Developing a mechanical system from scratch

[CFD]

Can we agree on this and move along to entries?

Yes, with a GSL.

 

[CanOz]

Hi Canaussieuck

Will each trader take responsibility for the entries, exits and stops on a particular stock or stocks or does it have to be a joint agreement thing?

Cheers
Happytrader

Once a system is being traded, you take the signals it generates HT. The entries, initial stops, trailing stops etc. are all perdetermined and tested.

Is that what you meant or did i miss the meaning in your question?

NOW

For the entries, what the best way to get us thinking here?

How about we start with something simple, like a key reversal?

Cheers,

 

[tech/a]

Incidently you'll also find (And its a common misconception that a system takes every signalled trade) that you wont have to take every trade and nor will you have the capital to take every trade.
Further you will also be fully positioned and unable to take new trades until trades are closed by either being stopped or exited.

Entries.

Breakouts?
Patterns?
Pullbacks?
Oscillators?
Pure Bar price action like that suggested?
Other?
Combination?

Buy Low sell high?
Buy high sell Higher?
Short Vica Versa.

I'm really only interested in charts, charts and more charts.

Id change focus to profit!

 

[CanOz]

Incidently you'll also find (And its a common misconception that a system takes every signalled trade) that you wont have to take every trade and nor will you have the capital to take every trade.
Further you will also be fully positioned and unable to take new trades until trades are closed by either being stopped or exited.

Entries.

Breakouts?
Patterns?
Pullbacks?
Oscillators?
Pure Bar price action like that suggested?
Other?
Combination?

Buy Low sell high?
Buy high sell Higher?
Short Vica Versa.



Id change focus to profit!

Thanks for the constructive criticism Daffy, if it weren't for your help we'd have to make all these mistakes ourselves!

Ok, lets forget about entries for now, and work on how much capital we're going to allocate to our system?

If this is CFD's, and the average margin is say, 50% (we'll need to check that on our universe at some stage) would it be safe to say that we'll need about 30,000 to be safe?

Cheers,

 

[tech/a]

No no
Entries are OK.

Capital Id say 30k for testing purposes but can test other capital bases.
You'll find it does make a difference but really as Nick says not that important provided you have enough to run atleast 8 positions without Brokerage being a major issue. I allow $30 in and out and while it can be cheaper its just a base.
Trading smaller parcels and brokerage becomes a real issue as does very short trades and massive frequency.

 

[CanOz]

Ok, great then...lets talk entries!!!!! Ron1n...you must have a few idea now?

I personally like the key reversal...i'll see if i can find a pic file of the bar pattern. Its easy for me to code too

Cheers,

 

[happytrader]

Once a system is being traded, you take the signals it generates HT. The entries, initial stops, trailing stops etc. are all perdetermined and tested.

Is that what you meant or did i miss the meaning in your question?

NOW

For the entries, what the best way to get us thinking here?

How about we start with something simple, like a key reversal?

Cheers,

Hi Canaussieuck

I've noticed afew of these threads start and then stop because of difference of opinion, knowledge bases and risk tolerance. I was thinking more along the lines of allowing each trader to express their particular talent whether it be for a certain stock, sector, penchant for shorts or longs, pattern recognition, fundamentals whatever, but all would be within a short term time frame, stop loss and parcel sizing. As I mentioned in an earlier post I was thinking of making it a possibility for battlers.

Cheers
Happytrader

 

[CanOz]

Hi Canaussieuck

I've noticed afew of these threads start and then stop because of difference of opinion, knowledge bases and risk tolerance. I was thinking more along the lines of allowing each trader to express their particular talent whether it be for a certain stock, sector, penchant for shorts or longs, pattern recognition, fundamentals whatever, but all would be within a short term time frame, stop loss and parcel sizing. As I mentioned in an earlier post I was thinking of making it a possibility for battlers.

Cheers
Happytrader

So what are you suggesting then? The system will work totally differently with a difference of capital in that range.

Tech or someone can jump in here, but i think a system to handle $2000 of initial capital will be totally different than a CFD system with $30k capital.

Maybe not, maybe you could do one for penny stocks, i think i saw a thead like that on ReefCap maybe.....

Cheers,

 

[happytrader]

So what are you suggesting then? The system will work totally differently with a difference of capital in that range.

Tech or someone can jump in here, but i think a system to handle $2000 of initial capital will be totally different than a CFD system with $30k capital.

Maybe not, maybe you could do one for penny stocks, i think i saw a thead like that on ReefCap maybe.....

Cheers,

Thanks for your reply Canausseuk, I was thinking more along the lines of using expertise in trading over larger capital bases. Within the system you could allocate each person $2000 with which they would be responsible for managing a particular sector, stock or whatever. Just an idea.

