# How to trade the Unholy Grails system?



## Elfanger

I have read and understood (I think), the systems presented in Nick Radge's book 'Unholy Grails'. I am interested in trying out one of the systems presented in the book.

The problem is, I am not sure how to actually go about it. I take it some software is needed, I cant just login to Commsec and look for the correct pattern myself?

Is there some sort of guide available for setting this up?

Thanks.


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## CanOz

Elfanger said:


> I have read and understood (I think), the systems presented in Nick Radge's book 'Unholy Grails'. I am interested in trying out one of the systems presented in the book.
> 
> The problem is, I am not sure how to actually go about it. I take it some software is needed, I cant just login to Commsec and look for the correct pattern myself?
> 
> Is there some sort of guide available for setting this up?
> 
> Thanks.




Typically a software application such AmiBroker is used. You purchase the software for a couple hundred bucks, then subscribe to a data supplier such as PremiumData. You load the code up or try and program it yourself.

Every nite you run exploration to identify the trade candidates. 

You put you orders in through a broker, such as Interactive Brokers.

Alternatively you might ask Nick how they could trade the strategy or something similar for you.

CanOz


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## qldfrog

if it helps, I went thru the same path:
so I bought Amibroker and a data feed, then started building my formula based initially on the book.
I made some mistakes in my implementation and leaked most of the profit I could have had on the bull market last december to february, so beware and if not in a hurry maybe play a paper portfolio (play) initially

also be careful when you try a system about what are your start/stop loss value (lower of the day, end of day etc)
in the volatile environment we have, it made a difference (I paid dearly for that one too)

anyway, I consider this as a learning fee, and not much anyway as opposed as what i can loose in a day like today!!!
Hope it helps


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## tech/a

Which one do you want to trade?


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## Elfanger

Thanks for the replies guys.

At the moment, I also have a susbscription to thechartist.com and have been looking at the recommendations there.

I am interested in these two strategies:

- 20% flipper
- Bollinger Band Breakout

Thanks.


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## Porper

Elfanger said:


> Thanks for the replies guys.
> 
> At the moment, I also have a susbscription to thechartist.com and have been looking at the recommendations there.
> 
> I am interested in these two strategies:
> 
> - 20% flipper
> - Bollinger Band Breakout
> 
> Thanks.




Elfanger, the Growth Portfolio is based on the same concepts as the Bollinger Band Breakout.


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## wombat40

Elfanger said:


> Thanks for the replies guys.
> 
> At the moment, I also have a susbscription to thechartist.com and have been looking at the recommendations there.
> 
> I am interested in these two strategies:
> 
> - 20% flipper
> - Bollinger Band Breakout
> 
> Thanks.




These 2 systems are the 1s i trade ..20 flipper on Russ 3000 and the BBO on the aussie market...you Def. need amibroker.  I use to use Bullcharts but gave it the flick and bort AB cos the systems are write for it !!


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## RandR

tech/a said:


> Which one do you want to trade?




Hey tech, 

because there is a little bit of talk about the systems in Radge's book, im intrigued to know, if someone put a gun to your head and made you pick one (other then techtrader of course) what system out of those discussed in the book would you trade with and why?


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## Lone Wolf

If you want to trade one of these systems yourself, it's just not realistic to manually go through hundreds of stocks every day, filtering the ones that don't meet your criteria and calculating price changes to see which ones you want to buy/sell. 

What you need:
- Amibroker - You could use other software, but Amibroker is reasonably priced and will allow you to write your own system code (or use someone else's). You can then backtest your system over any period of time with a range of variables to see how it would have performed.

- Data feed - You'll need end of day data on the stocks you want to trade in a format that's compatible with Amibroker. If you're putting you hard earned on the line I'd recommend you pay for reliable data. There are a few, but I personally use "Premium Data" and it integrates with Amibroker just fine.

- System code. You can purchase the Amibroker code from The Chartist (in the store under turnkey systems), or you can have a go at writing the code yourself from what is discussed in the book.

- A thorough understanding of the system (and the software). Whether it be your code or the turnkey system, understand what it's doing. Thoroughly test the system over various time periods and with different groups of stocks (all ords, ASX200 etc). Change the systems variables and note how it affects past performance. Know the stats - What's your average win/loss, biggest win/loss, biggest drawdown, longest loosing streak. Where do you make your money?

- The confidence to actually trade the system. - Comes from understanding the system. The backtested results are only relevant if you actually follow the systems rules. If the system says buy, but you say "No, I don't like the look of that chart". Then you're no longer following the system and the results are no longer valid. Some people can be more successful by applying a bit of discretion to their system, while others manage to ruin it completely. Take note of the worst performance in the backtest, ask yourself if you could keep trading through that tough period. You're not looking for the system that makes you the most money on paper, you need a system you have the confidence to continue trading even during periods of drawdown or going sideways.

-  A broker to place trades with. The software will tell you what to buy, but you'll place the trade yourself with a broker of your choice. Be sure to include the cost of commissions when you backtest.

- Trading capital - The size of your starting capital can have a big impact on the profitability of the system. Make sure you backtest with an amount of capital you are actually going to use.

If computers aren't your thing, then this could be a long journey for you. Amibroker is good, but it takes some research and practice to get the hang of it. Howard Bandy has written a now free book "Introduction to Amibroker" which will be helpful. The search function of this forum will also be helpful.


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## qldfrog

Lone Wolf said:


> .



+1 
your summary is much better than mine
 100% agree with you and I am just at the start of a long process myself


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## tech/a

RandR said:


> Hey tech,
> 
> because there is a little bit of talk about the systems in Radge's book, im intrigued to know, if someone put a gun to your head and made you pick one (other then techtrader of course) what system out of those discussed in the book would you trade with and why?




With the benifit of hindsite all of them.
From as early as this trend started.

But at anyone time we don't know whether we will get a strong trend or an oscillating market or with some instruments ---- flat.
Pros insist that you need to be following your system as long as it's performing within it's tested results.
We can never be sure when the most ideal conditions will materialize---going forward.
We can anticipate and we can program as Nick has in his systems and I in mine---filters which keep us from buying in less than ideal conditions.

I've been discretionary and will be ensuring I have longer term position trades in the market going forward.
When the time is right I'll be trading systems on stocks once again.

LONE WOLF

I don't agree with your statement about if you" don't like the chart" and choose not to trade that chart your system testing results become invalid,

If you've tested your system rigorously you'll realize that the test itself won't take every possible trade---capital generally doesn't allow it.Monte Carlo testing will also start each Portfolio at different start dates and different stock combinations.
So it shouldn't matter if you place some discretionary element into your system provided it doesn't add or subtract a condition or parameter.
That's been my experience.


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## Lone Wolf

tech/a said:


> LONE WOLF
> 
> I don't agree with your statement about if you" don't like the chart" and choose not to trade that chart your system testing results become invalid,
> 
> If you've tested your system rigorously you'll realize that the test itself won't take every possible trade---capital generally doesn't allow it.Monte Carlo testing will also start each Portfolio at different start dates and different stock combinations.
> So it shouldn't matter if you place some discretionary element into your system provided it doesn't add or subtract a condition or parameter.
> That's been my experience.




Tech, I agree, invalid was a bad choice of words. Your results will still fall within the backtested range. But the full list of Monte Carlo possibilities are no longer available to you since you've added another criteria at the buy stage. 

In the backtest you probably told the system to randomly choose which buy signals to take with your available capital. But In your real portfolio you make the choice by passing the candidates through another filter, your brain. The affect of this additional criteria was never specifically tested for. You are now skewing the results within the expected range. But you don't know if you are skewing your results to the upside of the range or the downside.

However, what you say is true. If you run a long enough Monte Carlo simulation, then regardless of how you choose which buy signals to take, one of those random portfolios in the simulation will match your real portfolio. So I believe you're arguing that even if you add an extra criteria at that stage, your results will still fall within the expected range of the simulation. 

When I first started trading a system I backtested with random selection of buy signals, but in my trading I filtered the charts by what I liked the look of. At the time, what I didn't like the look of was any chart that moved up "too fast" in recent days. My logic being that I've missed the boat and it's probably going to pull back now. But what I noticed as time went on was that many of those trades I skipped went on to even greater highs. While the more tame ones I selected remained rather tame. So my real results were skewed to the lower end of the Monte Carlo tests. But yes, the results were still within the expected bell curve. 

I still believe that second guessing the system is a bad habit for a beginner system trader to get into. First they skip trades because they don't like the look of it. Then they skip trades because "I think the market is about to tank" Or they backtest with 20 open positions but only open 10 in their real portfolio because they're worried about them all going south at the same time. Then they claim the system is broken because it's not working as expected.


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## tech/a

Still disagree
I've had 15 candidates picked each time I run a scan
Everyday I run it.
At the time I run the search I may have one in my portfolio
Exited so I only have one spot.
This is common in any of the 38 systems I have so far designed.

Seriously think about what your saying.
It just doesn't happen like that!
Picking the first middle or last chart which has the correct buy criteria 
Satisfied will place you in the range from the mean.
You can't possibly tell wether a random selection or a chosen selection will
Outperform each other.
The selections ALL satisfy the buy criteria.

At some point infact most points you'll have to select a stock from those 
In a list when you only have one slot to fill.
Using your grey matter or a dart won't guarentee which out performs which.

So if it makes you happy to brain scan the charts before you buy them
Like I DO I say go ahead !

If your results are under at the low end of your mean.

*DONT EVER TRADE DISCRETIONARY!*


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## CanOz

Well this is an interesting discussion hey...

Wouldn't have picked you Tech for a guy that would try and take every signal until you ran out of capital...but i suppose in part that's the same thing you're saying too, it wouldn't matter if you ran out of capital either.

Interesting, can this be tested? I guess we could add code to flipper to ignore a random set of trades and then compare results....

OR just ask Nick..,lol! Perhaps he's tested it.

Anyway, very good points of view, very informative.

CanOz


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## Lone Wolf

I'm not sure if you realise this so I'll say it first. When I talk about people adding their eyeball criteria to the selection criteria - I'm not just talking about picking the candidate you like the most. I'm saying that by applying an eyeball filter, there will also be times where you have capital to invest, but you keep the cash on the sideline because you don't like the look of any of the candidates your system suggested. How can you say that doing this makes no difference whatsoever to the outcome? In one case you're 100% invested, in the other you have one trade worth of cash in the bank.



tech/a said:


> Still disagree
> I've had 15 candidates picked each time I run a scan
> Everyday I run it.
> At the time I run the search I may have one in my portfolio
> Exited so I only have one spot.
> This is common in any of the 38 systems I have so far designed.




Yep, with you so far.



tech/a said:


> Picking the first middle or last chart which has the correct buy criteria
> Satisfied will place you in the range from the mean.




Yes you will be in the range of your backtested results. But you can manipulate where in the range you end up by adding additional criteria.



tech/a said:


> You can't possibly tell wether a random selection or a chosen selection will
> Outperform each other.
> The selections ALL satisfy the buy criteria.




But you can tell if a random selection will outperform a chosen selection. That's why we wrote the system rules in the first place. We identified criteria that narrow the field down to the ones most likely to give better performance. If you then narrow the field even further with additional criteria, you're changing the outcome once more.



tech/a said:


> At some point infact most points you'll have to select a stock from those
> In a list when you only have one slot to fill.
> Using your grey matter or a dart won't guarentee which out performs which.




Agreed. Just as there is no guarantee that our system generated buy signals will outperform the ones it filtered out. But we know that over time our criteria will cause the results to skew in our favor. In the same way, using your grey matter (assuming you always look for the same thing) over a random selection will also cause a skew in the results over time, one way or the other.



tech/a said:


> If your results are under at the low end of your mean.
> 
> *DONT EVER TRADE DISCRETIONARY!*




If what you say is true then my discretionary picking of candidates had no affect on the outcome. So it has no bearing on my skill in discretionary trading.

Look Tech, I'm not trying to undermine you. You probably have more knowledge and experience in the area right now than I will ever have in my life. And if the two of us were to disagree I'd advise people to follow your lead, not mine. One of us doesn't understand where the other one is coming from. It's usually me. :

Lets take Tech Trader for example. You have previously stated that there are additional eyeball filters you apply to Tech Trader after it spews out a list of buy signals. Why do you apply these additional criteria if they don't make any difference to the outcome? Because you know that they do make a difference. Any time you add an additional criteria, you change the outcome in some way.

Lets use a pseudo code example:

Backtest code:
Buy signal = 
Price has risen 20% in the last 10 days.
Sell signal = 
Price has fallen 20% from its high.

Real portfolio trading decision:
Buy signal = 
Price has risen 20% in the last 10 days AND (eyeball test) the last bar closed in the top half of the range for the day.
Sell signal =
Price has fallen 20% from its high.

You're telling me there will be no difference between the results of the above two examples? Whether you program the buy criteria in, or add it in later as an eyeball test is irrelevant. It still changes the criteria by which the stocks get chosen and therefore changes the results.


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## Garpal Gumnut

It all becomes so complicated.

Remember Occams Razor.

Simplest solution is better.

While I admire techs who work systems, it seems for time/effort, versus profit/cost, versus sticking to systems with tweeks, it seems too mightily complicated.

Give me a breakout from a range on strength, an inverse head and shoulders recovery after a long bear descent, or an ascending triangle on a group of chosen stocks, then I am interested, if I have the dough.

There are too many variables not only in stocks and TA, and in life, for a systematic approach to work, for the average investor.

Unholy Grails is excellent. It is not the Holy Grail, as Nick explains in his book.

gg


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## tech/a

Garpal Gumnut said:


> It all becomes so complicated.
> Remember Occams Razor.
> 
> Simplest solution is better.
> 
> While I admire techs who work systems, it seems for time/effort, versus profit/cost, versus sticking to systems with tweeks, it seems too mightily complicated.
> Give me a breakout from a range on strength, an inverse head and shoulders recovery after a long bear descent, or an ascending triangle on a group of chosen stocks, then I am interested, if I have the dough.
> 
> There are too many variables not only in stocks and TA, and in life, for a systematic approach to work, for the average investor.
> Unholy Grails is excellent. It is not the Holy Grail, as Nick explains in his book.




Having turned $30,000 into $360,000 in 6 yrs with one of mine all traded live and still on Nick's site for those who want to use as an example, a few would disagree.
I remember getting a hamper delivered the size of a packing case one year from a guy who had used T/T for his super,compounding and re investing his profits.
His card informed me his return for the year was 64% on capital way above my tested averages.
His super was high 6 figures.

If you have serious funds to invest longterm then systems trading is a sound viable alternative to others.
Your method maybe another but I haven't seen YOUR stats on that!

LONE WOLF

I'm not here to alter beliefs.
If that's what you have found then you should trade In accordance with YOUR findings.


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## Lone Wolf

tech/a said:


> LONE WOLF
> 
> I'm not here to alter beliefs.
> If that's what you have found then you should trade In accordance with YOUR findings.




Sigh. Every time I try to communicate with others I’m reminded of why I don’t do it often.

I don't mean to argue Tech. I just wanted to explain my thinking so that I can learn something from the discussion that follows. You feel further discussion is pointless and that’s fine. Thanks for trying anyway. 

My apologies to Elfanger who’s thread I partially derailed. It’s not as hard as we made it sound. I suggest you get set up and try testing things for yourself. You’ll soon see for yourself what matters and what doesn’t.


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## Trembling Hand

Lone Wolf said:


> Sigh. Every time I try to communicate with others I’m reminded of why I don’t do it often.




LOL. It could be worse. No one could respond. Then you know you're in trouble.


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## tech/a

> Sigh. Every time I try to communicate with others I’m reminded of why I don’t do it often.




Sorry but felt/feel we are in circles.


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## qldfrog

tech/a said:


> Having turned $30,000 into $360,000 in 6 yrs with one of mine all traded live and still on Nick's site for those who want to use as an example, a few would disagree.



Tech/a which one if I may ask? I am building my own AB "system"  and would be keen to compare...
Cheers


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## tech/a

qldfrog said:


> Tech/a which one if I may ask? I am building my own AB "system"  and would be keen to compare...
> Cheers




Techtrader
It peaked at around $425,000 a year before 
The GFC.


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## systematic

Garpal Gumnut said:


> There are too many variables not only in stocks and TA, and in life, for a systematic approach to work, for the average investor.




There are too many variables not only in stocks and TA, and in life, to use anything but a systematic approach, for the average investor.


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## CanOz

systematic said:


> There are too many variables not only in stocks and TA, and in life, to use anything but a systematic approach, for the average investor.




+1 totally agree mate, for EOD trading I couldn't be bothered trading anything but an algo.

CanOz


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## skc

Lone Wolf said:


> Sigh. Every time I try to communicate with others I’m reminded of why I don’t do it often.
> 
> I don't mean to argue Tech. I just wanted to explain my thinking so that I can learn something from the discussion that follows. You feel further discussion is pointless and that’s fine. Thanks for trying anyway.




Lol Lone Wolf. I hear you and I agree with you. You never know what you brain filtter is doing to your system. It may under- or outperform non-filtered results, but it is still within the original system Monte Carlo umbrella.

I don't think tech/a disagrees with you. You guys are just talking pass each other.


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## Lone Wolf

skc said:


> Lol Lone Wolf. I hear you and I agree with you. You never know what you brain filtter is doing to your system. It may under- or outperform non-filtered results, but it is still within the original system Monte Carlo umbrella.
> 
> I don't think tech/a disagrees with you. You guys are just talking pass each other.




Someone understands me... I have tears in my eyes...

Yes, that's what I was saying. Somehow you managed to use less words than me though. :


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## tech/a

Lone Wolf said:


> Someone understands me... I have tears in my eyes...
> 
> Yes, that's what I was saying. Somehow you managed to use less words than me though. :




Last try.
I actually have 2 visual filters in my Techtrader method.
(1) The stock cannot be in a clearly long term range.
(2) The stock must be either breaking out of a longer term down trend or be In a clear up trend.

Here is where we differ.
If they were added filters then certain stocks would not be in the scans satisfying the criteria for the system.
The same criteria used to test ALL stocks selected by the system rules.

My arguement is that the MonteCarlo results give me a deviation from the mean results using ALL stocks selected
Of say 20% low end----32% mean ----42% high end.
Picking ANY of those selected in a scan will see my long term results ( according to testing ) fall somewher between 20 and 42%. Knowing that even if I used a dart on those selected ---- unless market conditions differed markedly from those used in testing--- then that's where my profit is likely to fall.

