Developing a mechanical system from scratch

[CanOz]

Sorry I can't see how Nick has put the Intra_day V EOD to rest
If Anything he has thrown it into complete Chaos suggesting that ONE can or should trade 3 -4 markets at any one time 24 hours a day
This is Madness and Lunacy if you ask me?

I find that my EDGE is that I put the hard yards well before the ASX opens
I wake up the birds and prepare for each day
I set my "open " orders and a few continency orders

"The Wind Calls the Tune " and I go off and play some golf and freshen up for another day at sea on the ASX in the morrow

Only this form of sailing gives you the stamina and technique to last out any year and then year on and year out

The downfall of course is you must love waking up the birds
I enjoy it and it is truly wonderful to stidy the Global Exchange when she stands still for only a few moments

That is my edge!

How anyone could do the necessary preparations for 3 time zones is beyond me and I congratulate anyone who says they can

Salute and Gods speed
PS I do some Intra-day trading when the weather outside is miserable but play the market more like a the pokies /Casino with small funds

I never invest real funds on an Intra-day whim!

Ok, lets move on, we're not going to trade a mechanised system intraday right?

 

[nizar]

So do we all think that EOD would be the best for a mechanical system?

I dont think theres any "best" here.
It depends on your timeframe, your other lifestyle commitments, etc..

Im sure there are traders that clean up in both compartments, both EOD and intraday.

It would make for an interesting study though:
EOD traders versus IntraDay traders. WHo makes more per year annually in terms of R.O.E ?

Results would be very interesting....

Thoughts on who would win???
(i personally reckon the longer term trend traders, they really clean up)

 

[wayneL]

I reckon for the purposes of this exersize, EOD would be best.

 

[doctorj]

Ok, lets move on, we're not going to trade a mechanised system intraday right?

I think since you started this thread, you've got the right to make decisions on the goals of the system. This type of thread won't work as a democracy.

So we've got an EOD mechanical system. Now, what are we trading? Stocks, indices, currencies? And how are we going to trade them? CFDs, shares, warrants, options, futures....?

 

[Nick Radge]

Mathematically a higher frequency system will win the race, but as has been said, at what cost? I certainly have no interest in sitting in front of a screen as I love my golf and fishing as well. EOD will fit the bill as Wayne has suggested. Build a system that is (a) systematic and (b) end of day so a realistic working person can operate it without placing their finances in jeopardy.

The concept of CFD/Margin/Other is not important at this stage. A system that works on EOD stock data will also work on CFD's or Margin. Get the system right and then think about how the best way to trade would be. Perhaps because the vast majority herein trades shares or some type of variable we stock to stocks rather than FX or futures.

Other aspects to now consider:

(1) Holding time (1 - 5 days, 5 - 30 days, longer?)
(2) Breakout, pull back
(3) Swing or trend following
etc etc

These answers will then lend themselves toward more important questions such as number of positions, capital required which in turn will answer the question on what instrument will then be required to trade the system.

The issue we're going to face is that everyone has a different personal makeup so everyone will automatically put forward a difference of opinion of what will constitute a better method.

 

[Captain_Chaza]

So do we all think that EOD would be the best for a mechanical system?

Also, thanks Nick, for your input as well, i'm sure everyone would be very appreciative of your comments here anytime.

So EOD...

What about CFD's, as Wayne has brought up before there is the issue of counter party risk, could this be an issue?

Are we better to just look at margin on stocks?

Cheers,

CFD's IMHO is a mugs' game
As always I only speak for myself

I have only been in this forum for a relatively short time but have noticed the Great calibre of seaman we have here on this forum and their lack of interest in CFD's

Maybe they also agree with me that CFD's are for mugs and pretenders

Salute and Be Well

 

[Kauri]

..I set my open orders and a few continency orders

The Wind Calls the Tune ..

Hey Cap... If you are having trouble with your continence I fully understand why the wind calls the tune..

 

[R0n1n]

I am currently tracking a system called The Three By Two System:

This is a simple long only system that buy's stocks after a down streak and sells them after an up streak. Back to back purchases on the same stock are possible.

