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"Trading Receipes" + Chandelier Exits
----------------------------------------------------
Mark ~ Thank you for this most interesting posting.
My belief that the 'Holy Grail' is to be found 'close by the exits' is
strongly re-inforced by what you say.
cheers
Richard Harrisson
Aegina, Greece
------------------------
"Everyones friend is no-ones friend".
{ visit www.lliarsoflondon.com }
-----Original Message-----
From: Mark Johnson <janitor@xxxxxxxxxxxx>
To: omega-list@xxxxxxxxxx <omega-list@xxxxxxxxxx>
Date: 01, November 1998 9:26 PM
Subject: Random entries + LeBeau exit = Profitable system
>In Chuck Le Beau's "System Traders Club" Bulletin #2,
>he lays out an exit strategy called the Chandelier Exit.
>Chuck asserts that if you use RANDOM entry signals, plus
>the Chandelier Exit, you'll make money. See
>
> http://www.tradersclub.com/bulletins/bulletin2.htm
>
>Just now (11/01/98) I tested this assertion. And, to
>my surprise, I sure did achieve Chuck's predicted result.
>I entered a random trade in a random direction at a
>random price, and then employed the Chandelier Exit
>with no other rules. No stops, no profit targets,
>nothing else. Chandelier Exit, Random entry. Period.
>
>I used Trading Recipes to perform these tests; it has
>a handy RANDOMPRICE builtin function that's just perfect
>in this application. I chose a value of $150.00 per
>contract for (Commission + Slippage) in the tests.
>
>Chuck says "In general the best values for the exit in
>most markets ranges between 2.5 and 4.0" so I used the
>midpoint of these two numbers, 3.2. And I applied it
>to a portfolio of 20 commodity futures markets, which
>I myself happen to trade in my own real-money account,
>and for which I have up-to-date data. Following Chuck's
>bulletin, I computed the 50 day Average True Range.
>
>Here then are the rules of the system I tested:
>
> ENTRY RULE:
> If you've been flat (had no position) for 3 or more
> days, pick a direction (long or short) at random.
> Pick a random time during the day. Enter an order
> in that direction at that time-of-day.
>
> EXIT RULE:
> Let Z = 3.2 times the 50 day Average True Range.
> Let HHSE = the highest high since you entered.
> Let LLSE = the lowest low since you entered.
> If you're long, exit at (HHSE - Z) on a stop order.
> If you're short, exit at (LLSE + Z) on a stop order.
>
>
>I tested this "system" on data going back to 850102,
>thirteen and a half years. The 20 markets used in the
>tests were:
>
> BP DM HO KC SF
> CD DX HU LB TU
> CL FY JO MB TY
> CT HG JY NG US
>
>As always, I tested using a reinvestment-of-profits
>position sizing algorithm. When the account is twice
>as big, it trades twice as many contracts. When it
>is one third as big, it trades one third as many
>contracts. This corresponds to the way I actually
>trade my real-money account. I don't sit still with
>the same number of contracts for thirteen solid years.
>Other folks, of course, might trade their accounts
>differently.
>
>Here are my results:
>
>Commission+Slippage: $150 per contract per trade
>Number of trades: 2084
>Winning trades: 729 (38.3%)
>Losing trades: 1355 (61.7%)
>Equity Growth: 11.56 (finalequity / initialequity)
>Compound Annual Growth Rate: 19.88 % per year
>Max Drawdown: 41.0 %
>#days winning: 1751
>#days losing: 1698
>Days making new equity highs: 195 (5.7%)
>
>
>As you can see, this "system" was profitable.
>Which tends to support Chuck LeBeau's claim
>that the Chandelier Exit is a powerful technique;
>it's a lot easier to believe that the profits
>came from the exit and not from the random entry.
>
>Please, no snide remarks about my Trading
>Recipes code. It was slapped together in
>an hour, to get some quick test results.
>It WASN'T polished and rewritten and reformatted
>for beauty or to win any style points:
>
>' RESOURCES
>'
>' Take a trade at random then use Chuck Le Beau's Chandelier Exit
>' Idea from System traders club bulletin #2
>'
>COL6 = COL6[1] + 1
>IF (COL6 <= 5) THEN COL1 = H ; COL2 = L ; COL7 = 0 ; COL8 = 0
>IF H > COL1[1] THEN COL1 = H OTHERWISE COL1 = COL1[1]
>IF L < COL2[1] THEN COL2 = L OTHERWISE COL2 = COL2[1]
>COL3 = ATR[50]
>COL4 = COL1 - (3.2 * COL3)
>COL5 = COL2 + (3.2 * COL3)
>COL7 = COL7[1]
>COL8 = COL8[1] + 1
>'
>SYSTEM = 2 * POINTVALUE * COL3[1]
>
>' TRADE ENTRY LOGIC
>'
>MEMORY[1] = RANDOMPRICE
>MEMORY[2] = MEMORY[1] - (.5 * (H + L))
>IF (COL7 = 0) AND (COL8 > 3) AND (MEMORY[2] > 0) THEN \
> BUY = RANDOMPRICE ; COL7 = 1 ; COL8 = 1 ; COL1 = H ; COL2 = L
>IF (COL7 = 0) AND (COL8 > 3) AND (MEMORY[2] <= 0) THEN \
> SELL = RANDOMPRICE ; COL7 = -1 ; COL8 = 2 ; COL1 = H ; COL2 = L
>'
>' CALCULATE POSITION SIZE
>'
>MEMORY[5] = (.01 * EQUITY / SYSTEM)
>IF (MEMORY[5] < 1) THEN MEMORY[5] = 1
>NEWCONTRACTS = MEMORY[5]
>
>' TRADE IN PROGRESS
>IF (COL7 = 1) AND (L < COL4[1]) THEN SELLSTOP = COL4[1] ; COL7 = 0 ; COL8 =
0
>IF (COL7 = -1) AND (H > COL5[1]) THEN BUYSTOP = COL5[1] ; COL7 = 0 ; COL8 =
0
>
>
>I hope you enjoyed reading this.
> -Mark Johnson
>--
> Mark Johnson Silicon Valley, California mark@xxxxxxxxxxxx
>
> "... The world will little note, nor long remember, what is said
> here today..." -Abraham Lincoln, "The Gettysburg Address"
>
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