My eyeball screen I could not code so used the above logic for justifying it's use.
Over the years of live testing the system was returning results above the mean which was 32% and the mean 
27% from memory.
Frankly I have no idea whether the eyeball filter or exceptional bullish conditions tilted the returns above the mean.
I suspect the latter! But I do know that compounding/margin and pyramiding saw returns on capital invested that were and are phenomenal.

*Over 6 years $30k to $360k that's over 1000% on money invested.
Many lose sight of this--- infact don't even see it!*

I think/ hope this explanation helps our cause Lone Wolf.
Good discussion should be encouraged and I have enjoyed this one.


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## tech/a

*Actually it was 7 Years.*

*For those interested* This is the last Equity Curve Graph Daryl put up.

*1200% on capital invested in 7 yrs!*

We had closed trading for a little while 
I had closed my own trading in JULY---its all on the website.
We began with $30K on BT Margin So $90K---leveraged 3:1 The $90000 looks like 0
due to perfect placement of my line!!!

*Click to expand*

*

*

No money in systems trading?


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## craft

tech/a said:


> *Actually it was 7 Years.*
> 
> *For those interested* This is the last Equity Curve Graph Daryl put up.
> 
> *1200% on capital invested in 7 yrs!*
> 
> We had closed trading for a little while
> I had closed my own trading in JULY---its all on the website.
> We began with $30K on BT Margin So $90K---leveraged 3:1 The $90000 looks like 0
> due to perfect placement of my line!!!
> 
> *Click to expand*
> 
> *
> View attachment 51429
> *
> 
> No money in systems trading?




Lies, damned lies and statistics.

Did you have to pay back the original 60K loan from the ending 360K?

The *leveraged* return if you had the loan to repay would be 30K to 300K or a CAGR of 38.9%

If you held your leverage ratio constant at 3:1 then you would have had a 120K loan at the end and 30K to 240K is a leveraged CAGR of 34.6% 

90K to 360K over 7 years is an *unleveraged* return of 22% CAGR.

The regression line on the all ords accumulation index returned 24.6% CAGR over the 03 to 07 bull market.

The real strength of any trend following system is the switching to cash to reduce the depth of draw down – the delay in switching back out of cash is the cost on the up legs.  Why didn’t you not keep going with it and wait for the next signals?  How would it have fared in the 10-12 sideways noise?

ps. Lonewolf I thought you post made splendid sense – but I didn't comment because my views don't count on this tech centric forum.


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## tech/a

You pay the interest on the loan
You keep the profit.
If I lost X Id be margin called.
You dont get given the 60K to run off and 
trade through any platform you like.
You dont physically take the money.

Anyway *MORE LIES.*for your amusement.

*Click to expand.*


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## Trembling Hand

craft said:


> Lies, damned lies and statistics.
> 
> Did you have to pay back the original 60K loan from the ending 360K?




Hey? Not sure what you mean here craft? A margin loan is not a loan, its leverage.


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## craft

tech/a said:


> You pay the interest on the loan
> You keep the profit.
> If I lost X Id be margin called.
> You dont get given the 60K to run off and
> trade through any platform you like.
> You dont physically take the money.
> 
> Anyway *MORE LIES.*for your amusement.
> 
> *Click to expand.*
> 
> View attachment 51430




Tech

What you have put up is all totally bollocks for establishing what the actual CAGR was and I’m sure you know it, but why ruin a god story with reality.

No idea if the equity chart is closed trades or open – obviously the Allords you are comparing too is on an open basis.

No idea if your equity chart includes dividends, if so the comparison should be the accumulation index

No idea if you equity chart included the subtraction of interest.

If the 360K ending balance is all equity rather than capital employed why did your opening balance start at 90K and not 30K  

Whether you describe it as a loan or margin – Is the 360K equity or is it capital, if it’s capital how much equity did you make on your original 30K equity?

If it was somebody else putting this rubbish up you and your mates would be all over them.

The level of Hypocrisy is unbelievable.

Correction of mistake in my previous post:

If you held your leverage ratio constant at 3:1 then you would have had a 120K loan at the end and 30K to 240K is a leveraged CAGR of 34.6%

should be

If you held your leverage ratio constant at 3:1 then you would have had a 240K loan/margin at the end and 30K to 120K is a leveraged CAGR of 21.9%


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## Trembling Hand

craft said:


> If you held your leverage ratio constant at 3:1 then you would have had a 240K loan/margin at the end and 30K to 120K is a leveraged CAGR of 21.9%




Nah thats just not right. I'm surprised you don't know how a leveraged account works. Once you close out all trades you have no "loan" all you have is capital.


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## craft

Trembling Hand said:


> Nah thats just not right. I'm surprised you don't know how a leveraged account works. Once you close out all trades you have no "loan" all you have is capital.




If the 360K is closed out equity why does the equity curve start at 90K capital and not the original 30K equity?


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## Trembling Hand

craft said:


> If the 360K is closed out equity why does the equity curve start at 90K capital and not the original 30K equity?




Not sure which bit you are talking about. Tech will have to answer that.


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## robz7777

I think what he is getting at.... 

$30k plus $60k on margin = $90k start.. 

1) Is $360k end value $330k equity plus $30k margin? 
2) Or was the $30k paid off once the equity got to $90k?
3) Or was the 33% gearing maintained throughout the system so ending margin was $120k and equity of $240?

If we are looking at the CAGR surely we have to look at the system results without leverage used?


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## Trembling Hand

robz7777 said:


> I think what he is getting at....
> 
> $30k plus $60k on margin = $90k start..
> 
> 1) Is $360k end value $330k equity plus $30k margin?
> 2) Or was the $30k paid off once the equity got to $90k?
> 3) Or was the 33% gearing maintained throughout the system so ending margin was $120k and equity of $240?
> 
> If we are looking at the CAGR surely we have to look at the system results without leverage used?




Dudes you don't pay off anything. For every dollar in your account they will alow you to hold a position to the value of $3.

You don't pay back anything. You never get any extra money in your account. We are not talking risk adjusted returns. We are just talking about starting capital of $30,000 to ending capital of $ 360,000. (maybe $330,000??)

I don't understand the confusion. Its a pretty simple calculation isn't it?


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## tech/a

*Craft*

I'll leave it to you to sort your mess out.
I bought a Commercial property with my $387000 (What I had at the end of my stint in my personal account).
So know I wasn't $60K short!--I'm sitting in it now!

The exercise was and still is designed to help those who are starting on the journey---it never was and certainly isnt the be all and end all of systems.

But as I'm well and truly used to by now--when ever I post anything about it up---it attracts those who want to cut down  "The Tall Poppy".


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## tech/a

Trembling Hand said:


> Not sure which bit you are talking about. Tech will have to answer that.




 We Bought $90k of stock.
At the end we sold $360k of stock.
I personally had turned my 30K into $387k and used it to purchase My building.

Sh==t people get excited about big percentages --- once you do it you wont get so flustered!


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## craft

tech/a said:


> *Craft*
> 
> I'll leave it to you to sort your mess out.
> I bought a Commercial property with my $387000 (What I had at the end of my stint in my personal account).
> So know I wasn't $60K short!--I'm sitting in it now!
> 
> The exercise was and still is designed to help those who are starting on the journey---it never was and certainly isnt the be all and end all of systems.
> 
> But as I'm well and truly used to by now--when ever I post anything about it up---it attracts those who want to cut down  "The Tall Poppy".




The equity curve put up runs from 90K to 360K over 7 years .  We know that starting capital is 30K equity and 60K margin.

What is not explicit is whether the 360K ending figure is 360K equity, 300K equity and the original 60K margin or if the 3:1 margin was retained and includes 240K Margin. Even if the leverage ratio wasn't maintained where was the 60K original margin retired in the equity curve?

Dodge and weave and insinuate that I don't understand all you like, but I doubt that you will provide any real transparency.

My bull**** meter is ringing loudly and I suggest others should also until there is the same level of accountability here as he would be expect of others.


----------



## craft

tech/a said:


> Sh==t people get excited about big percentages --- once you do it you wont get so flustered!




You always resort to this sort of crap when challanged - you asume so much but know so little.


----------



## Trembling Hand

craft said:


> My bull**** meter is ringing loudly and I suggest others should also until there is the same level of accountability here as he would be expect of others.




It did run live on Nicks forum from start to end.


----------



## tech/a

> Dodge and weave and insinuate that I don't understand all you like, but I doubt that you will provide any real transparency.
> 
> My bull**** meter is ringing loudly and I suggest others should also until there is the same level of accountability here as he would be expect of others.




Hah ha ha Transparency.
Spend the weekend reading the 55 Threads and 2261 Posts 
On Techtrader on "The Chartist"

Show me that level of transarency here!!

Click to expand 
Read to *EXPAND EVEN MORE*

*

*


----------



## craft

Trembling Hand said:


> It did run live on Nicks forum from start to end.




I know that and I'm not disputing there was probably good things to come from the whole exercise.

But given the potential leverage and the market backdrop – I suspect it was a fairly ordinary return when calculated and expressed in a realistic and comparable way.


----------



## Trembling Hand

craft said:


> I know that and I'm not disputing there was probably good things to come from the whole exercise.
> 
> But given the potential leverage and the market backdrop – I suspect it was a fairly ordinary return when calculated and expressed in a realistic and comparable way.




Fair comment. Still ya gotta give credit for having the guts to document it. *NO ONE ELSE here has.* In spite of all the jaw boning that goes on.


----------



## odds-on

craft said:


> But given the potential leverage and the market backdrop – I suspect it was a fairly ordinary return when calculated and expressed in a realistic and comparable way.




It would be interesting to see the return calculated and expressed in a comparable way. It would also be useful if it included how many manhours were spent to obtain these returns. Trading and leverage vs index tracker and beach 

Cheers


----------



## robz7777

Trembling Hand said:


> Dudes you don't pay off anything. For every dollar in your account they will alow you to hold a position to the value of $3.
> 
> You don't pay back anything. You never get any extra money in your account. We are not talking risk adjusted returns. We are just talking about starting capital of $30,000 to ending capital of $ 360,000. (maybe $330,000??)
> 
> I don't understand the confusion. Its a pretty simple calculation isn't it?




TH - I'm fairly sure Tech said that the portfolio was managed through a margin loan? If i'm correct then at some stage he would need to repay the loan at some stage to finalise the account.. 

I understand that Tech has based his figures on a return based upon his initial $30k but not everyone is comfortable using leverage to trade - even with a methodology which is proven to work. I like the strategy and have subscribed to the chartist as I am not currently in a position to spend hours (or years) learning how to create my own strategy..


----------



## craft

Trembling Hand said:


> Fair comment. Still ya gotta give credit for having the guts to document it. *NO ONE ELSE here has.* In spite of all the jaw boning that goes on.




I’ll happily give credit and lots of it for that – but I also expect accountability to sum up the outcomes realistically and clearly.


----------



## odds-on

Trembling Hand said:


> Fair comment. Still ya gotta give credit for having the guts to document it. *NO ONE ELSE here has.* In spite of all the jaw boning that goes on.




Returns do matter, the whole point of investing/trading is to achieve excess returns. Everybody who visits ASF is trying to achieve excess returns (and protect principal). My bullsh!t detector starts ringing when I see anybody claiming a CAGR>15% over timeframe of 5 years or more.


----------



## tech/a

> TH - I'm fairly sure Tech said that the portfolio was managed through a margin loan? If i'm correct then at some stage he would need to repay the loan at some stage to finalise the account..




You ----Still don't get it people.
Your given leverage and pay interest on it --WHEN YOU USE IT.
We didn't always use it. Was minor in the overall scope of things.

anyway----


----------



## CanOz

Margin loans just allow you to either take larger positions than your account size, or more positions than your account size. Generally the accepted way is to take more positions while having the same risk on each trade. Portfolio heat becomes the risk.

Leverage and compounding are all part of a successful strategy. I don't see what the problem in understanding this is.

In laymens terms...

I have a margin account with IB, I don't have to pay the loan back, as I trade it just gives me more buying power. As the positions grow the buying power become less until I'm fully leveraged. As the positions shrink the buying power becomes more....simple.

CanOz


----------



## tech/a

odds-on said:


> Returns do matter, the whole point of investing/trading is to achieve excess returns. Everybody who visits ASF is trying to achieve excess returns (and protect principal). My bullsh!t detector starts ringing when I see anybody claiming a CAGR>15% over timeframe of 5 years or more.





Its all documented and has been for
over 10 yrs---been published and tested in around 15 languages
by countless 1000s on who knows how many bourses.


OK so I start with $30K
7 years later I have $387K

How would *YOU* express my return on investment---?
Im not claiming ----- it is* ACTUAL*--its there live to verify---


----------



## McLovin

CanOz said:


> Margin loans just allow you to either take larger positions than your account size, or more positions than your account size. Generally the accepted way is to take more positions while having the same risk on each trade. Portfolio heat becomes the risk.
> 
> Leverage and compounding are all part of a successful strategy. I don't see what the problem in understanding this is.
> 
> In laymens terms...
> 
> I have a margin account with IB, I don't have to pay the loan back, as I trade it just gives me more buying power. As the positions grow the buying power become less until I'm fully leveraged. As the positions shrink the buying power becomes more....simple.
> 
> CanOz




I think the issue is that some people see a margin loan as a setup where a bank gives you $x and you pay interest on that money and it sits on your balance sheet until you eventually repay the lump sum, rather than seeing it as a revolving line of credit.

The use of leverage allowed a much larger return on equity even with an average return on capital. I think that is the only point craft et al are making.


----------



## craft

tech/a said:


> You ----Still don't get it people.
> Your given leverage and pay interest on it --WHEN YOU USE IT.
> We didn't always use it. Was minor in the overall scope of things.
> 
> anyway----




The equity curve as documented for Tech Trader runs from 90 to 360 a CAGR of 21.9% or 400% over 7 years.

You claim a return of 30 to 360 (or 387 for your self) which is a CAGR of 42.6% or as you express it 1200% over 7. 


Very slowly so an idiot like me can understand – reconcile these two returns and I will leave you in peace.


----------



## Trembling Hand

craft said:


> The equity curve as documented for Tech Trader runs from 90 to 360 a CAGR of 21.9% or 400% over 7 years.
> 
> You claim a return of 30 to 360 (or 387 for your self) which is a CAGR of 42.6% or as you express it 1200% over 7.
> 
> 
> Very slowly so an idiot like me can understand – reconcile these two returns and I will leave you in peace.




Why have you started it @ 90  capital was 30?


----------



## pavilion103

Trembling Hand said:


> Why have you started it @ 90  capital was 30?




Yeh that's what I was thinking too.


----------



## JimBob

I think this is being made to be a lot more complicated than it needs to be.  Money in pocket at start = $30k, money in pocket at end = $360k.  Ignore the effects of margin and leverage, your starting capital is still the same, the leverage just allows you to take more positions with your starting capital than you would with no leverage.


----------



## craft

Trembling Hand said:


> Why have you started it @ 90  capital was 30?




Look at the equity curve at post 28.


----------



## Ves

Trembling Hand said:


> Why have you started it @ 90  capital was 30?



If he blew up does he lose 30k or 90k?


----------



## aarbee

This is a very interesting discussion. 
Trading on margin is a good way of maximising profits but what people forget is that it also multiplies drawdowns. While developing a mechanical trading system and deciding to use leverage for actual trading, the DD is a major factor.  Techtrader was traded live and the results are there for all to see is a great illustration that Trend Following and Mechanical trading works. However, talking about >1000% returns etc is misleading.

What one has to take away about the merits of the system is the fact that it took 90k to whatever ending equity it did. Margin should not be a part of the performance metric of the system. 

Cheers


----------



## Trembling Hand

craft said:


> Look at the equity curve at post 28.




Yeah sorry cannot really see what it starts at. But starting Capital was 30.



Ves said:


> If he blew up does he lose 30k or 90k?




That depends on technicalities but it would be 30. Of course if it was a disaster where all your holding if using all margin dropped lower than 30% overnight then you start losing more than your capital. But come guys really?


----------



## craft

To stop this going round in circles what I’m digging at is 

What return is attributable to the system and what return is attributable to the leverage.

You shouldn’t confuse the two.


----------



## Trembling Hand

Actually this is a very interesting discussion and dare I say it gets to the underlying dreaded argument, one that I never want to really get involved in but here goes. TA vs FA!!

System traders use leverage, or can use leverage, with simple portfolio management. Thats why we use stops and cannot for the life of use understand hanging onto something thats the market is pushing against us.

I bet I regret this post.............


----------



## Trembling Hand

craft said:


> To stop this going round in circles what I’m digging at is
> 
> What return is attributable to the system and what return is attributable to the leverage.
> 
> You shouldn’t confuse the two.




Most systems NEED leverage to hold position.


----------



## McLovin

Trembling Hand said:


> Actually this is a very interesting discussion and dare I say it gets to the underlying dreaded argument, one that I never want to really get involved in but here goes. TA vs FA!!
> 
> System traders use leverage, or can use leverage, with simple portfolio management. Thats why we use stops and cannot for the life of use understand hanging onto something thats the market is pushing against us.
> 
> I bet I regret this post.............




Would it be fair to say a system, unlevered, will return below average returns because it is designed (from a risk perspective) to be levered?


----------



## CanOz

McLovin said:


> Would it be fair to say a system, unlevered, will return below average returns because it is designed (from a risk perspective) to be levered?




No, not necessarily. In fact most system design and testing that I've done with my own systems and the flipper were unleveraged. No leverage at all was taken into account. The results are compounded, that's all.

CanOz


----------



## JimBob

Without leverage, you wouldn't be able to take up as many positions as you would with leverage so you either need a much larger starting base or your equity curve would be reduced due to taking less positions.  In this case, the end point should still be achieved, just at a later date as long as your system remains valid.


----------



## McLovin

CanOz said:


> No, not necessarily. In fact most system design and testing that I've done with my own systems and the flipper were unleveraged. No leverage at all was taken into account. The results are compounded, that's all.
> 
> CanOz




Thanks Can. So if you were assessing a system you'd want to know about its unlevered returns?


----------



## craft

Trembling Hand said:


> Actually this is a very interesting discussion and dare I say it gets to the underlying dreaded argument, one that I never want to really get involved in but here goes. TA vs FA!!
> 
> System traders use leverage, or can use leverage, with simple portfolio management. Thats why we use stops and cannot for the life of use understand hanging onto something thats the market is pushing against us.
> 
> I bet I regret this post.............