BUY: If a stock goes down 3 days in a row, BUY at the open the next day
SELL: If a stock that the system is long closes up 2 days in a row, sell entire long position in that stock at the next day’s open.

may not be the right one.. but we can test it out.

 

[Captain_Chaza]

I am currently tracking a system called The Three By Two System:

This is a simple long only system that buy's stocks after a down streak and sells them after an up streak. Back to back purchases on the same stock are possible.

BUY: If a stock goes down 3 days in a row, BUY at the open the next day
SELL: If a stock that the system is long closes up 2 days in a row, sell entire long position in that stock at the next day’s open.

may not be the right one.. but we can test it out.

Well, Lets take your 2 day Tack for an All-Out Ocean trial on the Beautiful LNC tomorroww
There is no sign to me indicating that I would sell tomorrow on the open
Lets see what happens ?

Since I will be on the golf course after the open
I would stay in for at least another day
Any other opinions are welcome before the Dawn on the open?

EG: A conticency Sell order could be placed @ say 0.69c
NB: Those Greedy landlubbers love round figures like 0.70c

Salute and Gods speed

 

[Joe Blow]

Gents, can we keep this thread on topic as much as possible.

The discussion is meant to revolve around the development of a mechanical trading system. Lets try to focus on that, shall we?

 

[CanOz]

Mathematically a higher frequency system will win the race, but as has been said, at what cost? I certainly have no interest in sitting in front of a screen as I love my golf and fishing as well. EOD will fit the bill as Wayne has suggested. Build a system that is (a) systematic and (b) end of day so a realistic working person can operate it without placing their finances in jeopardy.

The concept of CFD/Margin/Other is not important at this stage. A system that works on EOD stock data will also work on CFD's or Margin. Get the system right and then think about how the best way to trade would be. Perhaps because the vast majority herein trades shares or some type of variable we stock to stocks rather than FX or futures.

Other aspects to now consider:

(1) Holding time (1 - 5 days, 5 - 30 days, longer?)
(2) Breakout, pull back
(3) Swing or trend following
etc etc

These answers will then lend themselves toward more important questions such as number of positions, capital required which in turn will answer the question on what instrument will then be required to trade the system.

The issue we're going to face is that everyone has a different personal makeup so everyone will automatically put forward a difference of opinion of what will constitute a better method.

Ok, so we're EOD, done then.

What about holding time then, does this warrent consideration for the market conditions? Or is this something that does not apply as we will test it through various market conditions?

To me, on my limited experience and knowledge, it would seem that a shorter time frame would pick up more signals i.e. we're looking for shorter swings....but is that really true?

Need some opinions here, what affects the decision on holding time?

Cheers,

 

[nizar]

Need some opinions here, what affects the decision on holding time?

Hi Can,

In my opinion, the holding time depends on the behaviour of the stock.
If the stock behaves [ie. uptrend], i cant see why you cant hold it for 1yr+ or however long the trades allows.

Most of my big winners are all long-term trades.
Sure, it doesnt give you the rush of daytrading, but you get the results.

 

[nizar]

I am currently tracking a system called The Three By Two System:

This is a simple long only system that buy's stocks after a down streak and sells them after an up streak. Back to back purchases on the same stock are possible.

BUY: If a stock goes down 3 days in a row, BUY at the open the next day
SELL: If a stock that the system is long closes up 2 days in a row, sell entire long position in that stock at the next day’s open.

may not be the right one.. but we can test it out.

Interesting system, looks good in theory, dunno about in practice though.
Typical bullmarket system though. BUY instructions assume the markets has an upward bias.

 

[>Apocalypto<]

I am currently tracking a system called The Three By Two System:

This is a simple long only system that buy's stocks after a down streak and sells them after an up streak. Back to back purchases on the same stock are possible.

BUY: If a stock goes down 3 days in a row, BUY at the open the next day
SELL: If a stock that the system is long closes up 2 days in a row, sell entire long position in that stock at the next day’s open.

may not be the right one.. but we can test it out.

