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CRLeBeau@xxxxxxx wrote:
>
> In a message dated 7/30/98 3:23:45 AM, bved01@xxxxxxx wrote:
>
> <<Which indicators do you find provide better than random entries?
> >>
>
> My favorite as most people know is the ADX rising. Other good entries are
> volatility type entries, CCI, and channel breakouts. Except for the ADX, most
> entries require a two step process of a "setup" followed by a "trigger". I
> think Charles Wright gave me that idea almost ten years ago and it has been a
> most valuable way of thinking about entries. I think his name still pops up
> on this list from time to time. The setup defines the direction and strength
> of the trend and then the trigger is the precise timing mechanism that gets
> you started in the right direction at the right time. If you follow this setup
> and trigger process a lot of indicators will start working.
>
> Chuck LeBeau
> traderclub.com
I tested two entries based on a "rising" ADX and compared the results against random entries
using data from two stocks; BA and INTC. BA represents a big cap, cyclical type issue and
INTC a big cap growth issue.
The first required an ADX(14) < 15 and ADX(14) > ADX(14)[10]. The second required only that
ADX(14) > ADX(14)[10] + 4. I exited each trade after 10 days to isolate the impact of the entry
strategy. Admittedly, my the interpretation of "rising" may not be yours. If you can be more
specific, I'll test it too.
The results from the random entries provide a basis from which I can judge the value of the
other strategies. If a rising ADX truly provides "better than random entries" then a strategy
utilizing it should show a positive expected value relative to the random entries.
Random Test1 Test2
Number of Trades 2772 150 947
Avg Profit/Loss ($) -14.75 -17.49 31.04
Std Dev ($) 816 676 877
To me, it looks like ADX doesn't add any significant information to the trade. The P/L for
Test1 and Test2 are near zero given the size of the standard deviation.
Note that I used the "Random Trader" ELA code from Dave DeLuca, Tradeworks Software,
http://www.arrowsmith.net/~ddeluca/tradeworks. It's a neat little piece of programming. Thanks,
Dave.
I have no affiliation with Dave DeLuca. He doesn't know me from Adam.
Comments are welcome.
Regards,
Bill Vedder
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