FA is also a system.

It could also be leveraged and I’m sure some do.

Portfolio management is just as relevant to FA.

I would be the first to admit that volatility is higher for many successful FA systems and this in turn would be a reason to keep gearing levels more conservative then for a smooth technical system equity curves.

But no matter how smooth the equity curve the higher you leverage the more at risk to an outlier you are, so leverage and its risk/return needs to be analysed separate to the underlying system return.

You shouldn't regret your post - I see no difference in the most important aspects between the two.


----------



## Trembling Hand

McLovin said:


> Would it be fair to say a system, unlevered, will return below average returns because it is designed (from a risk perspective) to be levered?




Well I'm sure we are now getting into the how long is a piece of string. BUT

Once you have a profitable system you soon find that you are taking a position worth $100,000 but only risking $2000 to hopefully make $6000. Considering your risk is $2000 but the position is worth  $100,000 what should your capital be? Any reasonable trader would be mad to alot $100,000 to something only risking 2 g. Its just a tool to get your capital working. 

Why not use leverage take 3 positions risk 6 g against $100,000 and aim for say 18 win? Thats why techies struggle with FA. I imagine a FA trader wouldn't stress over their stocks going 6% against them?


----------



## Trembling Hand

craft said:


> FA is also a system.
> 
> It could also be leveraged and I’m sure some do.
> 
> Portfolio management is just as relevant to FA.
> 
> I would be the first to admit that volatility is higher for many successful FA systems and this in turn would be a reason to keep gearing levels more conservative then for a smooth technical system equity curves.
> 
> But no matter how smooth the equity curve the higher you leverage the more at risk to an outlier you are, so leverage and its risk/return needs to be analysed separate to the underlying system return.
> 
> You shouldn't regret your post - I see no difference in the most important aspects between the two.




Yeah I agree. I hate when I see people saying I made 90% in 3 months. Sure you can do it. I have statements laying around this place turning $1,000 into $50,000 in 7 days. But its BS to a large degree. The turnover was something like $8 mil. I **** you not. Whats the risk adjusted returns. 0.6% for a weeks work..... ho hum.


----------



## skc

Craft,

When I used to pair trades CFDs I might be, say, holding $20k long and $20k short. The margin required to support the trade is probably $8k maximum. But with my own risk management in mind dealing with lots of pairs over a long time, the trading account size would be ~$100k. 

So if I made $500 on that trade, I measured my return in two different ways:
1. Return on position size which was $500/$20k = 2.5%
2. Return on account size which was $500/$100k = 0.5%

But when I consider my annual return and CAGR etc, it's simply how much cash is in the account over how much I've put in. If I had $150k at the end, it's 50% return. It doesn't matter that at some stage during the year I held $400k long and $400k short.

In the case of tech/a return... it is neither here nor there. I would have accepted the fact that he started with $30k and was able to withdraw $360k (or whatever) at the end of 7 years and call the CAGR that way. How much face value was held during the journey is irrelevant.



odds-on said:


> Returns do matter, the whole point of investing/trading is to achieve excess returns. Everybody who visits ASF is trying to achieve excess returns (and protect principal). My bullsh!t detector starts ringing when I see anybody claiming a CAGR>15% over timeframe of 5 years or more.




You probably need to recalibrate your BS detector. The market itself did better than that at times. Even a term deposit back in the 90s could do that...


----------



## craft

skc said:


> Craft,
> 
> When I used to pair trades CFDs I might be, say, holding $20k long and $20k short. The margin required to support the trade is probably $8k maximum. But with my own risk management in mind dealing with lots of pairs over a long time, the trading account size would be ~$100k.
> 
> So if I made $500 on that trade, I measured my return in two different ways:
> 1. Return on position size which was $500/$20k = 2.5%
> 2. Return on account size which was $500/$100k = 0.5%
> 
> But when I consider my annual return and CAGR etc, it's simply how much cash is in the account over how much I've put in. If I had $150k at the end, it's 50% return. It doesn't matter that at some stage during the year I held $400k long and $400k short.




Is a small return on a large (undercapitalised) exposure that results in a 50% return on equity equivalent to your 50% return in a professionally approached pairs trading method? 

 Which is more repeatable?

Leverage has a different risk profile to system return and I want to know what’s responsible for what return before I can evaluate the risk/reward.

For pairs trading I assume net leverage is relatively small even if exposure is large. That’s not the case for a leveraged long only system.


----------



## Trembling Hand

craft said:


> Leverage has a different risk profile to system return and I want to know what’s responsible for what return before I can evaluate the risk/reward.




Is it a simple matter of picking some sort of risk metric? Or how do you actually evaluate the risk of a two or more vastly different system?


----------



## sinner

A couple of trend following systems leveraged 3:1. There is definitely alpha in portfolio management, you are simply not holding assets which aren't in a bull market, which is more than you can say for at least 10-20% of any given stock index. The green curve is actually techtrader run against the XSO.

(against the XSO to represent techtrader universe better)



(as you can see even in the most potent of bull runs there will be 10-20% of any index which isn't participating)



I'd also point out that the traditional use of technicals has been to reduce volatility. Leveraging low volatility is a technique which is now being recognised as the major driver in returns for fund managers like Buffett.


----------



## craft

Trembling Hand said:


> Is it a simple matter of picking some sort of risk metric? Or how do you actually evaluate the risk of a two or more vastly different system?




I’m sure you don’t want to side track into distribution of returns and how truly random or correlated they are etc.  The point I am making is that I wouldn’t even try to evaluate a system until after I had isolated its returns from any effect of leverage. 

The figures Tech is flinging around clearly includes some effect from leverage but how much – can’t get a straight answer to that so can’t get to the underlying system performance. It appears to me the system equity curve ran from 90 to 360 or 21.9% CAGR which is nothing extrodinary for a trend following system in a big bull market, the rest of the result is leverage.  But I’m guessing because my questions are dodged with insinuation of my lack of understanding.

As well as the bull market period I would want to know how the system performs in a choppy sideways market before I could even think of assigning safe leverage levels.


----------



## Trembling Hand

Craft yeah I agree. Its a good result not spectacular but its still a long way from what most traders manage - even in bull markets. Sad but seriously true!!

By the way they are not designed to work in sideways markets. Thats why they have triggers that turn them on and off.


----------



## tech/a

Ive made a simple point.
Pedantics aside.

Sure the headline got discussion going.
Yes there are ways to maximize return.
Which includes the use of leverage.
If anyone wants to read through the pages of info
they will see how Risk is minimized and how draw down
is also kept well in control (With tradesim you can test including
leverage--dont know about amibroker).

But an average system Techtrader turned $30k into $360k

If you had a SMSF and got on that with say 200K or more
then you'd be pretty damned happy with the results.

You only need one prolonged move in your direction with
enough in it to be life altering.

Food for thought---digest it or let it Rot--up to you.


----------



## craft

Trembling Hand said:


> Craft yeah I agree. Its a good result not spectacular but its still a long way from what most traders manage - even in bull markets. Sad but seriously true!!
> 
> By the way they are not designed to work in sideways markets. Thats why they have triggers that turn them on and off.




But no trigger is perfect and getting whipsawed in sideways markets is the norm.

I here lots of discussion on Monte Carlo but how many chunk the actual market equity curve in varying block sizes to preserve the serial correlation? 

As soon as you Monte Carlo resample using a period of one you are making an implied assumption of no correlation or full randomness and that’s’ just not how the market works.  It’s quite feasible that a trend system will turn on multiple times to trends that fizz out early – and you can’t know in advance which one will be the real deal so you have to take every signal. Under these false starts its easy to get multiple losers across a correlated portfolio and have it happen two, three, four or more times before a sustained trend gets under way.  The reality of what correlated instruments do is almost inconceivable under a random distribution. 

A system has to be evaluated across all market conditions – cherry picking the return from a trend system in a bull market gives you a false sense of reality as does Monte Carlo simulations if you destroy a serial correlation that actually exists.


----------



## Trembling Hand

Craft, again no argument from me. Thats why I take the discretionary way.


----------



## craft

Trembling Hand said:


> Craft, again no argument from me. Thats why I take the discretionary way.




And you had better get back to it and me to reading some annual reports

Cheers.


----------



## qldfrog

craft said:


> A system has to be evaluated across all market conditions – cherry picking the return from a trend system in a bull market gives you a false sense of reality as does Monte Carlo simulations if you destroy a serial correlation that actually exists.



true but you can backtest your system against a falling market period, a choppy one and a bull one 
then based on your risk appetite you choose parameters with fits best in all situations;
my current "system" (a work in progress ) is designed that way, will not be the best in any specific  market but should offer nice enough result over the long range and i stress this the long range, I am on for a 5 years or so trip and will see how it goes
I will probably go for other variant etc each with their own portfolio and I am determined to see how it ends up on the long term


----------



## sinner

craft said:


> But no trigger is perfect and getting whipsawed in sideways markets is the norm.




The classic paper "Dynamic Strategies for Asset Allocation" by Perolde and Sharpe went into this topic deeply. I think what you are describing is essentially the result of a crowded trade (at least from the perspective of the paper).

http://www.stanford.edu/class/msande348/papers/PeroldSharpe.pdf


----------



## tech/a

qldfrog said:


> true but you can backtest your system against a falling market period, a choppy one and a bull one
> then based on your risk appetite you choose parameters with fits best in all situations;
> my current "system" (a work in progress ) is designed that way, will not be the best in any specific  market but should offer nice enough result over the long range and i stress this the long range, I am on for a 5 years or so trip and will see how it goes
> I will probably go for other variant etc each with their own portfolio and I am determined to see how it ends up on the long term




Attempting to design a system which will perform in all market conditions is futile in my view

You only need 2 
Trending
Or
Ranging.

You need to be trading both.
That way you'll catch trends and profit in ranging markets while your trending system is switched off or under performs.


----------



## aarbee

Table 39 on pg 107 of "Unholy Grails" outlines the performance of the Techtrader system after 1000 iterations in Monte Carlo simulation. 
CAGR   Avg/21.29%    Range Min/14.53%    Range Max/30.82%
maxDD Avg/39.3%      Range Mon/49.9%    Range Max/32.7%

In terms of the Drawdowns, the figures are quite high as such. Beginning to trade it with 3x leverage would be sheer madness based on the figures presented. Even with the knowledge that Tech turned a 30k float to 360k, it would not be prudent to trade the system with any leverage based on the results outlined above. The lower DD figure of 32.7% would still be way outside the comfort zone of nearly all traders. 

I am currently working on an EOD system showing a Win Rate of 82%, about 110 trades per year, with a DD of around 3% and annual return of 4.7% (not compounded).  With these figures, leverage is a great tool. Even with 5x leverage the DD would be around 15% which would be acceptable to most traders, while the returns can be quite juicy. This is generally not possible with Trend Following systems which by their nature have relative higher drawdowns and leverage would only make these worse. One should not forget that DD is the number one reason most traders start second guessing or quit trading their systems. TF systems by their nature are difficult to trade by most people, primarily due to whipsaws and DDs (length and depth thereof).

Nick has outlined quite a few TF systems in Unholy Grails for all to see. However, I will be very surprised if there would be too many people who will end up trading these consistently over a period of time even if they get attracted by the nice looking compounded equity curves showing final equities in millions of dollars. I for one never backtest with equity compounded but those realistic curves don't look sexy in books and publications touting particular systems. 

As for the topic of the thread, the systems in the book can be easily traded. They are not hard and do not require much time. I have been trading one of the systems and will get a good idea of it's performance after trading for atleast another one or two years. With ideas presented in the book, even better systems can indeed be designed. 

Cheers


----------



## kid hustlr

Good discussion and aarbee's thoughts about the techtrader are very good. 

Using leverage on a system with a high maxDD can obviously create problems.

In regards to the actual question in the OP, I actually consulted several different sources with the exact same question and Nick himself was kind enough to reply to me. Effectively I asked him 'I've read your book, what do I do now?'

His reply was below:

*You have a variety of options to move forward.

You can set up a watchlist and do it manually. Obviously you'll need faith yourself that it works, so doing it this way is somewhat 'geusswork' and very laborious. Perhaps its not psychologically the strongest way to proceed.

You ocan download our turnkey code that operates with Amibroker. This enables you to run the systems as designed with the knowledge the codde is correct (many have sent theor own versions and much of it is garbage). Doing it this way allows you to test and validate it for yourself, but also tinker and change parameters to better suit your own objective. You will need to buy Amibroker and then also the data to run it.

Lastly, you can subscribe to our Growth Portfolio, which is how I manage my very own SMSF and manage money for others. There is no need for software or data, you know its being monitored and personally traded by me, and we also offer ongoing research and support.

Anyway, not trying to sell you - just saying you have a variety of options to think about if you wanted to proceed. *

I think which option one decides upon is going to vary depending on the individual. 

- If I was running my own SMSF and had a decent balance, I'd just subscribe to the Growth Portfolio. This seems like an obvious option.

- Purchasing the turnkey system and validating ideas yourself is ideal if you have the time/skill/ability. Any concerns about how the system operates can be answered as you can explore them yourself.

- In theory, if you don't have the time or expertise, you could just pick one of the systems and trade it. If you have a trading account, paid subscription for data and the ability to set up a watchlist (i'm sure you could do this in Ninjatrader or some other software) in theory you can trade it. You just won't have done all the validation work yourself and may not have the same 'peace of mind' during a drawdown.

EDIT: Nick's attitude is really really good by the way.


----------



## chops_a_must

craft said:


> But no trigger is perfect and getting whipsawed in sideways markets is the norm.
> 
> I here lots of discussion on Monte Carlo but how many chunk the actual market equity curve in varying block sizes to preserve the serial correlation?
> 
> As soon as you Monte Carlo resample using a period of one you are making an implied assumption of no correlation or full randomness and that’s’ just not how the market works.  It’s quite feasible that a trend system will turn on multiple times to trends that fizz out early – and you can’t know in advance which one will be the real deal so you have to take every signal. Under these false starts its easy to get multiple losers across a correlated portfolio and have it happen two, three, four or more times before a sustained trend gets under way.  The reality of what correlated instruments do is almost inconceivable under a random distribution.
> 
> A system has to be evaluated across all market conditions – cherry picking the return from a trend system in a bull market gives you a false sense of reality as does Monte Carlo simulations if you destroy a serial correlation that actually exists.




I think you're missing a main point here...

Trading systems aren't, or shouldn't be traded in isolation.

Like tech says, he's range trading as well.

Personally, if you're a tech trader, I reckon you want three time frames: long term, mid term and short term. Complementing each other, and smoothing out your overall returns. And working in different market conditions.

From memory tech a like many of us bought bottom drawer stuff un leveraged in the gfc.

Although I'm not sure how to develop a range trading system, as most of the types of trades for that I've experimented with end up having to rely on mean reversion, and aren't strictly range trades.

Anyway, I've made my point and I'll save my other opinions for discussion elsewhere on the topic.

Really good thread and discussion though.


----------



## tech/a

> Table 39 on pg 107 of "Unholy Grails" outlines the performance of the Techtrader system after 1000 iterations in Monte Carlo simulation.
> CAGR Avg/21.29% Range Min/14.53% Range Max/30.82%
> maxDD Avg/39.3% Range Mon/49.9% Range Max/32.7%
> 
> In terms of the Drawdowns, the figures are quite high as such. Beginning to trade it with 3x leverage would be sheer madness based on the figures presented. Even with the knowledge that Tech turned a 30k float to 360k, it would not be prudent to trade the system with any leverage based on the results outlined above. The lower DD figure of 32.7% would still be way outside the comfort zone of nearly all traders.




In reply.

The maximum D/D was in the GFC.

My own filters had me out in July 2008.
The system actually was stopped out of ALL trades ( the one I was trading ) before the Max % was reached.
Nick left T/T in its raw state something he didn't do with the others---making suggestions for improvement with all others but not T/T

Adding that it is probably the most tweeked method around as its been available for all to play with.
It also shows only 1 negative year in 14 yrs (2008) with 2009 returning 113%
There is a 97% chance of being profitable in 30 mths

I have also played with it and have 4 T/T methods which have its base premise but far better results.
Drawdown can be minimised (19% through the GFC) is my best with the T/T based methods.

Was never meant to be the system of systems but was and is meant to show that anyone can build one from scratch.---Even a DUCK.

I urge everyone to learn from the journey many of us have been through and are going through.
A few of us put stuff up for the general populace to rip apart---that's what its for ---if you didn't then there would be nothing learnt.



> I am currently working on an EOD system showing a Win Rate of 82%, about 110 trades per year, with a DD of around 3% and annual return of 4.7% (not compounded). With these figures, leverage is a great tool. Even with 5x leverage the DD would be around 15% which would be acceptable to most traders, while the returns can be quite juicy.




*Aarbee*

LTCM had a very similar premise based upon an ARB strategy.
Very high win rate in its 90% s I believe. Drawdown--low single figures.
Ideal for Leverage.
I guess you know what happened to LTCM?


----------



## chops_a_must

tech/a said:


> Attempting to design a system which will perform in all market conditions is futile in my view
> 
> You only need 2
> Trending
> Or
> Ranging.
> 
> You need to be trading both.
> That way you'll catch trends and profit in ranging markets while your trending system is switched off or under performs.




Agreed on your first point. Half agree on your second. Because I'm not sure on your terminology.


----------



## Gringotts Bank

I think there are much better systems out there than those in the Unholy Grail, no disrespect intended to Nick.

2003-2007 bull run was highly unusual in it's length, strength and lack of volatility.  *Any* trend following system would have done well in that time frame.  For those interested in turn-key, the following systems might be of interest because they adapt to the conditions, and you're not guessing as to when the market is trending or ranging.  None of those massive DD's to worry about.

http://www.adaptivetradingsystems.com/trading-systems.html


----------



## tech/a

Gringotts Bank said:


> I think there are much better systems out there than those in the Unholy Grail, no disrespect intended to Nick.
> 
> 2003-2007 bull run was highly unusual in it's length, strength and lack of volatility.  *Any* trend following system would have done well in that time frame.  For those interested in turn-key, the following systems might be of interest because they adapt to the conditions, and you're not guessing as to when the market is trending or ranging.  None of those massive DD's to worry about.
> 
> http://www.adaptivetradingsystems.com/trading-systems.html




Having the best trading system on earth in "The Unholy Grails" was never Nicks intention.
But if you'd have read the book you'd know that.

