Drawdowns

[tech/a]

When restricted to the S&P 500 we found an inverse relationship between the tendency to have substantial and prolonged % moves and market capitalization.

Seems it could be used as a buy filter (Like bang for buck).
I guess trading a Margin list as I have brings the market cap of stocks traded
generally higher.
Anyway I'm Ok with academics who prove its not possible to make a profit trading trends.

I had a Chartered accountant once tell me to stop working for myself and seek employment.
2 Doctors and a solicitor heatedly trying to convince me that I was going to face ruin holding the number of properties I had.That was in 1998.

I changed accountants.
My professional friends snatch the odd weekend getaway in our apartments.

 

[theasxgorilla]

Someone who is very critical of mechnical trend following is Victor Niederhoffer ...

I'm not surprised Niederhoffer feels this way. Michael Covel hangs him out to dry quite a bit in his book titled "Trend Following", and from the account of Niederhoffer's story in this book he seems like the kind of smart person who couldn't appreciate what trend following is about. These people seem to believe that their smarts are the secret to their success in the market and the market itself is responsible for their failures. Self-attribution bias I believe it's called.

Trend System results are hard to distinguish from the results of a randomly-selected, equal-weighted portfolio, or at least that the mean and standard deviation of the returns of such a portfolio should be the benchmark for the Trend System, rather than a cap-weighted index.

I don't pretend to be experienced or extensively knowledgeable on this topic. I started writing code for a system about 2-3 months ago. But I had a hunch that this needed to be the case and I agree with his statement. For this reason before working on any system I created a random entry/exit system to which I added various componentents such as equal-weighting of positions and price filters. I then made 2500 random runs over 10 years of data (imperfect data by Howard and Blackstars definition and survivorship biased too, but it's a benchmark so I believe relative comparisons between different systems can still be made...if it can't I'm not sure I want to know ) and observed the changes in distribution of CAGR and Max DD. These become part of my benchmark to which a system with superior edge should have superior Monte Carlo distributions.

ASX.G

 

[tech/a]

No offence ASX but do you actually trade?
and if you do do you or have you made enough to lets say pay for a reasonable home?

I don't pretend to be experienced or extensively knowledgeable on this topic. I started writing code for a system about 2-3 months ago. But I had a hunch that this needed to be the case and I agree with his statement. For this reason before working on any system I created a random entry/exit system to which I added various componentents such as equal-weighting of positions and price filters. I then made 2500 random runs over 10 years of data (imperfect data by Howard and Blackstars definition and survivorship biased too, but it's a benchmark so I believe relative comparisons between different systems can still be made...if it can't I'm not sure I want to know ) and observed the changes in distribution of CAGR and Max DD. These become part of my benchmark to which a system with superior edge should have superior Monte Carlo distributions.

All this and lots of educated head nodding---hear hear good point.
Anyone made a profit here?

Your a smart guy.
So is Howard and so are many others here.
Is it really necessary to have a degree in statistics to be successful?

My hunch is that some people (Not saying yourself or anyone here for that matter) get so tied up in the design and analysis that they question the validity of just about everything.
Complicate the crap out of everything and forget to actually TRADE.

Ive watched at least 10 attempts to design and trade a system here and on Reefcap.Other than Stevo and a very few others Ive seen failure after failure.Only 3 have logged their trading that I know of. None who have succeeded as far as I know are statistical graduates.

Its like a little snippet is found in one persons writings and another in anothers then a contradiction followed by a gem.

What the hell makes a good system.---I reckon I know and If I dont trade again in my entire life the market has been highly profitable for me.

I reckon its pretty easy.
Stock goes up get on it for as long as you can.
Turbo charge it with sensible leverage and re invest profit.
Cut losses short.
Keep out of stagnant stock.
Code a method that does that.
Test it and TRADE IT.

Sorry having a bit of a rant.
I'm frustrated that it "Appears" amazingly difficult to "Get it right".
I simply dont agree.

 

[wayneL]

No offense Tech, but that was really an obnoxious post.

 

[weird]

Motorway interesting post.

I recently read a old-ish blog by Jack o'Clubs, concerning his experience using MTPredictor following the 3 trade setups ... TS1, TS2 and TS3.

http://www.trade2win.com/boards/blogs/viewblog.php?userid=42821

My understanding of his conclusion , is that he had more success with the TS2 trade setup. Although this is only from 3 months of paper trading.