You would not want to using the sell rule too much in the last four years!

 

[CanOz]

Hi Can,

In my opinion, the holding time depends on the behaviour of the stock.
If the stock behaves [ie. uptrend], i cant see why you cant hold it for 1yr+ or however long the trades allows.

Most of my big winners are all long-term trades.
Sure, it doesnt give you the rush of daytrading, but you get the results.

Well i'm over the rush...i want RESULTS BABY!

So do we want a system where the holding time is changeable....?

Like, an exit thats adjustable? Difficult to test?

Ok, how about we just use the trailing stop that Nick reviews in his course, every time the stock makes a new high, the stop moves up to the new low.....or are we getting ahead of oursleves here?

First of all, are we long only? Short trades don't normally last as long, correct?

Cheers,

 

[doctorj]

I guess when we talk about hold times, we're really asking do we want a more nimble system that takes a little more time to manage, or a longer term, set & forget.

Of course, we'd love something that will hold forever and make us all rich, but we're not trying to design the perfect system here, merely a system that offers a good return per unit of risk (ie. Sharpe ratio) and has characteristics that make it trade-able, such as reasonable max drawdown, win% etc.

Once we decide what we're trying to achieve (in this case, hold time) we can start testing entries/exits that we think will achieve that goal.

Given TT is well documented here and elsewhere already, my vote is to design a system that is shorter term in nature so we don't cover old ground...

 

[R0n1n]

Interesting system, looks good in theory, dunno about in practice though.
Typical bullmarket system though. BUY instructions assume the markets has an upward bias.

Nizar, it does look good in theory, but it would be good to test it out.

ofcourse the sell can/should be modified to suit.

 

[>Apocalypto<]

CFD's IMHO is a mugs' game
As always I only speak for myself

I have only been in this forum for a relatively short time but have noticed the Great calibre of seaman we have here on this forum and their lack of interest in CFD's

Maybe they also agree with me that CFD's are for mugs and pretenders

Salute and Be Well

Any margin product can cause you mayor pain, if you not ready to trade or not using money management correctly to suit your experience and balance.

Entries have to much sharper & spreads can add to your loss when your wrong.

But hey you can damage you bank account just as bad with Share trading!

I have noticed CFD's work fine for EOD systems just more attention is needed to monitor the trade, specifically on pull backs and your margin if your not in much profit after entry.

They never expire so you can hold as long as you want.

 

[Captain_Chaza]

Ok, so we're EOD, done then.

What about holding time then, does this warrent consideration for the market conditions? Or is this something that does not apply as we will test it through various market conditions?

To me, on my limited experience and knowledge, it would seem that a shorter time frame would pick up more signals i.e. we're looking for shorter swings....but is that really true?

Need some opinions here, what affects the decision on holding time?

Cheers,

You are not going to beleive me when I say this
"The Wind Calls the Tune"
But it does
Probably the best holding pattens I have ever seen is the 8 Day Spring Gale
Believe me !These cannot be predefined and are not easy to hold onto in their strength

If I am lucky I might catch one of these glorious Spring gales Once a year
but unfortunately like most Gutless Captains I usaully drop the ropes much too early fearing she may split the mast

I don't think you can define a cruise strategy to say
1-5 days
5-20 days
etc

However I am willing to learn any new tacks and tricks

Like all sea sports I feel we are totaly dependant on the sea and weather conditions at the time
Not only in our own vicinity but also many thousands of miles to the north

The point I am trying to make is I don't think you can put a strict timing arrangement on any tack
Patience is sometimes required (But not too much for my liking)

Sometimes the anticipacted wind never builds up and at other times she just fizzles out before you have time to jump out of your bunk

Salute for now and as always
Strap yourselves into your bunks for a good night's sleep

 

[CanOz]

Given TT is well documented here and elsewhere already, my vote is to design a system that is shorter term in nature so we don't cover old ground...

Ok sounds good to me, i'd like to see a system that goes short too, so that might suit this approach?

Thats 2 for a shorter time frame.

Cheers,


off to bed...