Its actually designed for people like you who are drawn to equity curves like the one shown on your link.
In the hope you maybe better equipped to keep your $2995 plus updates in your pocket.
But if you'd have read the book you'd know that.

Not every trend following systems trader or discretionary trader made a profit in those years--
But you'd also know that.


----------



## aarbee

Hi tech,

My remarks were put forth as a reminder that use of leverage should be predicated on sound analysis of numbers for a system. GFC happened and so for anyone considering trading this or any other similar system has to base their judgements on the basis of backtesting results including that period. Of course, OOS testing would be part of the validation process. Like I mentioned, I am trading a properly tested momentum based system tweaked from ideas presented in Nick's book.  



tech/a said:


> In reply.
> 
> *Aarbee*
> 
> LTCM had a very similar premise based upon an ARB strategy.
> Very high win rate in its 90% s I believe. Drawdown--low single figures.
> Ideal for Leverage.
> I guess you know what happened to LTCM?




I know what happened to LTCM but you are pre-supposing too many things in lumping the system I mentioned in passing to that of LTCM's ARB strategy. I have been a trend-follower and it is still my prime strategy. However, there are many short term EOD strategies that are very viable. Of course, like any other, they need to be properly tested (IS and OOS) and validated before trading with real money. More importantly, the performance of the strategy needs to be monitored on continuous basis.  Contrary to what you appear to be inferring, all these strategies don't have to go down the LTCM way. 

For profitabe trading through all seasons, the trader's arsenal should have multiple strategies trading different markets in different time frames exploiting the different traits of the market's structure.

Cheers


----------



## tech/a

Sorry I seem to be missing something.

What is it that you believe bought about the demise of LTCM ?


----------



## aarbee

tech/a said:


> Sorry I seem to be missing something.
> 
> What is it that you believe bought about the demise of LTCM ?




No idea what you are missing tech. Matter of fact, I am quite confused as to what brought on LTCM in the discussion. I'll take a shot. It must be the mention of high win rates and leverage in my posting. Your earlier reply seemed to indicate that (and I might be completely wrong here) high win rates, low DD and leverage means going down the toilet like LTCM. 

There is reams of literature on what caused the demise of LTCM. No point rehashing the whole thing. However, I'll say when events like LTCM happen, it is more than the strategy that paves the way. There were systemic problems in LTCM. Even strategy wise, they were using quite complex ones dreamt up by academics and Nobel winners. They also ended up using very high leverage. 

Quote
At the beginning of 1998, the firm had equity of $4.72 billion and had borrowed over $124.5 billion with assets of around $129 billion, for a debt to equity ratio of over 25 to 1. It had off-balance sheet derivative positions with a notional value of approximately $1.25 trillion, most of which were in interest rate derivatives such as interest rate swaps. The fund also invested in other derivatives such as equity options.
Unquote

Contrast this with what I talked about.  A quite simple Mean-reversion strategy with high win rate, low DD, and a simple 5:1 leverage trading very liquid instruments. For the life of me I can't think of how this would equate to risks of going down the LTCM way. 

There are a lot of inefficiencies in the market that can be exploited to extract profit. Trends (Momentum) and Mean-Reversion are two of the most prevalent. As a retail trader, we should have systems in our arsenal to trade for both to smooth out our equity curve. Between the two, Trend-Following is by far the more difficult to trade due to whipsaws, deeper drawdowns, long string of losses etc. In difficult times it does require a lot of fortitude to stay the course. 
Other short-term, high win rate, low DD strategies are easier to trade, complement the TF ones and *most importantly *are far easier to monitor the health of during trading. One has a very prompt feedback in such systems when they go out sync with the market because of frequency of trades etc.

It is rather disingenuous of you to defend 3:1 leverage in a TF system (with relatively high DDs) which by it's very nature is hard to monitor for performance but condemn to ignominy a 5:1 leverage of a frequently trading system with low DD and is far easier to monitor and based on a very persistent inefficiency in the market structure. 

Notwithstanding above, I will record here my appreciation of all the benefits the live discussion of TechTrader system has brought to many traders and doubters of Trend-Following, and systems trading. 

Apologies to the starter of this thread for taking it off-topic.

Cheers


----------



## CanOz

aarbee said:


> Apologies to the starter of this thread for taking it off-topic.
> 
> Cheers




No worries, great post aarbee. Cleared that one up for me too.

CanOz


----------



## sinner

chops_a_must said:


> Although I'm not sure how to develop a range trading system, as most of the types of trades for that I've experimented with end up having to rely on mean reversion, and aren't strictly range trades.




If you have a look at the Sharpe paper I posted he explains "Constant Mix" trading strategies, these are strategies that perform best within ranging environments. Please consider that "mean reversion" is a constant mix style strategy.


----------



## tech/a

LTCM's demise was leverage.

Even a 2% move against ---which was all but never heard of--- would smash it.
While if it could have been funded it may have survived---it couldn't and didn't.

My point was as is yours that poor use (Perhaps cavalier use) of leverage will if things turn pear shaped have the potential to ruin *any* trading method.

*Back to T/T*.
and leverage.

I wont ask you read the complete topic BUT.
Position sizing was 10% of capital and risk was 10% of entry price.
so 1% on leveraged capital/trade and 3.33% on initial capital.
That to me was acceptable. risk of ruin on testing was Zero and Potential for profit
was 100%.

Testing which I completed in 2002---didn't have the GFC in the test.
In fact from memory the worst case draw down from testing was 23-24%
at the time of completion of testing.

Plan was that if the System performed under the numbers returned that I would not trade it.
Youll find quite a bit of discussion where the system was out performing the mean for quite
sometime and the question asked----why keep trading it if its outside the test series.
Answer was that it was still in the tested ranges.

It did trade lower than the 23% and when it did I sold out.
We kept the live one going and in the end all positions crossed the exit with no new triggers forth coming.
It eventually made a new equity high in 2010 according to Nicks testing--although I don't know--the live portfolio is very likely to have as well.

Thanks for the discussion enjoyed it.


----------



## chops_a_must

sinner said:


> If you have a look at the Sharpe paper I posted he explains "Constant Mix" trading strategies, these are strategies that perform best within ranging environments. Please consider that "mean reversion" is a constant mix style strategy.




Fair enough.


----------



## skc

aarbee said:


> Table 39 on pg 107 of "Unholy Grails" outlines the performance of the Techtrader system after 1000 iterations in Monte Carlo simulation.
> CAGR   Avg/21.29%    Range Min/14.53%    Range Max/30.82%
> maxDD Avg/39.3%      Range Mon/49.9%    Range Max/32.7%




Aarbee, do you know what risk per trade were these drawdown based on?



tech/a said:


> Position sizing was 10% of capital and risk was 10% of entry price.
> so 1% on leveraged capital/trade and 3.33% on initial capital.
> That to me was acceptable. risk of ruin on testing was Zero and Potential for profit
> was 100%.




How does 3.33% risk per trade relates to the % risk per trade used in testing?


----------



## odds-on

skc said:


> You probably need to recalibrate your BS detector. The market itself did better than that at times. Even a term deposit back in the 90s could do that...




Fair point, so I did some checks. The RBA website has monthly bank term deposit rate history going back to 1982. I downloaded the data and checked how many months the term deposit rate was greater than 15%, the results are below:

1 month	- 0 cases
3 month	- 9 cases (approx. 2% of the sample set)
6 month	- 12 cases (approx. 3% of the sample set)
1 year	- 7 cases (approx. 2% of the sample set)
3 year 	- 0 cases.

According to the data the maximum term deposit rate was 17.25% (!!!) on a 3 month term deposit rate in Oct 1989!

You make a fair point but due to the low occurrence of >15% rates I do not think my detector needs recalibrating.


----------



## tech/a

> How does 3.33% risk per trade relates to the % risk per trade used in testing?




I don't know how Nick position sized the system in the book.
Ill ask him.


----------



## qldfrog

tech/a said:


> Thanks for the discussion enjoyed it.




And thanks for your input


----------



## Lone Wolf

tech/a said:


> Last try.
> I actually have 2 visual filters in my Techtrader method.
> (1) The stock cannot be in a clearly long term range.
> (2) The stock must be either breaking out of a longer term down trend or be In a clear up trend.
> 
> Here is where we differ.
> If they were added filters then certain stocks would not be in the scans satisfying the criteria for the system.
> The same criteria used to test ALL stocks selected by the system rules.
> 
> My arguement is that the MonteCarlo results give me a deviation from the mean results using ALL stocks selected
> Of say 20% low end----32% mean ----42% high end.
> Picking ANY of those selected in a scan will see my long term results ( according to testing ) fall somewher between 20 and 42%. Knowing that even if I used a dart on those selected ---- unless market conditions differed markedly from those used in testing--- then that's where my profit is likely to fall.
> 
> My eyeball screen I could not code so used the above logic for justifying it's use.
> Over the years of live testing the system was returning results above the mean which was 32% and the mean
> 27% from memory.
> Frankly I have no idea whether the eyeball filter or exceptional bullish conditions tilted the returns above the mean.
> I suspect the latter! But I do know that compounding/margin and pyramiding saw returns on capital invested that were and are phenomenal.
> 
> *Over 6 years $30k to $360k that's over 1000% on money invested.
> Many lose sight of this--- infact don't even see it!*
> 
> I think/ hope this explanation helps our cause Lone Wolf.
> Good discussion should be encouraged and I have enjoyed this one.




Tech,

I just wanted to say thanks for this post. It clarifies in my mind what you're getting at. 

I agree with what you've said. I still believe that your two visual filters did alter the probability of where in the tested range you would fall.  

If you and I were to run the same system on the same market with the same starting capital. I choose which candidates to take by random selection. You choose which to take by using your knowledge and experience of the market. I am quite confident that over a long enough time period your results will outperform mine. (The idea is based on you being a good discretionary trader who will provide an additional edge to the system).

But the important point is that it doesn't really matter, since both of us will still fall within the tested range.


----------



## tech/a

> I agree with what you've said. I still believe that your two visual filters did alter the probability of where in the tested range you would fall.




That was the plan.
Keeping in trades that move and hopefully putting me in the top of the range.
As it turned out I was.
Luck or design---don't know.



> But the important point is that it doesn't really matter, since both of us will still fall within the tested range.




Well that's my view your eyeballing a screened stock from screened stocks.
You could also take the first or last one screened in each batch----


----------



## craft

Lone Wolf said:


> But the important point is that it doesn't really matter, since both of us will still fall within the tested range.




This is not necessarily correct and it is a similar problem to the serial correlation for trending systems I pointed to earlier. 

Monte Carlo simulations imply randomness. The likelihood of seeing something as correlated as the results of a visual filter within a Monte Carlo range is ridiculously small if you have only run a few thousand iterations.

Keeping in mind your inherent knowledge of the odds of picking 6 of 45 numbers to win Tatts, try working out the random probability of your actual trades taken appearing from the full range of system possibilities – not forgetting that Monte-Carlo returns every ball for another chance of selection.

Randomly picking the results of your visual filter selections in a few thousand iterations would be akin to winning tatts.


----------



## tech/a

craft said:


> This is not necessarily correct and it is a similar problem to the serial correlation for trending systems I pointed to earlier.
> 
> Monte Carlo simulations imply randomness. The likelihood of seeing something as correlated as the results of a visual filter within a Monte Carlo range is ridiculously small if you have only run a few thousand iterations.
> 
> Keeping in mind your inherent knowledge of the odds of picking 6 of 45 numbers to win Tatts, try working out the random probability of your actual trades taken appearing from the full range of system possibilities – not forgetting that Monte-Carlo returns every ball for another chance of selection.
> 
> Randomly picking the results of your visual filter selections in a few thousand iterations would be akin to winning tatts.




Not understanding?

Your saying that it could happen that selections (Visual filter) could fall *OUTSIDE* of the range?
Your still convinced that this visual filter is altering the system?


----------



## Ves

tech/a said:


> Not understanding?



I think there are numerous discussions about this type of thing in Taleb's book _Fooled by Randomness._  He puts it pretty elegantly.  It sounds like craft is discussing the issue along the same lines.


----------



## craft

tech/a said:


> Not understanding?
> 
> Your saying that it could happen that selections (Visual filter) could fall *OUTSIDE* of the range?
> Your still convinced that this visual filter is altering the system?




The math is saying that it will *Probably* fall outside the range - unless of course you visual filter results are no better/worse then random.


----------



## Lone Wolf

craft said:


> Monte Carlo simulations imply randomness. The likelihood of seeing something as correlated as the results of a visual filter within a Monte Carlo range is ridiculously small if you have only run a few thousand iterations.




It depends on how long you run your Monte Carlo simulation for. The idea is to cover every possible combination of candidates produced by your system. You probably won't do that with only a "few thousand" runs. (It obviously depends on how selective your system is).

If you test 100% of the combinations then it doesn't matter how they were chosen. If you only test 10% of the possible combinations, then your testing was incomplete and who knows what could possibly happen.

But this is another reason to understand the system and know the backtested stats. Stop trading your system if it starts behaving outside the expected ranges and work out why its happening.

I once tested a mean reversion system I found on the net somewhere, it returned good results when I ran a quick test of 100 runs. But whenever I ran it over 1000 runs the worst case scenario was a blown account. That is the danger of limited testing/understanding.


----------



## tech/a

Ves said:


> I think there are numerous discussions about this type of thing in Taleb's book _Fooled by Randomness._  He puts it pretty elegantly.  It sounds like craft is discussing the issue along the same lines.




Love Teleb.Viewed many lectures and read his works.



craft said:


> The math is saying that it will *Probably* fall outside the range - unless of course you visual filter results are no better/worse then random.




OK 
Explain how that's going to happen given this.

The system finds prospects (any system ) by searching a given set of parameters with a given set of variables.
The search will return a number of prospects.
In testing it will randomly select a group of these prospects and label it a portfolio and over time will return a result. ALL of these possible combinations of possible portfolios will return their own set of results.
These results will fall between a high and low range.

So I could select the first one found in the scan
or only those starting in B
Or those which display a triple bi pass pattern.
Every one of those will return a set of numbers *WITHIN THE RANGE* of tested results.
They cant possibly return a result *OUTSIDE OF THE RANGE.
* because the visual selection is *FROM THOSE IN THE RANGE ONLY.*

The visual selection *ISN'T A CONDITION *of the system.
Its a self imposed condition of which one out of the prospects selected are chosen to trade.
No different to choosing ones starting in "B"

*I AGREE* That there is absolutely NO correlation as to results 
achieved by adding this filter. It did give me a feel good feeling that I "Thought" I maybe placing myself in trades which were more likely to perform. I was "lucky" to the extent that the traded portfolio both mine and on the forum ---were at the out performance end of the results in testing.


----------



## craft

tech/a said:


> Love Teleb.Viewed many lectures and read his works.
> 
> 
> 
> OK
> Explain how that's going to happen given this.
> 
> The system finds prospects (any system ) by searching a given set of parameters with a given set of variables.
> The search will return a number of prospects.
> In testing it will *randomly* select a group of these prospects and label it a portfolio and over time will return a result. ALL of these possible combinations of possible portfolios will return their own set of results.
> These results will fall between a high and low range.
> 
> So I could select the first one found in the scan
> or only those starting in B
> Or those which display a triple bi pass pattern.
> Every one of those will return a set of numbers *WITHIN THE RANGE* of tested results. Not necessarily - because they aren't random selections
> They cant possibly return a result *OUTSIDE OF THE RANGE.Yes they can because they are not random and if the numbers of iterations are not large enough in relation to the number of possible permutations - they probably will fall outside.
> because the visual selection is FROM THOSE IN THE RANGE ONLY.
> 
> The visual selection ISN'T A CONDITION of the system.
> Its a self imposed condition of which one out of the prospects selected are chosen to trade.
> No different to choosing ones starting in "B"
> 
> I AGREE That there is absolutely NO correlation as to results
> achieved by adding this filter.You can't possible have any idea if your results are different to random because you didn't test it.  It did give me a feel good feeling that I "Thought" I maybe placing myself in trades which were more likely to perform. this is a contridiction to saying No correlation. I was "lucky" to the extent that the traded portfolio both mine and on the forum ---were at the out performance end of the results in testing.*



*

How many possible system entries was there?

How many did you take?

What is the number of possible permutations based on those two numbers?

What is the probability that your Non Random permutation will be picked up in 1000 random iterations?

ps.

I'm not your math teacher.*


----------



## tech/a

> I'm not your math teacher.




True.

I have a pretty good one with a PHD in Physics.
Ill point the thread out to him and get his input.

Ill post up the reply.


----------



## CanOz

craft said:


> How many possible system entries was there?
> 
> How many did you take?
> 
> What is the number of possible permutations based on those two numbers?
> 
> What is the probability that your *Non Random *permutation will be picked up in 1000 *random* iterations?
> 
> ps.
> 
> I'm not your math teacher.




Craft, the whole thing is documented trade by trade on Reefcap...Have you even had a look?

CanOz


----------



## tech/a

test


----------



## CanOz

tech/a said:


> test




Hmmm....


----------



## tech/a

Cant get a post to appear.

Will try again.

Here is the reply from my Maths guru.

I think you're both right and that you agree with each other to an extent.


I think the argument is one of Practical vs. Academic.



Technically, the choice of a subset of the prospects does introduce another variable (or variables) into the system. The question is whether these additional variables greatly influence the performance of the specific portfolios that can be chosen from these prospects, e.g., does choosing all prospects starting with A perform significantly better or worse than those starting with B?


In other words: do you care about the variability in performance between the possible portfolios chosen from the found set of prospects? If most of the possible portfolios chosen from this set perform about the expected rate of return, then that's all you care about. Anything else becomes academic.


Yes, if the shortlisted set of prospects are more numerous than places you have in your portfolio, there will be a (possibly large) number of permutations possible in choosing that portfolio and each portfolio will behave differently. If the system thus far works, however, then their performance should be similar to within the statistical variability of the system. Some will perform well, some worse, but they should always fall within a (preferably tight) distribution about the parameter set that was optimised.


Take home message: if the system thus far worked as it was designed, the extra degree(s) of freedom in choosing a final portfolio shouldn't significantly affect returns.


Really, it's an embarrassment of riches! What a luxury to be able to choose from a shortlist in the knowledge that your final portfolio should perform within certain bounds.