From MTPredictor website,

"A TS2 trade set-up is where the ABC correction forms as a correction when the main trend is already well established and has already had an earlier correction. In Elliott wave terms, this is a Wave 4 correction."

The TS2 setup reminds me a little of the Type-1 BUY setup in Advanced get.

That is in both cases we are entering based on the existence of an established trend. EW has been used as a trend identifier.

This in essence is trend following, although in this case, we may be wishing to utilise this momentum for a short or medium term gain.

Chick Goslin, in Trading Day by Day, makes an interesting set of 3 laws of trading, where the 2nd is "continuation is more likely than change".

The MT Predictor guys also place alot of emphasis on money management and position sizing along with their scans, particularly reward risk ... we then have a few different things in play here which could further contribute to success.

 

[stevo]

Tech
"None who have succeeded as far as I know are statistical graduates."

You don't have to be a statistical graduate to understand that it would be good to trade a system that beats throwing darts at the middle pages of the Financial Review!

stevo

 

[theasxgorilla]

No offence ASX but do you actually trade?
and if you do do you or have you made enough to lets say pay for a reasonable home?

Haha, I post on forums, write in my blog and in between waiting for responses I go out and dig holes in the garden. What makes you think that I don't trade? Yes I trade and my CGT liabilities for the last 5 years suggest on the balance of things I'm not losing, FWIW. But this doesn't mean ****! Its been almost impossible to lose in this market.

I made 50% last year, net of expenses, and I don't mind admitting my account size isn't that large so this is quite a feat, IMO. Yes I can and do trade. No I didn't buy a house with the money. What does this have to do with anything?? You want to measure where I'm up to on my journey relative to you? I've started the journey...forget the details.

I agree with you, it's not that hard. But it can be time consuming and full of cognitive biases. I have a demanding profession, so I don't need even less free time and more stress. A key reason why I don't document any of my trades in the public domain is that I am trying as best as possible to preserve the integrity of the decision making. Call it an information diet. I don't need yours or anyone elses opinion to validate my decisions. You'd be familiar with this attitude I suspect.

Is it really necessary to have a degree in statistics to be successful?

My hunch is that some people (Not saying yourself or anyone here for that matter) get so tied up in the design and analysis that they question the validity of just about everything.

Frankly I can't think of a better way to be. I thrive on questioning the hell out of everything. If people can't tollerate that, well, I'm sorry, work a bit harder to get your ideas across if you think you're right or decide it's not worth the effort, up to you. I'm not unreasonable, I willingly change my point of view but not just because someone uses CAPITAL letters and bold in their posts.

Give me something of worth and value. In the meantime I'll be out in the garden digging a hole.

 

[theasxgorilla]

"None who have succeeded as far as I know are statistical graduates."

You don't have to be a statistical graduate to understand that it would be good to trade a system that beats throwing darts at the middle pages of the Financial Review!

Just on this topic, I think it can be on the virge of insulting to some well schooled people how technically easy it is to design and implement a trend following system...even one that goes beyond being what everyone seems to agree is a simple system, a la Tech Trader. But for me, I think it's still better to go full circle through the process of understanding why its ultimately simple than to just believe it, find you do well, and not be able to recognise the difference between well done and dumb luck.

ASX.G

 

[Nick Radge]

weird,
The constant similarities between MTPredictor and AGET are because Steve, the developer of MTP worked with Tom Joseph, the developer of AGET. He left to make a simpler approach to the setups and MTP was born.

The basis of their approach is, and dare I say it here, simple. They look for a pre-defined pullback within a strong trend. We could substitute the TS2 for any number of patterns, such as a micro triangle ala' Curtis Arnold, and get the same outcome. There is no secret to TS2 nor any other pattern for that matter, MTP simply take comfort from it because it suits them. What they really promote is the positive expectancy created from a low risk setup. When you have a win rate, such as theirs, near 35%, you need to run the winners out past 3R. That's it in a nutshell.

