stocks, I am very interested in your experience
with
>the Rydex funds. I would appreciate more comments from you about these.
You
>can respond privately to my e-mail. Thank you for taking the time to read
>this.
>
>Russ
><<<<<<<<<<<
>Interesting similarity to my situation. I also traded stocks for years. I
>spent hours in analysis and still got killed once in a while by management
>manipulating the numbers, flaky analyst recommendations, unexpected
>earnings surprises, etc. I concluded I needed at least 30 stocks to spread
>the risk and following this many was a huge amount of work.
>
>Then, about a year ago I met several money managers who were making 50%
>returns per year trading the Rydex funds with a several-day holding period,
>as a part-time job. Much less analysis and very simple trading systems. So
>I developed some systems for this that seemed a lot better than what they
>were using.
>
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