Some people wouldn't like this arbitrariness since it forces discretion - I'm probably one of them! Fair enough. In that case, just run a filter of your choosing over the shortlist and choose the single portfolio that results. It's almost arbitrary if all you care about is the performance range dictated by the initial system. Then the problem is: what filter is best? Which parameters should be optimised and to what bounds? This step itself would require tuning during the system optimisation process - it indeed introduces free parameters, but these are parameters that shouldn't greatly affect the bounds within which the chosen portfolio will perform.


I think the point is: if the simpler system can guarantee (within statistical margins) that any portfolio chosen from the prospects will perform within desired bounds, then who cares? If it concerns you, just tighten up the selection process with an algorithm and optimise it if you want. It may very well be that adding an optimised selection algorithm to the end of the system will find the one true portfolio to rule them all, but it could present a significant optimisation problem itself. It's a matter of preference and practicality. If it works to the specifications you want, then it works. End of story.


I think I've just reiterated everything you said... 



Kris


----------



## tech/a

By the way the system was never optimized.


----------



## craft

Tech, your Maths Guru hasn’t addressed how Monte Carlo simulation which implies randomness doesn’t represent well anything that has correlation. 

Trend systems simulation suffers because there is correlation in the data set which you destroy when you select a sample period of 1 for the simulation and force an implied randomness.

Choosing subsets with any sort of additional filter/routine etc also introduces non-randomness which is not modelled by the Monte Carlo simulation.

You can say its all academic v’s practical but unaccounted for correlation can take you outside of your expected range from Monte Carlo testing very easily and quickly.

Taking things to an extreme may help you see the issue – Imagine your visual filter is really good and you pick only the 50 best trades out of 100 available.  What are your odds that a Monte Carlo simulation would randomly select those 50 trades with just a few thousand iterations – less than winning lotto?  

The only way your visual filter is not a problem for staying with-in the probable test ranges from a Monte Carlo Sim is if your filter does no better or worse than Random – hence creating no selection correlation.

I would suggest you seek a second opinion from somebody like Howard Bandy.


----------



## craft

CanOz said:


> Craft, the whole thing is documented trade by trade on Reefcap...Have you even had a look?
> 
> CanOz




Can Oz

This is not really about Tech Trader – That’s only an example of the principle, Which is *Monte Carlo simulation does not model serial correlations.*

Serial correlation can be introduced in the actual data set itself or by any systematic action that is not part of the tested system parameters.

If you want a real world example read Nick Radges latest article on the Growth portfolio. – The Performance Illusion – what’s happening there is real life correlation moving things away from the modelled results – not beyond the range but significant all the same.

I thought you system guys would be all over this. It’s not academic to what you do –Its very  important.

My effort to raise the issue ends here – people can dismiss it out of hand or research it – I don’t care either way.


----------



## CanOz

craft said:


> Can Oz
> 
> This is not really about Tech Trader – That’s only an example of the principle, Which is *Monte Carlo simulation does not model serial correlations.*
> 
> Serial correlation can be introduced in the actual data set itself or by any systematic action that is not part of the tested system parameters.
> 
> If you want a real world example read Nick Radges latest article on the Growth portfolio. – The Performance Illusion – what’s happening there is real life correlation moving things away from the modelled results – not beyond the range but significant all the same.
> 
> I thought you system guys would be all over this. It’s not academic to what you do –Its very  important.
> 
> My effort to raise the issue ends here – people can dismiss it out of hand or research it – I don’t care either way.




lol, I've been too busy with all things unimaginable to notice...but I'll ask Nick for a copy of the article...thanks!

CanOz


----------



## tech/a

Craft.

If your placing any form of extra criteria and running it on the whole market then I would agree.

But I'm not.

Specifically to your question of how many prospects.
That varied day to day but was generally 4 - 10
There was only ever 10 in the portfolio so every time a position was closed there would be many to choose from

True random would be to just pick anyone as the next one.
I could have fluked everyone that fitted in my visual.
I'm personally happy that it makes no difference as my selections come from those satisfying the system rules,

As for Gurus mine is a Doctor of Physics. Currently working in Cancer research.
Happy for you to get Bandy involved.I'm surprised he hasn't jumped in already.
If this was about Amibroker he'd b all over it. Bandy I believe to be a Doctor of Mathamatics.

Must be money in books and lectures!

Monte Carlo analysis well that's a whole new topic.


----------



## RandR

I dont want to but in ... but I believe Howard Bandy has already left a comment about what is being discussed between you two (craft and tech/a) on this forum back in February in another thread.



> Greetings --
> 
> Please permit me to raise a caution. This thread mentions both random selection and TradeSim. I do not have Nick's book or the code being discussed, so my comments may not be needed -- in which case ignore them or modify them as is appropriate.
> 
> *Use of random numbers and Monte Carlo simulation is valuable under some circumstances. [One of my recent books (and forty-plus years of my professional experience) is devoted to that.] But that analysis usually begins with a set of trades that were chosen deterministically.
> 
> Before testing a system that has a random entry or random issue selection, ask yourself whether you would use a random process -- whether you would throw some dice -- to decide whether to trade or to choose among alternative trades. If you would, then continue. If you would have some preference, as I do and most people I work with do, that ranks those alternatives, include the code that describes that ranking -- perhaps as a positionscore -- and form a deterministic system. Then, following the validation process and walk forward runs, use the out-of-sample trades to work through the risk analysis, safe position size in keeping with your personal risk tolerance, and analyze profit potential. These are the steps where Monte Carlo analysis is most appropriately used.*
> 
> Regards,
> Howard




If I am reading this correctly, he is suggesting once you have back tested with monte carlo analysis if you are not selecting your trades randomly (throwing the dice to choose which of your candidates gets the money). Then you NEED to test your discretionary choosing to be able to appropriately posistion size and analyze true risk and profit potential. You cannot assume that by simply running monte carlo analysis you can then select your canditates from further discretionary criteria and have the results fall within the range of your monte carlo analysis. When using anything other then 'randomness' could indeed take you below the range or above. Am I interpreting that correctly?


----------



## chops_a_must

RandR said:


> I dont want to but in ... but I believe Howard Bandy has already left a comment about what is being discussed between you two (craft and tech/a) on this forum back in February in another thread.
> 
> 
> 
> If I am reading this correctly, he is suggesting once you have back tested with monte carlo analysis if you are not selecting your trades randomly (throwing the dice to choose which of your candidates gets the money). Then you NEED to test your discretionary choosing to be able to appropriately posistion size and analyze true risk and profit potential. You cannot assume that by simply running monte carlo analysis you can then select your canditates from further discretionary criteria and have the results fall within the range of your monte carlo analysis. When using anything other then 'randomness' could indeed take you below the range or above. Am I interpreting that correctly?




Not really.

Because it's not truly random, and not truly discretionary.

It's just a choice between the options provided, which could be given a position score if code was provided.


----------



## Wysiwyg

Have now finished reading the Unholy Grail. Interesting reading about an Index filter. I remember discussing some form of Index filter on this forum after the GFC crash around 2010. Nothing new I am sure but my thoughts were a close below the 250 DEMA. Thread is here somewhere. 
Anyways, the crux of the trend trader story is,  when the bull runs come along you want to be ready and get on it. Longevity and intensity are the unknown factors  but in ones mortal life there could be the mother-of-"all bull runs. You too could look back and say, "I was on it"



> I actually have 2 visual filters in my Techtrader method.
> (1) The stock cannot be in a clear long term range.
> (2) The stock must be either breaking out of a longer term down trend or be In a clear up trend.



  These filters may not be easily coded into the system or if hard coded , the system may be a failure. Experience does work better than hard coded ranking criteria and in this system it did. I like the discretionary final decision method.


----------



## NewbieTrader1982

CanOz said:


> Typically a software application such AmiBroker is used. You purchase the software for a couple hundred bucks, then subscribe to a data supplier such as PremiumData. You load the code up or try and program it yourself.
> 
> Every nite you run exploration to identify the trade candidates.
> 
> You put you orders in through a broker, such as Interactive Brokers.
> 
> Alternatively you might ask Nick how they could trade the strategy or something similar for you.
> 
> CanOz




Does this really work long term as its supposed to have a PE over  time? Is his testing of the systems really accurate? I read somewhere that certain systems are best for bull markets and others for side trending. If Nick's tested systems are what they claim to be, couldn't anyone really just purchase a few systems for different markets and expect a PE overtime?

Forgive me if my questions are stupid, I am just trying to get my head around all this. Also, assuming Nick's stuff is accurate, I don't understand why so many ppl are trying to write their own code rather than just purchasing from him...what am I missing here.?

Thanks


----------



## Trembling Hand

NewbieTrader1982 said:


> Does this really work long term as its supposed to have a PE over  time? Is his testing of the systems really accurate? I read somewhere that certain systems are best for bull markets and others for side trending. If Nick's tested systems are what they claim to be, couldn't anyone really just purchase a few systems for different markets and expect a PE overtime?
> 
> Forgive me if my questions are stupid, I am just trying to get my head around all this. Also, assuming Nick's stuff is accurate, I don't understand why so many ppl are trying to write their own code rather than just purchasing from him...what am I missing here.?
> 
> Thanks




NT whats PE?

As to your questions - the testing he has done is robust. The problem with all systems is stationarity. You design and test on past data that validates your signals so you deploy it in real time. The market is always evolving from bull to bear to just out right depressed and going nowhere. Volatility increases and decreases then the stocks that are trending greatly change. For a few years its small caps then they just bog down for years and the Large caps start running. Just at the time you notice they are the hot thing they stop. When someone starts a system like Nick's inevitably its after a hot period and running into a 6-12 month period of drawdown. They trade it for 8-12 months and it goes nowhere so move on. Nicks systems are certainly a longer term commitment.

People code their own systems looking for better performance. Either different instruments, timeframes, Max drawdown stats, etc or just outright better returns.


----------



## pixel

NewbieTrader1982 said:


> I don't understand why so many ppl are trying to write their own code rather than just purchasing from him...what am I missing here.



People write systems for two reasons:

to make money from selling it 

to gain an edge over other traders
As soon as a significant number of traders follow the same "system", they won't have an edge over others (each other) any more. From a certain threshold level, a smart algo (bot) will detect  the setup required to lead to a particular mob reaction, where a large number of system traders will either buy or sell. ... and the "Shooting the fish in a barrel" fun is about to begin.


----------



## NewbieTrader1982

Trembling Hand said:


> NT whats PE?
> 
> As to your questions - the testing he has done is robust. The problem with all systems is stationarity. You design and test on past data that validates your signals so you deploy it in real time. The market is always evolving from bull to bear to just out right depressed and going nowhere. Volatility increases and decreases then the stocks that are trending greatly change. For a few years its small caps then they just bog down for years and the Large caps start running. Just at the time you notice they are the hot thing they stop. When someone starts a system like Nick's inevitably its after a hot period and running into a 6-12 month period of drawdown. They trade it for 8-12 months and it goes nowhere so move on. Nicks systems are certainly a longer term commitment.
> 
> People code their own systems looking for better performance. Either different instruments, timeframes, Max drawdown stats, etc or just outright better returns.




Thanks for your feedback. When I said PE I meant Positive Expectancy. So is it safe to say that with any system, eye balling or certain criteria is applied first? I think @tech/a said somewhere his two visual criteria first is "1) The stock cannot be in a clearly long term range. (2) The stock must be either breaking out of a longer term down trend or be In a clear up trend."

Does it then mean that Systems Trading could see you go 24 months with no profit? I like the mathematical edge (basically means you are becoming the casino) with a Systems approach...just still trying to get my head around it.

Are you a Systems trader?

Thanks again.


----------



## NewbieTrader1982

pixel said:


> As soon as a significant number of traders follow the same "system", they won't have an edge over others (each other) any more.




Interesting point. I wonder how much this actually would be an issue since my strong hunch is most people wouldn't have the correct mindset from the outset to implement the system anyway, Am I wrong to assume this?

Thanks


----------



## NewbieTrader1982

Trembling Hand said:


> People code their own systems looking for better performance. Either different instruments, timeframes, Max drawdown stats, etc or just outright better returns.




For the average person (that's myself), I'm guessing they would have buckleys chance of coding something better than Nick?


----------



## NewbieTrader1982

Trembling Hand said:


> The problem with all systems is stationarity. You design and test on past data that validates your signals so you deploy it in real time. The market is always evolving from bull to bear to just out right depressed and going nowhere. Volatility increases and decreases then the stocks that are trending greatly change. For a few years its small caps then they just bog down for years and the Large caps start running.




Ok I think I understand this. So wouldn't that mean that if someone had an endless supply of capital then over the long term they would have to perform very well, since human psychology never changes and eventually it will come back to the signals your systems works on? If that assumption is correct then I guess the issue is twofold, 1. No one has unlimited funds and 2. No one really wants to wait X amount of time to eventually get their projected PE return if it ends up being 5-10 years.

Or am I completely off-track?>

Thanks


----------



## Roller_1

NewbieTrader1982 said:


> Thanks for your feedback. When I said PE I meant Positive Expectancy. So is it safe to say that with any system, eye balling or certain criteria is applied first? I think @tech/a said somewhere his two visual criteria first is "1) The stock cannot be in a clearly long term range. (2) The stock must be either breaking out of a longer term down trend or be In a clear up trend."
> 
> Does it then mean that Systems Trading could see you go 24 months with no profit? I like the mathematical edge (basically means you are becoming the casino) with a Systems approach...just still trying to get my head around it.
> 
> Are you a Systems trader?
> 
> Thanks again.




Remember that there are a infinite number of ways to approach the market and the same goes for systems trading. You can trade a monthly, weekly, daily or intra day. It depends of your goals/ beliefs.

I trade using a systematic approach but use Mean Reversion strategies that a trade may last 1-7 days. This style 'usually' creates a higher win % than some of the longer term systems in unholy grails. Long term systems can have long periods of Drawdown so can be hard to trade psychologically, as TH said its a long term commitment (as any trading should be).   

I'd suggest going to thechartist.com.au and read some of the articles on there. I think there's a fair bit of info you can access


----------



## NewbieTrader1982

Roller_1 said:


> Remember that there are a infinite number of ways to approach the market and the same goes for systems trading. You can trade a monthly, weekly, daily or intra day. It depends of your goals/ beliefs.
> 
> I trade using a systematic approach but use Mean Reversion strategies that a trade may last 1-7 days. This style 'usually' creates a higher win % than some of the longer term systems in unholy grails. Long term systems can have long periods of Drawdown so can be hard to trade psychologically, as TH said its a long term commitment (as any trading should be).
> 
> I'd suggest going to thechartist.com.au and read some of the articles on there. I think there's a fair bit of info you can access




Really appreciate your feedback. Actually I am purposely not going to thechartist website yet as I am hoping to get unbiased information/feedback/bearings here first before I go there..call it part of my Due Diligence process 

Very interesting point you make re timeframes. I know for my own goals, I am more interested in shorter term cash flow/profits  (say 1 week to 2 months) rather than longer term profits which I have covered by other asset streams. I like your timeframes and using a Systems approach. I guess my question is, if you have a higher win % with less frequent DD, does that then mean when you do have DD it eats up weeks or months of your profit in one go?

Really appreciate your input mate.

NT


----------



## pixel

NewbieTrader1982 said:


> Interesting point. I wonder how much this actually would be an issue since my strong hunch is most people wouldn't have the correct mindset from the outset to implement the system anyway, Am I wrong to assume this?
> Thanks



Generally speaking, your hunch is probably spot-on. However, systems that are advertised and promise a decent ROI will tend to attract a number of "serious" investors/ traders that have the inclination and discipline to follow the rules quite meticulously. It's those systems that a speedy algo can "learn" and take advantage of. 
You may have heard of HFT boxes sitting right next to the main trading computers in Stock Exchanges, squeezing in their own buy and sell orders nanoseconds before yours? That may not immediately drive a system trader into ruin, but it certainly blunts the edge by clipping a tick or two off every trade.


----------



## NewbieTrader1982

pixel said:


> .
> You may have heard of HFT boxes sitting right next to the main trading computers in Stock Exchanges, squeezing in their own buy and sell orders nanoseconds before yours? That may not immediately drive a system trader into ruin, but it certainly blunts the edge by clipping a tick or two off every trade.




Nope complete newbie in all this, but I've heard of it now  Very interesting. In that case, I guess private traders might want to edit the code of something to try to get that edge of other traders using the same code. Again, I wonder how much of a difference it really would make? Since I'm assuming the money System traders are making is from the masses and not from their peers?


----------



## pixel

Trembling Hand said:


> The problem with all systems is stationarity. You design and test on past data that validates your signals so you deploy it in real time.



+1
That's why Systems should have a use-by date, just like other perishable goods.


----------



## NewbieTrader1982

pixel said:


> +1
> That's why Systems should have a use-by date, just like other perishable goods.




Would you then not go back to the System when the market goes back to similar signals that the System is designed to do well in?

Cheers


----------



## pixel

NewbieTrader1982 said:


> Nope complete newbie in all this, but I've heard of it now  Very interesting. In that case, I guess private traders might want to edit the code of something to try to get that edge of other traders using the same code. Again, I wonder how much of a difference it really would make? Since I'm assuming the money System traders are making is from the masses and not from their peers?



If you can afford to place a HFT box into a Stock Exchange, you're no longer a System Trader of the kind we're talking about here. Those boxes are owned by instos and make up over 50% of the entire turnover. Yes, they take it from the masses by "learning" when a sufficient number of us are likely to buy or sell - and then they jump in and clip our wings. The greater the number of individuals trading in a similar pattern, the more clearly it will show, even if it's only a small fraction, percentage-wise.


----------



## Trembling Hand

NewbieTrader1982 said:


> Would you then not go back to the System when the market goes back to similar signals that the System is designed to do well in?
> 
> Cheers



At what level do you decide that the market has changed and the _other _system needs to be turned on? Probably after its clear and again about to change! We are talking about making predictions about future events.


----------



## Roller_1

NewbieTrader1982 said:


> Really appreciate your feedback. Actually I am purposely not going to thechartist website yet as I am hoping to get unbiased information/feedback/bearings here first before I go there..call it part of my Due Diligence process
> 
> Very interesting point you make re timeframes. I know for my own goals, I am more interested in shorter term cash flow/profits  (say 1 week to 2 months) rather than longer term profits which I have covered by other asset streams. I like your timeframes and using a Systems approach. I guess my question is, if you have a higher win % with less frequent DD, does that then mean when you do have DD it eats up weeks or months of your profit in one go?
> 
> Really appreciate your input mate.
> 
> NT




It's not neccessairy less frequent DD but i've found DD to be shorter in duration because you are trading a lot more frequently and can dig out of drawdown quicker. If you have a longterm system that uses a index filter for example you might not place a trade for 6-12 months, while it may reduce the MAX Dd of that system it's hard to make money if you aren't trading. 

does that then mean when you do have DD it eats up weeks or months of your profit in one go?

Not really but anything can happen. Sure you can go into a 10-15% DD and you don't make that over night or in a week clearly, but the PE comes from long term application of any system you have to stick at it. It comes down to your risk tolerance too. 

Unless you have a 95% win rate (even then) there will be DD


----------



## NewbieTrader1982

Trembling Hand said:


> At what level do you decide that the market has changed and the _other _system needs to be turned on? Probably after its clear and again about to change! We are talking about making predictions about future events.




Got it. Then I am confused, what use is a Systems approach? How do we know when to use it? When to not use it?  According to Nick Radge (from my limited understanding) he uses it day in day out, he says " think of the next 1000 trades'. So then when is a Systems approach useful...?

Thanks


----------



## pixel

NewbieTrader1982 said:


> Would you then not go back to the System when the market goes back to similar signals that the System is designed to do well in?
> 
> Cheers



yes, you could. But "the market" has an infinite variety. You'd be busy forever, comparing and tweaking systems "just right" for current conditions. If you have to buy your systems, my guess is you'll have to spend more on a variety of systems than the average punter spends on trading.


----------



## NewbieTrader1982

pixel said:


> yes, you could. But "the market" has an infinite variety. You'd be busy forever, comparing and tweaking systems "just right" for current conditions. If you have to buy your systems, my guess is you'll have to spend more on a variety of systems than the average punter spends on trading.




I don't mind spending more on systems if I know there is a PE in different markets and know which system to use for different markets. I'm looking at this from an entrepreneurial perspective on my part. Not sure if my approach is applicable to Systems trading though.. still very much trying to figure this mystery out.


----------



## NewbieTrader1982

Roller_1 said:


> It's not neccessairy less frequent DD but i've found DD to be shorter in duration because you are trading a lot more frequently and can dig out of drawdown quicker. If you have a longterm system that uses a index filter for example you might not place a trade for 6-12 months, while it may reduce the MAX Dd of that system it's hard to make money if you aren't trading.
> 
> does that then mean when you do have DD it eats up weeks or months of your profit in one go?
> 
> Not really but anything can happen. Sure you can go into a 10-15% DD and you don't make that over night or in a week clearly, but the PE comes from long term application of any system you have to stick at it. It comes down to your risk tolerance too.
> 
> Unless you have a 95% win rate (even then) there will be DD




Ok I understand that. So same frequency of DD but more frequent trading so quicker recovery therefore theoretically quicker returns of the PE process.

The System you are using, have you found it to be fairly robust over a period of actual trading time?

Cheers


----------



## tech/a

NewbieTrader1982 said:


> Would you then not go back to the System when the market goes back to similar signals that the System is designed to do well in?
> 
> Cheers




There are many ways people attack this.
From having a filter to semi turn off (No more buying if a long system)
To turning it off completely until some outside mechanism like an index filter indicates a time to return
OR
A favourite of mine.
Trading the system as you would in ghost phase---no money down
Until and if the system returns to an acceptable Drawdown or wipes off a drawdown.

I know of some systems which use the equity curve of the system as a filter in their system.

I would then be adding the period out of sync with my test results into the testing to be sure my system hasn't developed a flaw. 

Systems take time to develop even trading plans take a while to look "Good "(Read earn equity).
Tech Trader traded for 2 years and it felt like a snail on holidays. But as 300 day old trades closed our
It soon had a dose of Viagra.
Pete's method here as a discretionary method was the same.


----------



## NewbieTrader1982

tech/a said:


> There are many ways people attack this.
> From having a filter to semi turn off (No more buying if a long system)
> To turning it off completely until some outside mechanism like an index filter indicates a time to return
> OR
> A favourite of mine.
> Trading the system as you would in ghost phase---no money down
> Until and if the system returns to an acceptable Drawdown or wipes off a drawdown.
> 
> I know of some systems which use the equity curve of the system as a filter in their system.
> 
> I would then be adding the period out of sync with my test results into the testing to be sure my system hasn't developed a flaw.
> 
> 
> .




OK, so it seems some level of discretion is needed ? I am assuming the equity curve filter would be something like " if equity reduces from peak by X % then stop system'? Then once the market is back in sync using confirmation from broader market indicators and or your Ghost Phase method where DD are wiped off to then possibly get back in..

I wonder if Nick also uses discretion in his trading.. doesn't seem so from what I have read but I could easily be wrong. It sounds like...no matter even if you have a mathematical edge, markets change and you need to be proactive at some point and switch off, even though theoretically you should expect a PE if you continued based on historical testing.

Am I somewhat correct in my thinking..?


----------



## Roller_1

NewbieTrader1982 said:


> Ok I understand that. So same frequency of DD but more frequent trading so quicker recovery therefore theoretically quicker returns of the PE process.
> 
> The System you are using, have you found it to be fairly robust over a period of actual trading time?
> 
> Cheers




I'm still fairly new so i need longer to say it is robust i guess. I trade multiple systems but my first one has been live for 9 months, everything is tracking as it should in my opinion and returns are positive, in a bit of drawdown currently but that's ok.



tech/a said:


> A favourite of mine.
> Trading the system as you would in ghost phase---no money down
> Until and if the system returns to an acceptable Drawdown or wipes off a drawdown.
> 
> I know of some systems which use the equity curve of the system as a filter in their system.




This is hard to implement for longer term systems in my opinion because of their low trade frequency.
You can't jump into a trade half way through when the equity curve moved back above x%


----------



## Roller_1

NewbieTrader1982 said:


> OK, so it seems some level of discretion is needed ? I am assuming the equity curve filter would be something like " if equity reduces from peak by X % then stop system'? Then once the market is back in sync using confirmation from broader market indicators and or your Ghost Phase method where DD are wiped off to then possibly get back in..
> 
> I wonder if Nick also uses discretion in his trading.. doesn't seem so from what I have read but I could easily be wrong. It sounds like...no matter even if you have a mathematical edge, markets change and you need to be proactive at some point and switch off, even though theoretically you should expect a PE if you continued based on historical testing.
> 
> Am I somewhat correct in my thinking..?




You'll find Nick is basically 100% systematic. You should be constantly checking your systems and monitoring for any issues or errors. 

Overrode my system during the brexit vote and didn't place my trades because of the uncertainty. I missed out on 7-8% return that day because of it! 
Just follow the system.


----------



## tech/a

NewbieTrader1982 said:


> OK, so it seems some level of discretion is needed ?




No.
If its part of a tested system then its part of the system.
Absolutely no discretion.


----------



## tech/a

Roller_1 said:


> This is hard to implement for longer term systems in my opinion because of their low trade frequency.
> You can't jump into a trade half way through when the equity curve moved back above x%




You wouldn't do that you'd just start new trades.


----------



## NewbieTrader1982

tech/a said:


> No.
> If its part of a tested system then its part of the system.
> Absolutely no discretion.




OK, so it seems people want to follow a System, only to not follow it at some point. Then how valid will their results be of that System...


----------



## Trembling Hand

NewbieTrader1982 said:


> OK, so it seems people want to follow a System, only to not follow it at some point. Then how valid will their results be of that System...



Mate there is a how heap of maths, stats and science behind proper system development. Its a deep rabbit hole to dive down to do properly but still I think a legitimate field to look into.

In fact I cannot see discretionary trading be worth anyone's time other than it being their fulltime job OR a hobby, and therefore a very low return if not a cost long term. For someone who has experience and a capital position in their main field of expertise I would advise them to use their time making money in that field. Trading has a very low barrier to entry but that doesn't mean its easy. The amount of time wasted on trying to 'make it' in the market is bordering on tragic within the middle age male demographic.  I can see the merits in trying to develop a system that requires a low level of daily input as a secondary income source. Something along the lines of what Nick offers but something along the lines of a consistent index betting algo or disc approach is years in the development. Why do that if you can just employ a few more dudes in your main field and smash that out of the ballpark?


----------



## NewbieTrader1982

Trembling Hand said:


> I can see the merits in trying to develop a system that requires a low level of daily input as a secondary income source. Something along the lines of what Nick offers but something along the lines of a consistent index betting algo or disc approach is years in the development. Why do that if you can just employ a few more dudes in your main field and smash that out of the ballpark?




Hi @Trembling Hand, great post. That's pretty much all I am looking for, something as a secondary income and in time if I get good at it then perhaps increase my risk level or numbers for greater returns. But its definitly not an avenue I am looking at to replace my main business. I understand property, I have an edge with property, eg negotiating, deal finding BMV, vast contacts in the industry and relationships etc. So I definitely have an edge against most 'players' in that game and that's what I will continue to do. But like you said, if I can develop or 'borrow' someone elses system and in time be able to trade certain patterns well then it would be a nice CF stream separate to real estate. That's really my main goal and I think in that sense I am quite lucky perhaps from a few others as I am not 'relying' on trading to be THE strategy/wealth creation vehicle to change my life. So much less pressure while  perusing to try to develop the skills.

I will keep on the journey mate and I appreciate everyone's great feedback. Probably will get Am broker in the near future and start looking at charts.

Thanks again


----------



## tech/a

T/H
Espouses wisdom


----------



## Trembling Hand

@NewbieTrader1982 in that case I would definitely look at stuff similar to what Nick does. I think its relatively cheap and will not require week after week of screen time. It will probably not make you rich (again ) unless a roaring bull market comes along (thats doubtful) but as far as a learning experience -certainly will teach you the fundamentals of trading, whether you eventually decide on a systematic approach or disc. (fundamentals as in what makes a profit and how to go about it. Not fundamentals as in Warren Buffet stuff though you should probably have a look at that too)


----------



## Trembling Hand

tech/a said:


> T/H
> Espouses wisdom



Yeah me in my trading room,


----------



## NewbieTrader1982

Trembling Hand said:


> @NewbieTrader1982 in that case I would definitely look at stuff similar to what Nick does. I think its relatively cheap and will not require week after week of screen time. It will probably not make you rich (again ) unless a roaring bull market comes along (thats doubtful) but as far as a learning experience -certainly will teach you the fundamentals of trading, whether you eventually decide on a systematic approach or disc. (fundamentals as in what makes a profit and how to go about it. Not fundamentals as in Warren Buffet stuff though you should probably have a look at that too)




I was looking at Nick talk about a simple strategy he has for swing trading using the ABC wave with an indicator on the bottom such as RSI or slow stochastic. Looks very simple but the pattern does seem to be all over the place. So with a good money management system i'm gonna try it out to see howi go with it. He says to use a risk/reward ratio of at least 3.

Any opinion on this? Its the last video in the link.


Swing Trading - how to trade swing patters.
https://www.thechartist.com.au/Videos/


----------



## Valued

NewbieTrader1982 said:


> I was looking at Nick talk about a simple strategy he has for swing trading using the ABC wave with an indicator on the bottom such as RSI or slow stochastic. Looks very simple but the pattern does seem to be all over the place. So with a good money management system i'm gonna try it out to see howi go with it. He says to use a risk/reward ratio of at least 3.
> 
> Any opinion on this? Its the last video in the link.
> 
> 
> Swing Trading - how to trade swing patters.
> https://www.thechartist.com.au/Videos/




Anything using an ABC pattern or elliot waves etc seems all over the place because it is all over the place and everyone looks at it and sees a different pattern or sees patterns when none are there. At worst it is completely arbitrary.


----------



## NewbieTrader1982

Valued said:


> Anything using an ABC pattern or elliot waves etc seems all over the place because it is all over the place and everyone looks at it and sees a different pattern or sees patterns when none are there. At worst it is completely arbitrary.




Thanks for your feedback. So then the question in my mind is, how do I reconcile your opinion with Nick's...It almost seems everyone has a different take/opinion/truth from much of trading. 

I must say though, from a newbie's perspective, the ABC correlation with a below 20 line on SlowK, on good volume plus a tight bar... does seem to see price action bounce the way you plan many times. Couldn't a robust risk management plan perhaps see consistent profits?


----------



## Valued

NewbieTrader1982 said:


> Thanks for your feedback. So then the question in my mind is, how do I reconcile your opinion with Nick's...It almost seems everyone has a different take/opinion/truth from much of trading.




You can't. No one can prove to you their system works consistently since it is likely their sample size is way too small and a successful back test doesn't mean anything. You might have a system that happened to work well in the past but people only pick systems that do well in back tests so it's like a survivor bias in a way. 

You can consider what a profitable system may look like though and try to replicate that. This is difficult to do. In say poker it is easier since there are some hard mathematical truths you can work out e.g. you must call a bet at least x% of the time facing a turn bet of $50 into a pot of $100 and so you know if you're under that percent you're incorrect. Unfortunately, the market doesn't provide you with such precise mathematical rules. For a system to be profitable though when you enter the trade at some point you must be in a trend (assuming you're trading some basic directional strategy, this may not apply to some options strategies). Therefore, if you need to be in a trend you need the price to move and so you need some volatility. You can come to some conclusions like that.


----------



## Trembling Hand

NewbieTrader1982 said:


> I was looking at Nick talk about a simple strategy he has for swing trading using the ABC wave with an indicator on the bottom such as RSI or slow stochastic. Looks very simple but the pattern does seem to be all over the place. So with a good money management system i'm gonna try it out to see howi go with it. He says to use a risk/reward ratio of at least 3.
> 
> Any opinion on this? Its the last video in the link.
> 
> 
> Swing Trading - how to trade swing patters.
> https://www.thechartist.com.au/Videos/




Nah if its got anything to do with wave theory its discretionary trading. My recommendation was along the lines of his coded and tested systems. There are dudes here that have been disc trading for 10 years and from my take are still at step 1!!! If you can find a system that is hard coded that interests you and can follow along you will learn a heap about trading and what works/doesn't while not wasting 1000s of hours.

And I say that as someone who is 100% a discretionary trader. 



Valued said:


> You can't. No one can prove to you their system works consistently since it is likely their sample size is way too small and a successful back test doesn't mean anything. You might have a system that happened to work well in the past but people only pick systems that do well in back tests so it's like a survivor bias in a way.




Errr not really sure thats a true statement. There is certainly a robust way to go about system development to enable you to expect a give outcome from a set of events.


----------



## ThingyMajiggy

> There are dudes here that have been disc trading for 10 years and from my take are still at step 1!!!




See, listen to these guys NT, you don't want to be another ThingyMajiggy!


----------



## tech/a

ThingyMajiggy said:


> See, listen to these guys NT, you don't want to be another ThingyMajiggy!




Hasn't been from lack of trying Sam!

Some people are their own worst enemy.
The biggest draw back for most in your position is
Capital. When people don't have enough loss scares
the bejeezes out of them and holds them back.

Everyone wants the + and cant stomach the invariable -
Its trading---its a business and it needs capital.


----------



## ThingyMajiggy

tech/a said:


> Hasn't been from lack of trying Sam!
> 
> Some people are their own worst enemy.
> The biggest draw back for most in your position is
> Capital. When people don't have enough loss scares
> the bejeezes out of them and holds them back.
> 
> Everyone wants the + and cant stomach the invariable -
> Its trading---its a business and it needs capital.




Ahh not so much, I don't mind having losses, I'm young and can soon earn that back. Agree with the rest! I just feel I have no idea about an actual edge, plus I've spent most of these years focusing on the DOM/order flow but now knowing that it's not actually that useful, and wanting to know more HOW and WHY the market moves, find an actual edge, I have no trouble holding trades, entering, losses, beyond that. I just need to find something more concrete as far as entries and an edge goes. I like the idea of basing that off statistics as it's hard evidence/proof then, instead of some hair brain idea with waves and ABCs etc. but then I have no idea where/how to look for that, then you still need some trigger to actually enter.

Plus I've never actually tried properly, never done a solid stint of sim trading for say 6 months(feel I need the above first instead of throwing darts for 6 months?) but that is also partly because it's been tough to do for me as my shifts at work don't really allow me to stay up much past dinner time so I get like 10 minutes of Europe before bed, then no sim/demo accounts have access to any Asian futs markets so there's nothing I can do during the day either.....except mindlessly chasing my stupid tail around in circles and trying to learn how to find an edge. I'm off to South America on Monday and when I get back I'm going to nights hopefully which means I'll have access to the European session before work, so hopefully I can get my ar$e into gear in the mean time and have something concrete to work on for a long stint of sim trading so I can gather some stats on my trading, THEN I can work on the different areas to improve etc. but at the moment I'm back at square one after wasting so much time on order flow(it does have it's uses, but not how I was doing it) to find something decent/concrete that doesn't just feel like I'm throwing darts at a board.

Is the edge in the entry or is the edge in the management? Surely decent entries are the key to begin with, then its down to how you manage it, if you get rubbish entries then you've already put yourself in a hole and no management will get you out of it, so that's why I'm quietly trying to find something and reading lots in these forums, and going back over emails from yourself and TH from a blank mindset.

Basically, I'm an idiot who's wasted his time up to this point, clean slate and starting again. Just resisting asking for help because it appears I've been around for 10 years and done sweet f**k all so I'm a "has been" etc. Plus I've received lots of gems via email that I need to go back over. Plus I should probably keep a journal, or a playbook of some sort, but step 1 first. Then I can start on a long stint, some record keeping, some stats review and work on fixing things.

100% blame myself, have been my own worst enemy, wasted way too much time, procrastinated, haven't grown a pair and done anything properly. But I still do really really want to, more than ever. Enough BS.

Annnnnnnnnnd that post was WAY too big so I'll shut up now haha.