What is being said in these pages is that the psychological application of trading is what is difficult, if not impossible for the majority. My opinion on this, as stated in my book, is that we're brought up to be right in anything we do. Having a 35% strike rate goes against everything our schooling taught us. I believe that the vast majority of traders fail because they (a) do not understand this concept and always look for a better way, better being higher win rate, and (b) they risk too much of their capital.

I think it prudent that we all learn as much as we can about what we're attempting to do although I do think there is point at which comfort/payoff becomes inefficient. However, its also easier for me to say that because of personal experience which is what ASX_G is alluding to above.

 

[tech/a]

No offense Tech, but that was really an obnoxious post.

Was meant to be. Gets the type of responses above.

People who have written books have contributed here.These people are seen as experts,and they may well be in their field of system design.Do they trade?
Do they place serious money on the table (ASX,anyone can use play money.Vast difference investing serious money.----As I have asked a few---would you go get a $500,000 loan and invest it in your trading method?).1000's do just that to buy a home/s as an investment/s.

My questions to the experts and Radges suggestion were basically ignored.Yet Howard went to great pains initially to mention that discussion should be on topic and civil. I get annoyed when ignored ---just a personal thing.As has already been pointed out writting books doesnt necessarily equate to consistently profitable trading.

agree with you, it's not that hard. But it can be time consuming and full of cognitive biases. I have a demanding profession, so I don't need even less free time and more stress. A key reason why I don't document any of my trades in the public domain is that I am trying as best as possible to preserve the integrity of the decision making. Call it an information diet. I don't need yours or anyone elses opinion to validate my decisions. You'd be familiar with this attitude I suspect.

Anyone who makes a consistent profit would.Your not alone with time demands thats why simplicity is king.You'll note the T/T is recorded by Daryl every week and he takes care of house keeping.
T/Trader is not a showcase of how I trade.It is and was always an exerscise to see if a method could be systemised and traded forward to profit.
How it managed to out perform by the 100s of % in all its simplicity has been the basis for my own trading and from the mails I recieve many others.
Doesnt mean they use the system---just the building blocks,the simple yet effective ways of turning a very mediocure method into a very profitable one.It aint mathamatical genius.Its IS simple business application.

Frankly I can't think of a better way to be. I thrive on questioning the hell out of everything. If people can't tollerate that, well, I'm sorry, work a bit harder to get your ideas across if you think you're right or decide it's not worth the effort, up to you. I'm not unreasonable, I willingly change my point of view but not just because someone uses CAPITAL letters and bold in their posts.

Nor do I ASX,provided in the end you or I arent inflicted with Analysis Paralysis.Ive always enjoyed sound---heated at times debate with many here and on Reefcap.You learn more.But I do get annoyed when there are just hollow comments ,heaps of nodding in unison,about some statement that sounds right but no evidence to suggest that infact it has a basis of fact.
ASX I'm not asking you or anyone to change their view.Perhaps question some things.
Capitals and bold stem from my old marketing days.

Give me something of worth and value

I'm asking the same and guess I'll get it from the books offered up.

Personally I think I have given the odd "something" of worth and value over the years.If nothing else---If I can trade profitably---anyone can.
Yeh yeh a raging bull market--5 yrs the market doubles plus a bit.
5 yrs initial capital increases 10 fold plus a bit.---dumb luck!

Simply sound business.

 

[theasxgorilla]

What is being said in these pages is that the psychological application of trading is what is difficult, if not impossible for the majority.

Exactly...I hope I'm not the only one who realises that a model portfolio system 'housekept' in a forum thread somewhere doesn't involve an iota of this rather large part of the trading equation.

 

[tech/a]

I think you and Radge speak of different psychologies.

You the psychology of actually trading.
Radge the psychology of getting to the point of and indeed taking part in trading.---where my ramblings fall.

 

[weird]

weird,
The constant similarities between MTPredictor and AGET are because Steve, the developer of MTP worked with Tom Joseph, the developer of AGET. He left to make a simpler approach to the setups and MTP was born.

According to Tony Beckwith ,

http://www.trade2win.com/boards/showthread.php?p=84299&highlight=Steve+Griffiths#post84299

Steve Griffiths worked at Dynamic Traders, which is Robert Miner.

http://www.mtpredictor.com/company/SteveGriffiths.html

As Steve's trading career progressed, he became more involved in supporting other traders, especially trying to trade Elliott waves - in particular, running the Advanced GET™ usergroup in 1997-1999. Steve also represented both Advanced GET and Dynamic Trader in the U.K., and wrote trading reports for Dynamic Trader in 1999-2000.