Cheers
Happytrader

 

[tech/a]

Hi Canaussieuck

I've noticed afew of these threads start and then stop because of difference of opinion, knowledge bases and risk tolerance. I was thinking more along the lines of allowing each trader to express their particular talent whether it be for a certain stock, sector, penchant for shorts or longs, pattern recognition, fundamentals whatever, but all would be within a short term time frame, stop loss and parcel sizing. As I mentioned in an earlier post I was thinking of making it a possibility for battlers.

Cheers
Happytrader

Happy there is no problem with that in my not so humble opinion.
But as a basis why not get on with this as a model/Structure from which people if they wish can design a system to suit their specific needs.?
Otherwise it will get totally lost.

 

[nizar]

Incidently you'll also find (And its a common misconception that a system takes every signalled trade) that you wont have to take every trade and nor will you have the capital to take every trade.
Further you will also be fully positioned and unable to take new trades until trades are closed by either being stopped or exited.

Entries.

Breakouts?
Patterns?
Pullbacks?
Oscillators?
Pure Bar price action like that suggested?
Other?
Combination?

Buy Low sell high?
Buy high sell Higher?
Short Vica Versa.



Id change focus to profit!

Tech.
Buy on breakout and add to on pullback is good for discretionary trading, but maybe a bit difficult to make this (the buying on the pullback part) mechanical??

I know that we havent got here yet but i think in terms of money management the best way is 10% of remaining capital per trade.

JUst my opinion. Should be tested for each system.

 

[tech/a]

You can have multiple entry types by using the OR condition.

Coding you'll need a hand I'm no genius when it comes to complex coding.

 

[happytrader]

Happy there is no problem with that in my not so humble opinion.
But as a basis why not get on with this as a model/Structure from which people if they wish can design a system to suit their specific needs.?
Otherwise it will get totally lost.

Hi Tech

I believe there is an abundance of information in this forum but I do believe that most beginners lack the ability to put it all together in a useful way. The only way they can do that is to see it in action. A multitude of traders with the same budgets but different styles but all on the same page, I think would be useful.

Sounds like a trading room doesn't it?

Cheers
Happytrader

 

[R0n1n]

I asked my friend whose a full time stock trader for a simple system. Here is what he sent. I can ask him for metastock/Amibroker code if it look ok...

Setup: EMA(13) of close > Signal Line
Entry: Close crossing the previous peak
Exit : EMA(13) crossing below the Signal Line
Signal Line : EMA(9) of EMA(13)

Your opinion guys...
Ofcourse we can drop it, modify it chop it etc.. I just threw it in so that it can generate a few ideas..

 

[tech/a]

Seriously Using a short term EMA like the above is going to get whipsawed to death.
Ive tested enough of these to know you'll go broke in super quick time.
Your mate worries me!!
Nicholas Radge should be along soon to help out.
I dont wish to Hijack this thread (Special cheerio to Snake).

 

[R0n1n]

Seriously Using a short term EMA like the above is going to get whipsawed to death.
Ive tested enough of these to know you'll go broke in super quick time.
Your mate worries me!!
Nicholas Radge should be along soon to help out.
I dont wish to Hijack this thread (Special cheerio to Snake).

Tech I am just throwing ideas in, feel free to modify it etc.

I will see if I can get the code for it and back test it.

 

[CanOz]

Seriously Using a short term EMA like the above is going to get whipsawed to death.
Ive tested enough of these to know you'll go broke in super quick time.
Your mate worries me!!
Nicholas Radge should be along soon to help out.
I dont wish to Hijack this thread (Special cheerio to Snake).

You tested one for me, rememeber!

EMA may be ok for exits...or in combo with something else, i think we need something a bit more original....some bizarre combination of bars...what about today for example...how do we use these off sentiment days as entrys?

OR

We could just use a system to search for triangles, in an uptrend we enter on the break of the upper line, downtime opposite..appex for initial stop.

Cheers,

 

[doctorj]

What about a short term system that primarily looks for super-high volume. I've had some luck with back testing entries that rely almost entirely on volume (in combination with only the most rudamentary price based descrimination, such as up or down days) in mid caps and would be interested in exploring it further.

 

[CFD]

~~
Trading smaller parcels and brokerage becomes a real issue as does very short trades and massive frequency.

Does the capital need to be an issue, given that cfd's brokerage is a percentage! ie 0.1%x2

 

[happytrader]

Well Canaussieuck

Looks like you've got afew takers already; ROnin with his crossing of ema 9 and 13; Tech trading Radge style, your very own penchant for key reversals, triangles and bizarre combinations of pricebars; and Doctorj's taste for high volume.

Cheers
Happytrader