----------



## Roller_1

ThingyMajiggy said:


> Ahh not so much, I don't mind having losses, I'm young and can soon earn that back. Agree with the rest! I just feel I have no idea about an actual edge, plus I've spent most of these years focusing on the DOM/order flow but now knowing that it's not actually that useful, and wanting to know more HOW and WHY the market moves, find an actual edge, I have no trouble holding trades, entering, losses, beyond that. I just need to find something more concrete as far as entries and an edge goes. I like the idea of basing that off statistics as it's hard evidence/proof then, instead of some hair brain idea with waves and ABCs etc. but then I have no idea where/how to look for that, then you still need some trigger to actually enter.
> 
> Plus I've never actually tried properly, never done a solid stint of sim trading for say 6 months(feel I need the above first instead of throwing darts for 6 months?) but that is also partly because it's been tough to do for me as my shifts at work don't really allow me to stay up much past dinner time so I get like 10 minutes of Europe before bed, then no sim/demo accounts have access to any Asian futs markets so there's nothing I can do during the day either.....except mindlessly chasing my stupid tail around in circles and trying to learn how to find an edge. I'm off to South America on Monday and when I get back I'm going to nights hopefully which means I'll have access to the European session before work, so hopefully I can get my ar$e into gear in the mean time and have something concrete to work on for a long stint of sim trading so I can gather some stats on my trading, THEN I can work on the different areas to improve etc. but at the moment I'm back at square one after wasting so much time on order flow(it does have it's uses, but not how I was doing it) to find something decent/concrete that doesn't just feel like I'm throwing darts at a board.
> 
> Is the edge in the entry or is the edge in the management? Surely decent entries are the key to begin with, then its down to how you manage it, if you get rubbish entries then you've already put yourself in a hole and no management will get you out of it, so that's why I'm quietly trying to find something and reading lots in these forums, and going back over emails from yourself and TH from a blank mindset.
> 
> Basically, I'm an idiot who's wasted his time up to this point, clean slate and starting again. Just resisting asking for help because it appears I've been around for 10 years and done sweet f**k all so I'm a "has been" etc. Plus I've received lots of gems via email that I need to go back over. Plus I should probably keep a journal, or a playbook of some sort, but step 1 first. Then I can start on a long stint, some record keeping, some stats review and work on fixing things.
> 
> 100% blame myself, have been my own worst enemy, wasted way too much time, procrastinated, haven't grown a pair and done anything properly. But I still do really really want to, more than ever. Enough BS.
> 
> Annnnnnnnnnd that post was WAY too big so I'll shut up now haha.




Thingy,

Have you looked into Amibroker and coding systems?  I saw you mention that you can code a bit. It wouldn't take long to get good enough to test certain ideas etc. If it's a EOD system, then you can papertrade it on a sim acc when you're working etc. Then you get all your stats on entries, exits whatever you want. I'm 25 and started looking into discretionary stuff but felt this suited me better as i don't want to be screen watching all day/night at this stage


----------



## ThingyMajiggy

Roller_1 said:


> Thingy,
> 
> Have you looked into Amibroker and coding systems?  I saw you mention that you can code a bit. It wouldn't take long to get good enough to test certain ideas etc. If it's a EOD system, then you can papertrade it on a sim acc when you're working etc. Then you get all your stats on entries, exits whatever you want. I'm 25 and started looking into discretionary stuff but felt this suited me better as i don't want to be screen watching all day/night at this stage




Yeah I am looking into that a bit lately, I'm a Ninjatrader man though, thought I'd stick with it as it's got good stats and strategy testing etc. so there's a reasonable learning curve in learning C# then getting to know Ninjatrader's methods etc. but figured it might be a decent way of testing ideas if nothing else rather than trying to find something by staring at a chart.


----------



## Roller_1

ThingyMajiggy said:


> Yeah I am looking into that a bit lately, I'm a Ninjatrader man though, thought I'd stick with it as it's got good stats and strategy testing etc. so there's a reasonable learning curve in learning C# then getting to know Ninjatrader's methods etc. but figured it might be a decent way of testing ideas if nothing else rather than trying to find something by staring at a chart.




Yea ok fair enough. A good thing about Amibroker is there's so much info/ideas out there. But it's prob the same for Ninja trader i just haven't looked


----------



## NewbieTrader1982

Trembling Hand said:


> Nah if its got anything to do with wave theory its discretionary trading. My recommendation was along the lines of his coded and tested systems. There are dudes here that have been disc trading for 10 years and from my take are still at step 1!!! If you can find a system that is hard coded that interests you and can follow along you will learn a heap about trading and what works/doesn't while not wasting 1000s of hours.
> 
> And I say that as someone who is 100% a discretionary trader.
> 
> 
> 
> Errr not really sure thats a true statement. There is certainly a robust way to go about system development to enable you to expect a give outcome from a set of events.






Coded systems interest me, to be honest any system that 'works' interests me. If you like systems, then why are you staying discretionary? I know @tech/a is also discretionary and does well too.

Cheers


----------



## Trembling Hand

NewbieTrader1982 said:


> Coded systems interest me, to be honest any system that 'works' interests me. If you like systems, then why are you staying discretionary?



I like system development for the safety and learning process. I like disc for the out-performance.


----------



## tech/a

You'll be lucky to have consistent 25% with a good system (standard thinking) 
Those who gain 30% and a lot more would be discretionary.
Creative long term systems could do better than standard thinking.

Single entity systems can do better than portfolio type.
Whole topic on its own.


----------



## NewbieTrader1982

Trembling Hand said:


> I like system development for the safety and learning process. I like disc for the out-performance.




OK so it sounds like a good discretionary trader can outperform a Systems Approach but requires much more active trading/decisions/chart searching etc?

Is that fair to say?


----------



## NewbieTrader1982

tech/a said:


> You'll be lucky to have consistent 25% with a good system (standard thinking)
> Those who gain 30% and a lot more would be discretionary.
> Creative long term systems could do better than standard thinking.
> 
> Single entity systems can do better than portfolio type.
> Whole topic on its own.




Yup OK sounds similar feedback on Systems with what TH is saying. Got it.

The only thing then is, a discretionary trader would have to 'hope' (probably test) that he is using a 'strategy' that ALSO has a positive expectancy long term like a Systems approach has. Is that correct?


----------



## Newt

NewbieTrader1982 said:


> Yup OK sounds similar feedback on Systems with what TH is saying. Got it.
> 
> The only thing then is, a discretionary trader would have to 'hope' (probably test) that he is using a 'strategy' that ALSO has a positive expectancy long term like a Systems approach has. Is that correct?



Hi Newbie
Glad to hear you're digesting Nick's work.  Unholy Grails really is a beacon in the dark for those starting out - its hope and guidance that you can make systematic trading work (when the majority of conventional market wisdom says otherwise).
You should definitely get your feet wet with Amibroker and some quality data (Norgate?).  Just be aware when you think you've found something doing better than the 25%'ish Tech/a describes you're probably just "curve fitting".  There is a whole field of debate around daily versus weekly, complex versus more simple (hopefully more robust), acceptable risk and drawdowns (DDs have a habit of always eventually exceeding your worst case model).  As you're already heard, there isn't necessarily right or wrong approaches to the above - instead its very important to find what feels right to you, do the hard yards to check how and why it works and what the risks you're taking on are.  Only then can you have a reasonable positive expectation and faith to keep going through daily/weekly/monthly buffeting and doubts.

2 other tips from me would be:
- Enjoy the journey, but realistically expect to invest similar energy and time as you would for a tertiary degree to become profitable (which raises the question that perhaps most people would be better topping up their expertise in their normal area of work rather than dreaming about trading?!)
- Check out Andrew Swanscott's excellent podcast on systematic trading:
http://bettersystemtrader.com/


----------



## NewbieTrader1982

Newt said:


> Hi Newbie
> Glad to hear you're digesting Nick's work.  Unholy Grails really is a beacon in the dark for those starting out - its hope and guidance that you can make systematic trading work (when the majority of conventional market wisdom says otherwise).
> You should definitely get your feet wet with Amibroker and some quality data (Norgate?).  Just be aware when you think you've found something doing better than the 25%'ish Tech/a describes you're probably just "curve fitting".  There is a whole field of debate around daily versus weekly, complex versus more simple (hopefully more robust), acceptable risk and drawdowns (DDs have a habit of always eventually exceeding your worst case model).  As you're already heard, there isn't necessarily right or wrong approaches to the above - instead its very important to find what feels right to you, do the hard yards to check how and why it works and what the risks you're taking on are.  Only then can you have a reasonable positive expectation and faith to keep going through daily/weekly/monthly buffeting and doubts.
> 
> 2 other tips from me would be:
> - Enjoy the journey, but realistically expect to invest similar energy and time as you would for a tertiary degree to become profitable (which raises the question that perhaps most people would be better topping up their expertise in their normal area of work rather than dreaming about trading?!)
> - Check out Andrew Swanscott's excellent podcast on systematic trading:
> http://bettersystemtrader.com/




Thanks @Newt ..So I am just trying to understand what is actually being said then. Does that mean that all discretionary trading will eventually fail at some time? And therefore the only chance to be profitable long-term is from a robust System and no other way?

But then on the other hand, aren't there other types of traders out there not using a systems approach and being profitable for decades?

Thanks mate

*note to self, pick up the bloody phone call Nick to chat..*


----------



## NewbieTrader1982

A direct quote from nick " Discretionary Trading is the use of various chart patterns to identify low risk opportunities. These cannot be programmed into a computer, but by using correct trading principles we are able to create an edge over the longer term. Being a discretionary trader allows you to be completely in charge of the trading processes"

Comments?


----------



## tech/a

N/T
Every form of trading can fail from time to time.
Imagine in Property that every suburb valued differently from each other
and so did every street and every house in that street.

Price movements could be 3-30% every single day
Either up or down. With prolonged periods in either direction.
Imagine houses similar to each other varying dramatically daily even Hrly.
Even when it appears to be totally random with no reasoning.

Lets say developers like you and I are Systematic in our approach we have a proven method.

The general public are discretionary in their buying and selling.

*Throw in that you could buy or sell at the click of a mouse!!!*

How difficult do you think it would be to invest in property for either of us?


----------



## NewbieTrader1982

Yup I see your point and realise that the two assets are totally different beasts.

I think as you point out, being successful at trading is difficult and you have to be prepared for the swings, much more volatile than real estate.


----------



## Wysiwyg

rnr said:


> Hey Wysiwyg,
> I hope you are not suggesting that the code above represents the BBO system in Nick's book "Unholy Grails"!



Alright what have I done wrong?


----------



## Wysiwyg

Wysiwyg said:


> Alright what have I done wrong?



Okay I see in the book the entry/exit is a close above/below rather than a cross.


----------



## Wysiwyg

Tested 01/01/2016 to Present = $1776 gain from a 100k start. Just need to be patient with it.


----------



## Roller_1

where's the code?

This is my results on my code 2016-now
clearly a single run but you get a idea


----------



## Wysiwyg

Roller_1 said:


> This is my results on my code 2016-now
> clearly a single run but you get a idea






		Code:
	

Capital = Param("Start Capital", 100000, 10000, 100000, 2000);
SetOption("InitialEquity", Capital);
 
ATRPeriod = Param("ATR Period (Risk)", 45, 5, 50, 1);
ATRMultiple = Param("ATR Multiple (Risk)", 2.5, 1, 10, 0.5);
ATRAmount = ATRMultiple * MA(ATR(1), ATRPeriod);

Risk1 = Param("Dollar Risk", 1400, 100, 20000, 100);
PS = (Risk1/ATRAmount )* BuyPrice;
PSLimit = Param("Position Size Limit", 10000, 1000, 100000, 500);

PositionSize = IIf(PS < PSLimit, PS, PSLimit);

IndexClose  = Foreign("XAO", "C");
IndexMA = MA(IndexClose, 75);
GoLong = IndexClose > IndexMA;
PositionScore = Correlation(IndexClose, C, 20);

SetTradeDelays(1,1,1,1);

Turnover = MA(C * V, 5) > 1000000;

///// BBO \\\\\

MA100 = MA(C, 100);
MAStDev = StDev(C, 100);

UpperBand = MA100 + 3 * MAStDev;
LowerBand = MA100 - 1 * MAStDev;

Buy =  C > Ref(UpperBand, -1) & GoLong & Turnover;  //Cross(C, UpperBand)
Sell = C < Ref(LowerBand, -1); //Cross(LowerBand, C)


----------



## Roller_1

Wysiwyg said:


> Code:
> 
> 
> Capital = Param("Start Capital", 100000, 10000, 100000, 2000);
> SetOption("InitialEquity", Capital);
> 
> ATRPeriod = Param("ATR Period (Risk)", 45, 5, 50, 1);
> ATRMultiple = Param("ATR Multiple (Risk)", 2.5, 1, 10, 0.5);
> ATRAmount = ATRMultiple * MA(ATR(1), ATRPeriod);
> 
> Risk1 = Param("Dollar Risk", 1400, 100, 20000, 100);
> PS = (Risk1/ATRAmount )* BuyPrice;
> PSLimit = Param("Position Size Limit", 10000, 1000, 100000, 500);
> 
> PositionSize = IIf(PS < PSLimit, PS, PSLimit);
> 
> IndexClose  = Foreign("XAO", "C");
> IndexMA = MA(IndexClose, 75);
> GoLong = IndexClose > IndexMA;
> PositionScore = Correlation(IndexClose, C, 20);
> 
> SetTradeDelays(1,1,1,1);
> 
> Turnover = MA(C * V, 5) > 1000000;
> 
> ///// BBO \\\\\
> 
> MA100 = MA(C, 100);
> MAStDev = StDev(C, 100);
> 
> UpperBand = MA100 + 3 * MAStDev;
> LowerBand = MA100 - 1 * MAStDev;
> 
> Buy =  C > Ref(UpperBand, -1) & GoLong & Turnover;  //Cross(C, UpperBand)
> Sell = C < Ref(LowerBand, -1); //Cross(LowerBand, C)




Why are you using the ATR/Dollar risk as position sizing? doesn't the book say 20 positions at 5% of capital?

PositionScore =mtRandom();

Why are you using correlation to the index?


----------



## Wysiwyg

Thanks. Found the core criteria for all strategies in the book. Don't have Dividend data for the periods held. Couldn't find any reference to PositionScore???



		Code:
	

SetOption("InitialEquity", 100000);
SetOption("CommissionAmount", 29.95);
PositionSize = -100/20;

IndexClose  = Foreign("XAO", "C");
IndexMA = MA(IndexClose, 75);
GoLong = IndexClose > IndexMA;
PositionScore = mtRandom();

SetTradeDelays(1,1,0,0);

TurnoverLiquidity = MA(C * V, 7) > 500000 & MA(V, 7) > 500000 ;

///// BBO \\\\\

MA100 = MA(C, 100);
MAStDev = StDev(C, 100);

UpperBand = MA100 + 3 * MAStDev;
LowerBand = MA100 - 1 * MAStDev;

Buy =  C > Ref(UpperBand, -1) & GoLong & TurnoverLiquidity;
Sell = C < Ref(LowerBand, -1);


----------



## Roller_1

Wysiwyg said:


> Thanks. Found the core criteria for all strategies in the book. Don't have Dividend data for the periods held. Couldn't find any reference to PositionScore???
> 
> 
> 
> Code:
> 
> 
> SetOption("InitialEquity", 100000);
> SetOption("CommissionAmount", 29.95);
> PositionSize = -100/20;
> 
> IndexClose  = Foreign("XAO", "C");
> IndexMA = MA(IndexClose, 75);
> GoLong = IndexClose > IndexMA;
> PositionScore = mtRandom();
> 
> SetTradeDelays(1,1,0,0);
> 
> TurnoverLiquidity = MA(C * V, 7) > 500000 & MA(V, 7) > 500000 ;
> 
> ///// BBO \\\\\
> 
> MA100 = MA(C, 100);
> MAStDev = StDev(C, 100);
> 
> UpperBand = MA100 + 3 * MAStDev;
> LowerBand = MA100 - 1 * MAStDev;
> 
> Buy =  C > Ref(UpperBand, -1) & GoLong & TurnoverLiquidity;
> Sell = C < Ref(LowerBand, -1);




It just randomly selects a position if there are more buy signals than positions available, in theory its probably better to have a ranking system system such as ROC(c,30), but that's not is the book.  

Why not use the bollingerband function bbandtop & bbandbot?


----------



## Wysiwyg

You can ...

*UpperBand = BBandTop(C, 100, *3*); 
LowerBand = BBandBot(C, 100, *1*); *


----------



## Roller_1

i know you can but you didn't...


----------



## rnr

Wysiwyg said:


> Thanks. Found the core criteria for all strategies in the book. Don't have Dividend data for the periods held. Couldn't find any reference to PositionScore???
> 
> 
> 
> Code:
> 
> 
> SetOption("InitialEquity", 100000);
> SetOption("CommissionAmount", 29.95);
> PositionSize = -100/20;
> 
> IndexClose  = Foreign("XAO", "C");
> IndexMA = MA(IndexClose, 75);
> GoLong = IndexClose > IndexMA;
> PositionScore = mtRandom();
> 
> SetTradeDelays(1,1,0,0);
> 
> TurnoverLiquidity = MA(C * V, 7) > 500000 & MA(V, 7) > 500000 ;
> 
> ///// BBO \\\\\
> 
> MA100 = MA(C, 100);
> MAStDev = StDev(C, 100);
> 
> UpperBand = MA100 + 3 * MAStDev;
> LowerBand = MA100 - 1 * MAStDev;
> 
> Buy =  C > Ref(UpperBand, -1) & GoLong & TurnoverLiquidity;
> Sell = C < Ref(LowerBand, -1);





Almost there!
I suggest that you remove the Index Filter (for now) and adjust the code so that once an initial BUY signal has been generated for a security there will be no further BUY signals until a SELL signal has been triggered.
Now if you post a chart of RRL with the code attached showing BUY & SELL signals you will be able to confirm your code is correct by comparing any charts in the book that are relevant to the BBO system.

Perhaps you could re-run your test from post #180 so that we can see how the system operates with the correct code.

Thanks in advance Wysiwyg for being such a good sport.

Cheers, Rob


----------



## Wysiwyg

For rnr ...
Test 1 (left) without exrem, Test 2 with exrem.


----------



## rnr

Wysiwyg said:


> For rnr ...
> Test 1 (left) without exrem, Test 2 with exrem.




Thanks for that Wysiwyg as stats are interesting.

Can't help but wonder what the stats would look like without the XAO index filter.


----------



## Wysiwyg

rnr said:


> Can't help but wonder what the stats would look like without the XAO index filter.



Without the XAO 75 MA from same period, 01/01/2016 to present. Shows it is Index correlated with equity peaks in Aug 2016 and Jan 2017.


----------



## Wysiwyg

Without XAO 75MA on the left and with XAO 75MA on the right.


----------



## rnr

Wysiwyg said:


> Without XAO 75MA on the left and with XAO 75MA on the right.
> 
> View attachment 72974




Thanks again Wysiwyg for taking the time to post this info.


----------



## Roller_1

are you using 20 positions @ 5% of equity? Also are you only testing on current all ords or with historical constituents?


----------



## Roller_1

one problem with this system is it would be mentally hard to trade. a2m has a +200% open profit but look how far the stop is, basically 50% below current levels. But results show it's not too bad if you can ride the wave..


----------



## Newt

Roller_1 said:


> one problem with this system is it would be mentally hard to trade. a2m has a +200% open profit but look how far the stop is, basically 50% below current levels. But results show it's not too bad if you can ride the wave..
> View attachment 72979




Agree, and good points for potential new traders to watch.  Its very easy to get excited about the equity curve, but these psychological issues make for major roller coaster morale issues as the market cycles between up and down periods.  Those blips on the curve feel a lot more bumpy in real life.

Also notable that without the filter, performance is better, but the gyrations are even more pronounced.  That is, the psychology is even harder, and the risk of ruin becomes possibly higher (unless the greater volatility of returns is balanced by significantly greater (and reliable) returns).

Radge systems often involve a switch to tighter stops when the filter cuts in, and/or limitations on buying.  For those that feel they can cope with the psychological issues, it would also be beneficial to also review performance over the GFC historical data (2007 through to 2009) and see if you still prefer to leave out a filter.  No right or wrong, just issues for each individual to deal with and decide _before _the market bounces around.


----------



## tech/a

Roller_1 said:


> one problem with this system is it would be mentally hard to trade. a2m has a +200% open profit but look how far the stop is, basically 50% below current levels. But results show it's not too bad if you can ride the wave..
> View attachment 72979




It’s way worse than that.
Being a displaced M/A the exit will turn down and move away from where it is now
The slower it falls the worse it becomes.

Having said that the point of a system ISNT maximising profit on a single trade but finding a repeatable sequence of events which results in a positive expectancy.
So the system is as good as it was/is designed.
Trades in isolation aren’t what systems trading is about.

If you understand the above it’s no biggie phsycologically
If you want to trade it differently on its own you can


----------



## Joe90

_Couldn't find any reference to PositionScore???_
You could use 'bang for buck' as a PositionScore. Its a volatility filter, see bottom of this page on The Chartist site.
www.thechartist.com.au/Shares-Stocks/bang-for-buck-trade-management-strategy.html

PositionScore = ((10000/Close) * ATR(200))/100; //Nick Radge - "bang for buck".


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## InsvestoBoy

craft said:


> Lies, damned lies and statistics.




I recently had a chance to read Unholy Grails and was doing some searching on this forum to see commentary.

@craft interesting about this comment on @tech/a's TechTrader system, at first I thought the same thing as you that the returns were not much better than simply buying the index on leverage but I actually think it is better than that.

From the chart @tech/a posted, the dates are blurry so I couldn't be 100% sure about the exact start and end dates but I think it shows 90k starting capital on 23/08/2002 and 357k ending capital on 23/08/2009.

For an apples to apples comparison versus a benchmark, we would need to assume an investor with $30k takes out a 3:1 margin loan and invests the $90k lump into the XJO, reinvests all the earnings and franking credits, etc on the start date and removes it on the end date. Thanks to @peter2's mention, there is an index the XNT which represents this exactly.

You can see the data for that index here: https://au.investing.com/indices/s-p-asx-200-net-total-return-historical-data

The index value on the start date is 15950.62 and the index value on the end date is 28785.52.

So a benchmark investor would've received a total return of about 80% total over that time period. Maybe we can assume the benchmark investor reinvested dividends on 3:1 margin as well over time and the return would've been a bit better than that.

But I think based on those numbers TechTrader actually still outperforms quite handily, because it compounds on leverage over time. i.e. once the account has generated another 30k in profits there is 60k of real money there and at 3:1 margin it can trade 180k worth of stocks. At the terminal date with $357k the account would be able to trade a bit over a mil of stocks!



> The regression line on the all ords accumulation index returned 24.6% CAGR over the 03 to 07 bull market.




This isn't a fair comparison because you are trying to claim the best possible benchmark CAGR using the start and end date as 03-07 where TechTrader was trading 02-09, including making new highs in the system while the benchmark was near the lows of a big drawdown.



> The real strength of any trend following system is the switching to cash to reduce the depth of draw down – the delay in switching back out of cash is the cost on the up legs.




I think this statement would be correct if it was simply trend following the index. But TechTrader was investing in smaller individual companies (one of the rules in the scan is max price <$10) with a lot more upside volatility than the index, coupled with compounding leverage and tight risk management to avoid downside volatility. So there is a bit more strength to it than what you say, especially if you analyse the equity curve chart that @tech/a posted closely you can see there are plenty of periods where it provides uncorrelated returns which are quite valuable even if only as a diversified stream of returns.

I follow systematic trading quite a lot and can see some value there.



> Why didn’t you not keep going with it and wait for the next signals?




Didn't he use the money to buy a building?



> How would it have fared in the 10-12 sideways noise?




I guess the question is were there any stocks <$10 doing well during the 2010-2012 period? If you look at the return chart posted in Unholy Grails (implemented with slightly different position sizing rules from what @tech/a used), the return for 2010 was 22.3% and the return for 2011 was -6.1%, which is around when the edition I got a copy of was published so there is no 2012 result, but you could imagine TechTrader would be not too far off that mark if @tech/a had kept it up.

...

Anyway that is my 2c contribution to the heated discussion above.

The thing that I found missing from both equity return curves in the book and the chart @tech/a posted above is tax treatment. The annual net capital gains from the system would be quite hefty and trigger plenty of CGT, which if paid out of the trading capital would change the compounding equation quite a bit I imagine. But they are not included in any charts so the assumption for these curves is you must have plenty of spare capital to pay CGT to not interrupt the fidelity of the charts...


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## tech/a

Just a couple of things.

Finish date was October 2008
Reason I closed it was that the portfolio was closing trades but not giving new trades
There were 3 remaining and the equity high had been $467k and I wanted to buy
a property. Right or wrong I sold up.

The universe was BT Margin allowed margin traded stocks.

I know of a couple of people who have traded the original T/T until today and they are both 
very happy.
They both had a loss in 2009 of 8 and 9 %.

Me I trade a system based around the original method for my super.


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## InsvestoBoy

tech/a said:


> The universe was BT Margin allowed margin traded stocks.




Thanks @tech/a can you confirm my whether my description of how your margin account worked is correct?

i.e. if you had $30k you were able to own up to $90k in stock and if you managed to turn a $30k profit, you'd have a $60k balance and be able to own up to $180k in stock?

Also can you help us understand how tax worked on your trading system? As you traded it for 7 consecutive years you were generating net capital gains and must have been required to pay CGT if trading in your own account or corporate profits if you had setup a corporation to trade through. But the equity curve doesn't seem to show any impact of annual or quarterly tax payouts on capital gains and compounds regardless. 

How could you achieve this, unless you were paying tax from another source of funds?


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## rnr

↑
Thanks @tech/a can you confirm .....

*Also can you help us understand how tax worked on your trading system? As you traded it for 7 consecutive years you were generating net capital gains and must have been required to pay CGT if trading in your own account or corporate profits if you had setup a corporation to trade through. But the equity curve doesn't seem to show any impact of annual or quarterly tax payouts on capital gains and compounds regardless.*

Hi InvestoBoy,

I think it would be fair to say that the results of most system tests posted on a forum are on the premise that surplus profits are reinvested in the system. Having said that, I believe I have seen a couple of instances where a set amount has been taken out annually from profits.

Cheers,
Rob


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## InsvestoBoy

rnr said:


> ↑
> Hi InvestoBoy,
> 
> I think it would be fair to say that the results of most system tests posted on a forum are on the premise that surplus profits are reinvested in the system. Having said that, I believe I have seen a couple of instances where a set amount has been taken out annually from profits.
> 
> Cheers,
> Rob




Hi rnr, the results in question are not from a test they are supposed to be live trading results...

But even for backtesting purposes, I'd posit that if people aren't making some accountancy for paying something akin to the corporate tax rate of ~30% on your FY profits, they can't really rely on metrics like equity curve, CAGR, Sharpe produced by the backtest as meaningful because the premise that you can compound all profits is just plain wrong. Obviously some ratios like win/loss and expectancy are unaffected.


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## tech/a

Re margin yes you could but that’s not how it was used

Re tax
Profits were bulked together with my own tax as Director of RWI 
Along with a lot of property holdings and sales 
I never drew on the account to pay tax 
I have an accountant for the company and an accountancy firm for personal and company 
They work their magic. 

Took all the funds remaining to buy property 
There was quite a lot left that I’d held for over 12 mths


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## rnr

@InsvestoBoy 

*But even for backtesting purposes, I'd posit that if people aren't making some accountancy for paying something akin to the corporate tax rate of ~30% on your FY profits, they can't really rely on metrics like equity curve, CAGR, Sharpe produced by the backtest as meaningful because the premise that you can compound all profits is just plain wrong. Obviously some ratios like win/loss and expectancy are unaffected.*

Agree with your comments on this one.


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## InsvestoBoy

tech/a said:


> Re margin yes you could but that’s not how it was used




Please tell us for the posterity of this thread, and so we can make a useful comparison versus a benchmark, how it was used.


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## willy1111

InsvestoBoy said:


> Thanks @tech/a
> Also can you help us understand how tax worked on your trading system? As you traded it for 7 consecutive years you were generating net capital gains and must have been required to pay CGT if trading in your own account or corporate profits if you had setup a corporation to trade through. But the equity curve doesn't seem to show any impact of annual or quarterly tax payouts on capital gains and compounds regardless.
> 
> How could you achieve this, unless you were paying tax from another source of funds?




From my point of view... all funds available to the public, indexes etc show returns before tax, so from a comparison point of view I think it is better to show returns like this.

A VAMI (value added monthly index) spreadsheet allows one to do this.

Simply compare the account balance (market value of portfolio plus cash) at the start and end of the month, allowing for additions and withdrawals (tax) to show a monthly return which is then applied to an arbitary figure say $100k. Can also do it with a benchmark like All Ords Accumulation Index to compare returns to the benchmark.

If one wanted to know the before and after tax return simply make an additional withdrawal column just for tax when it is withdrawn from account.


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## qldfrog

But it is true your results in Australia can not really be that fantastic with our tax rates, or worse the cgt which is not inflation indexed..what a joke


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## tech/a

InsvestoBoy said:


> Please tell us for the posterity of this thread, and so we can make a useful comparison versus a benchmark, how it was used.




Initially I funded enough to trade 10 positions risking 10% on any one trade.
This was around $34000 my own capital and the rest Margin.

As equity grew and I closed winning and losing positions the account eventually became self funding.
Each new position was the same $10000 with $1000 risked.

Still using the BT margin list.
It was my opinion that BT had done their research and wouldn't allow a dud in that list!

Margin was only used to get going.
The idea was to show how a small account could profit in the longer term.
Often The portfolio was full of its 10 positions some at $10,000 and others deep in profit
a great deal more in the end the liquidated value had some very profitable stocks in it
I remember 4 being over 10X initial purchase.

From the top of my head QBE was one. Think TAH was another. That pulled over 10X initial capital over the life of the portfolio.


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## InsvestoBoy

willy1111 said:


> From my point of view... all funds available to the public, indexes etc show returns before tax, so from a comparison point of view I think it is better to show returns like this.




Not sure how that would be a valid comparison? If you invest in AFI, or VAS, sure they show the returns before tax, because you can hold them indefinitely without selling and causing a CGT event to occur. The systems described in Unholy Grails are constantly generating net capital gains and causing CGT events. The compounding in the equity curves and reported Sharpe ratios etc is only valid if you can pay that tax from another source. If you have to pay CGT or corp profits tax out of your trading profits then they are obviously overstated.


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## InsvestoBoy

tech/a said:


> Initially I funded enough to trade 10 positions risking 10% on any one trade.
> This was around $34000 my own capital and the rest Margin.
> 
> As equity grew and I closed winning and losing positions the account eventually became self funding.
> Each new position was the same $10000 with $1000 risked.




Thanks @tech/a, so it would be correct to say that after your run had generated ~60k in closed profits, you were no longer using the margin loan?



> Still using the BT margin list.
> It was my opinion that BT had done their research and wouldn't allow a dud in that list!




One idea I had recently was to build a universe from all of the fundamental managers who list their ASX holdings, that way you can essentially leverage the in-house fundamental research of many different firms.


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## tech/a

Don't think they are over stated.
If your wage before Tax is $100K your not overstating your wage
by having to pay tax from it.
You earned it just as a portfolio earned it.


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## InsvestoBoy

tech/a said:


> Don't think they are over stated.
> If your wage before Tax is $100K your not overstating your wage
> by having to pay tax from it.
> You earned it just as a portfolio earned it.




@tech/a I am specifically referring to the compounding portion of the curve.

If you start trading an account with $100,000 and assume you can generate 10% per annum returns, in year 1 you will have $110,000. 

If you pay no tax out of that and compound from there you'd have $121,000 by year 2. 

Instead if you have to pay 30% CGT on that $10,000 then you'd only have $107,000 to compound from. 

Generating 10% on $107,000 would net you $10,700 and after paying 30% CGT on that amount you'd have $114,490... 5.6% less money to compound with in year 3.

Those differences would add up to quite a lot over 10 years of trading versus the backtested equity curve.

If you're paying corporate profits tax *quarterly* the compounding equation would be quite different again.

Surely this is obvious and I'm not missing something...


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## tech/a

InsvestoBoy said:


> Thanks @tech/a, so it would be correct to say that after your run had generated ~60k in closed profits, you were no longer using the margin loan?




Yes.


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## tech/a

InsvestoBoy said:


> @tech/a I am specifically referring to the compounding portion of the curve.
> 
> If you start trading an account with $100,000 and assume you can generate 10% per annum returns, in year 1 you will have $110,000.
> 
> If you pay no tax out of that and compound from there you'd have $121,000 by year 2.
> 
> Instead if you have to pay 30% CGT on that $10,000 then you'd only have $107,000 to compound from.
> 
> Generating 10% on $107,000 would net you $10,700 and after paying 30% CGT on that amount you'd have $114,490... 5.6% less money to compound with in year 3.
> 
> Those differences would add up to quite a lot over 10 years of trading versus the backtested equity curve.
> 
> If you're paying corporate profits tax *quarterly* the compounding equation would be quite different again.
> 
> Surely this is obvious and I'm not missing something...




Yes again unless you pay tax from some other source.
The curve and compounding component is dependent on not eating into profits.


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## InsvestoBoy

InsvestoBoy said:


> The compounding in the equity curves and reported Sharpe ratios etc is only valid if you can pay that tax from another source. If you have to pay CGT or corp profits tax out of your trading profits then they are obviously overstated.






tech/a said:


> Don't think they are over stated.






tech/a said:


> Yes again unless you pay tax from some other source.
> The curve and compounding component is dependent on not eating into profits.




That's what I said heh!

All the equity curves in Unholy Grails and the one you posted for TechTrader should really come with a big disclaimer:

*Only valid if you are rich enough to pay taxes from other funds!*


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## tech/a

InsvestoBoy said:


> That's what I said heh!
> 
> All the equity curves in Unholy Grails and the one you posted for TechTrader should really come with a big disclaimer:
> 
> *Only valid if you are rich enough to pay taxes from other funds!*




Money makes Money!

As should every test I think I've ever seen.
Including Pete's portfolios and every other portfolio demo I've seen.

Your perfectly correct and those who wish to trade for a living are way off the mark in their calculations of capital needed to start their trading business.
From living expenses to tax.


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## willy1111

InsvestoBoy said:


> Not sure how that would be a valid comparison? If you invest in AFI, or VAS, sure they show the returns before tax, because you can hold them indefinitely without selling and causing a CGT event to occur. The systems described in Unholy Grails are constantly generating net capital gains and causing CGT events. The compounding in the equity curves and reported Sharpe ratios etc is only valid if you can pay that tax from another source. If you have to pay CGT or corp profits tax out of your trading profits then they are obviously overstated.




We are all different.

From my point of view, it is a valid comparison as I wish to know what the Compound Annual Growth Rate (CAGR) is of AFI or VAS or any other system before tax.

Why? because then I can gauge the annual return expected from a given amount of Capital, ie VAS may have a CAGR of 8.34% for the last 10 years compared to a system with a CAGR of 20% for last 10 years.

If I have $1M capital to allocate - I'd expect roughly a return of $83,400 from VAS and $200,000 from the system - I can then deduct the necessary tax depending on applicable tax rates at the time, it might be Pension mode in SMSF and no tax payable.  The net after tax is then available to me if I wish to pay for living expenses or re-invest.

So I find it helpful from that point of view.

Perhaps you are approaching it from the view of if I have $100K now, how many years compounding at x% before I have $1M in capital and not including the tax drag in x% will impact the time.


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## rnr

Hi InsvestoBoy,

Pressured for time yesterday arvo whilst responding to your post so had to cut my response short.

When evaluating which system to use one should factor in the impact of income tax on each system.
The very nature of the system, such as trend following in tech/a's case, will also have an impact on the timing of a taxable profit verses a system profit and hence the timing for payment of any income tax, whereas with a mean reversion system the system profit and taxable profit are likely to be almost the same.
The other issue that needs to be determined is the entity used to run the system (eg. individual, partnership, company, discretionary trust, unit trust, SMSF) as this will determine the rate of tax payable as well as initial setup costs and ongoing annual running expenses .

It is important that anyone involved with system development understand the impact of the above on their system metrics.

Cheers,
Rob


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## jjbinks

So I backtested the most straight forward 3 systems from unholy grails on US and AUS Markets.
(Bollinger Band, 100 day high, MA Cross)
Results are from orginal time period mentioned in the book. And more recent time.


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## Newt

Thanks for sharing JJbinks.  I bought the more basic US data some years ago and had similar experiences trying to get BO, BBO and trend systems in general to work on the US universe.  It seems the price you pay for greater liquidity is noiser less "trendy" stocks, as a gross generalisation. 
Not saying people shouldn't trade US, but the returns, simplicity, dividends for Aus stocks kept me focused on ASX for now.


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