 

[Chorlton]

The System that is traded on Radges site is still business as usual.
Its right up to date and there to veiw if people wish.
It took a new trade last week.

Personally is another matter.
I did trade 3 similar systems to T/T.
All I exited on July 27.
The reasoning behind this right or wrong is posted on the techtrader thread.
I am currently only taking a few short term trades.

Cheers Tech... I'll take a look at the T/T thread.........

 

[Nick Radge]

Steve Griffiths worked at Dynamic Traders, which is Robert Miner

aaahhh...I stand corrected. Thanks.

 

[wayneL]

Was meant to be. Gets the type of responses above.

Only because the responder is balanced. Stuff like that can quickly turn a forum to sh!te.

You don't like it when your integrity is challenged, please don't do it to others.

 

[tech/a]

Fair enough.

ASX I apologise openly if you felt that I had questioned your integrity.
I can see where it could be seen as a personal attack.
Didnt mean it that way---Was attempting to hone in on aspects you had bought up.
Evidently very badly.

 

[theasxgorilla]

ASX I apologise openly if you felt that I had questioned your integrity.
I can see where it could be seen as a personal attack.
Didnt mean it that way---Was attempting to hone in on aspects you had bought up.
Evidently very badly.

The apology should be to the contributors of the thread for once again trying to push a theoretical discussion forward to a place where it could bring to light your personal practical achievements. All paths lead to this place when you are posting tech/a.

Maybe you'd like to critique the original post which brought us here which surmises that a simple long term long-only trend following system may have little to no apparent edge when compared with a random entry-exit system that includes identical position sizing, leverage, stop losses, price and liquidity filters tested on the same data.

Why does cutting winners short via random exit and entering where ever the dart hits work? Because in a rising market, all ships float...you hop off one rising share and onto another...there is no need for finesse in the system because it almost can't fail!

Random entry/exit with all other relevant factors kept constant (including leverage) ought to be your benchmark, not the index. My non-expert, albeit common sense opinion only of course.

 

[tech/a]

The apology should be to the contributors of the thread for once again trying to push a theoretical discussion forward to a place where it could bring to light your personal practical achievements. All paths lead to this place when you are posting tech/a.

Ive sent you a private mail.
But this (conclusion that I'm massaging an ego) always occurs when I use the one live traded methodology in support of an arguement. If it was designed by someone else then I'm sure the reaction would be different.
Radge has 4 I know of which support all the arguements I put forward relative to T/T. I dont use his as you and anyone else cant verify it unless your a member of "The Chartist" .Stevo has one and I guess you can verify his results through his blog.

Maybe you'd like to critique the original post which brought us here which surmises that a simple long term long-only trend following system may have little to no apparent edge when compared with a random entry-exit system that includes identical position sizing, leverage, stop losses, price and liquidity filters tested on the same data.

Ive bought arguement to the thread against statements which say that what T/T has achieved (or any other longterm long system) cant be achieved.Using it to supprt my arguement/s

Why does cutting winners short via random exit and entering where ever the dart hits work? Because in a rising market, all ships float...you hop off one rising share and onto another...there is no need for finesse in the system because it almost can't fail!

Many do (Fail).Why is it that a profitable system hasnt come about in the thread on designing a system? Its not the only workable method its just A method which has worked in a market it was/is designed for.
Please post up this almost non failure system,Must admit Ive never seen one which takes a random exit and a dart board entry which makes a profit.
or is this an hypothesis you have?

Random entry/exit with all other relevant factors kept constant (including leverage) ought to be your benchmark, not the index. My non-expert, albeit common sense opinion only of course.

You have amibroker which apparently can do random entry and exit please show me.Take out the Entry and exit code and run the rest.If it outperforms any varifyable systems I know of then I'll shout the bar!
If T/T doesnt out perform it I'll shout it twice!

Carry on.
My apologies if Ive upset you in any of the above.
I'll just nip outside and fill up your hole.

 

[Sir Burr]

I'll just nip outside and fill up your hole.

esok: