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Dump it Here

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Success is not guaranteed
It’s a major disappointment that many traders don’t make any money. Trading is stressful & emotional when your money is on the line. Bloody hell it takes an enormous amount of time & effort to be consistently profitable because you are required to develop skills & attributes for successful trading. Those who trade well have already been well educated & prepared. To trade successfully & consistently profitable - you have to have a plan that you can follow.

Moreover
It doesn’t matter how disciplined or confident you are if you don’t have a “robust and simple trading method”, you won’t be successful. Forums are full of traders who are losing money because they have no plan & little self discipline. Traders who lack the required discipline are the traders who go on to break the rules, even concrete rules they set themselves. Break your rules once & you will do it again & again - eventually breaking your trading rules will become second nature - drifting away from your trading plan starts one of many bad habits.

Soap Box
I made a personal affirmation not to get back on my soap box, these series of recent posts prove old habits are hard to shake.

Skate.
 
Warr87 said:
Gotta trust the system. But being in a DD always makes you wonder what you can be doing better. I like systematic trading since I know my backtests have proven my edge (to some degree).
Click to expand...

Trust the system. Well, not always.

The Issue: when is a system broken?

Much will depend on what your system trades: (a) variety of asset classes (stocks, bonds, commodities), (b) single asset class (stocks).

If a single asset class (stocks) then;

If the system is underperforming, that information will be telling you something: that something is that the market conditions are changing.

So your system should perform in a bull market where most stocks will trend higher.
At a turning point, your system may well start to underperform; and
In a bear, go into drawdown; unless

Your system (or you) can differentiate between a bear market bounce and a true uptrend in a bear market.

This is essentially an analysis of sector rotation.

In a bear market for stocks, characterised by a rising commodity/bond ratio, inflation type stocks (gold, energy, basic materials) as examples, will enter bull markets.

In a falling commodity/bond ratio, interest rate sensitive stocks outperform (drugs, financials, utilities, consumer staples/discretionary) will outperform.

In a transition period, things get a bit choppier. Volatility starts to creep higher.

Your system may not be broken, it may simply be providing that (early) information as most of the systems discussed have as a consideration 'exits'. Exits are hit more often and sooner in transition markets and bear markets. That is valuable information as now you can pay more attention to the choices thrown up in your scans and avoid the pure 'bull market' plays and look for stocks starting their runs in more defensive sectors.

Currently energy and industrial metals are approaching breakouts from extended bear markets. If they do actually enter a bull market, then at some point the 'market' as an index, will start to reflect this (normally takes about 6 months or so). Signals in say Tech, then become bear bounces and not true long signals. Therefore we have been in a falling commodity/bond ratio. We still are. However, it is turning or more accurately slowing. If it does turn, we will enter a rising commodity/bond ratio.

Therefore, taking every signal, can result in underperformance. This is where experience is invaluable. Having traded through 2 major bears (2000 & 2008) and learned those lessons, it is not that your system is broken, it is simply that you as a trader have to step up to the next level and learn when to apply discretionary filters to your system, thereby avoiding sectors that are rolling over and taking signals in the sectors that will perform.

jog on
duc
 
For the Fundies:



On all metrics, the message is consistent.

So these are all simply additional filters that you pass your system through to decide whether it is truly broken or simply providing early information about the market, which requires discretionary adjustments by you.

jog on
duc
 

@peter2 post has been lifted from the SRG - SRG Global thread.

Disclaimer
The post by peter is very valid & well explained that SRG is on his watch list whereas SRG is on my Buy list.

I'm buying SRG today
@peter2 has made a compelling case why SRG is now in his watch list. If any one is interested why I'm buying SRG at the open today just ask & I'll make my case using technical analysis after the markets open. (I'll be busy for the next hour or so)

As traders we all have our own reasons why we enter & exit a position - a difference of opinions makes a market.

Skate.
 
@Skate yes please, would like to hear your reasoning and analysis on SRG. Thanks
 
Skate said:
I have a 50% record
Half of my picks are DUDS, I just wish I knew which half, knowing this would make me a much better trader.
Click to expand...

@Saqeeb sorry for the delay. Let me outline the analysis & reasoning behind the purchase of SRG today, remembering "One swallow doesn't make a summer" - meaning the outcome of this or any "one trade" is not guaranteed because of the uncertainties the markets hold.

The CAM strategy
The CAM strategy has indicated that SRG has started in a “Counter Trend” rally & is a buy today.

A Counter Trend?
The CAM strategy uses two indicator the (1) MACD & (2) ADX to determine a "Counter Trend" rally by comparing the slope of those indicators. The slope of each indicator identifies four different trends which is nothing short of amazing. Also using the commodity channel index (CCI) as a guide helps filter out many of those false signals that are sometimes impossible to avoid.

@tech/a often says - “when all the Ducks align”...

Counter trends
The CAM strategy has determined (ASX:SRG) is in the start of a "Counter Trend Rally" indicated by the BLUE-coloured price bars. The CAM Strategy colours the price bars so you know exactly the condition of every bar - meaning a "blue price bar" indicates a counter trend has commenced. A counter Trend is when the 10-period (ADX) is declining but the (MACD) is rising whilst having a closing price above the 13-period EMA.

ROC Filter
Also another indicator confirms that the ROC Filter is above 0% (the yellow ribbon at the bottom of the chart) - No yellow ribbon below the price bar means it’s safe to enter the position.



A bit about the ADX indicator
The "Average Directional Index" (ADX) shows the "strength" but "not the direction of the price that is trending". Trading in the direction of a strong trend reduces risk and increases profit potential. The ADX rises as the price strengthens into an identifiable trend & falls when the price weakens or consolidates.

Explanation of the MACD indicator
The "Moving Average Convergence Divergence" (MACD) is a trend-following momentum directional indicator that shows the direction of the price movement & can be useful to determine if a trend is strong or weak.

I only use a few Indicators
ATR, CCI, ROC, EMA, MACD, DSMA, ADX, MA
With an infinite number of indicator combinations, how on earth are you supposed to find something that works.

Using them in combination
Indicators by themselves have limited use but using indicators in combination makes them perform much better.

Indicators are just - Indicators
The key takeaway here is that indicator-based strategies will always be condition-dependent & I have designed them to work in a trending market. Indicators by themselves don’t make a strategy they just make a good strategy even better IMHO.

I have two complete strategies at the moment under going paper trading.
(1) a MAP strategy (a Moving Average Strategy) that has already been discussed in the 'Dump it here thread & coming along just nicely.
(2) Also I have a DSMA strategy (DSMA is an indicator developed by John Ehlers) - The DSMA indicator is an adaptive moving average that features rapid adaptation to volatility in price movement. As usual I'm not using the indicator as designed but I have wrapped John Ehlers idea into a whole new trading strategy & if paper trading aligns with backtesting I'll be doing cartwheels.

Skate.
 
qldfrog said:
Any relevant entry is most welcome @Skate , and we can all learn so much of these interactions.
As least at my humble beginner level. I have a bit of beekeeping tasks to do today but much to work on after Peter and Skate input
Click to expand...

I'm on my soapbox so another lengthy post..

@qldfrog has asked for "any relevant entry" in his "qldfrog-weekly-skate-inspired-system" thread but as my answer may have some broader educational value the answer would be better suited to the 'Dump it here' thread.

Lets talk about trends
Any style of trading depends on a trend, every trend needs a start & finish - there are even trends within a trend "but" the big question is how do we know a trend is starting - even more importantly how do we know when a trend is no longer trending? The answer is a simple use of a few indicators. The weather guys use indicators all the time to forecast what the weather is likely to do in the future & they tend to get the weather forecast right 50% of the time & as systematic trend traders will have a similar strike rate (50%) because trading is not an exact science. If your signals are correct 50% of the time, you are in the ballpark with my strike rate.

Indicators
There are so many indicators at the disposal of systematic traders so it's no wonder trading is confusing. Catching a confirm trend is even harder. Trends are so easy to spot in hindsight but you have to trade on the very last bar on the chart. I only use a few Indicators myself & they have been listed previously being: ATR, CCI, ROC, EMA, MACD, DSMA, ADX, SMA. With an infinite number of indicator combinations, how on earth are you supposed to find something that works. Indicators in isolation have limited use but using indicators in combination makes them perform much better. Before someone want to highlight the obvious that all indicators are lagging don't fret as in this day & age there are mathematical tricks to overcome these shortcoming. "Simple Moving averages" for an example have two characteristics - they lag and they smooth data.

Taking an indicator a step further (Sorry - the next paragraph is beyond beginners)
Background: Exponential Moving Average (EMA) and Simple Moving Average (SMA) are similar in that they each measure trends, but the exponential moving average gives a higher weighting to recent prices, while the simple moving average assigns equal weighting to all values. First off the look-back period of any indicator is very crucial to its overall performance factor but in saying this there are different ways to tweak them further by modifying the alpha term of an EMA by the amplitude of an oscillator scaled in standard deviations from the mean this in turn changes the responsiveness that's best suited for trend-following systems. The smoothing coefficient of this trick is that it automatically updated based on the magnitude of price changes. In summary, it turns the EMA into an adaptive moving average that features rapid adaptation to volatility in price movement.

Entry
As @qldfrog has asked for "Any relevant entry" let me give you one of thousands relevant entry into a trend as I've already given one entry for my MAP strategy that came about after @Gringotts Bank asked me what I know would work as an entry condition & backtesting isn't too shabby at all. My MAP strategy has been previously discussed here: https://www.aussiestockforums.com/posts/1028382/ with the CAM & BOX Strategy. The Amibroker code for the "MAP Strategy" buy condition has also been provided.

Any Relevant Entry
But after reading the words of @qldfrog - "Any Relevant Entry" - let me give you the first simplest entry into a trend that jumped into my mind & the simplest exit I though of. Lets try this I thought, as anything will get you into a trend. So here it is - lets Buy (All Ordinaries) when you make a new High of the last 5 periods (that being 5 weeks on a weekly system) & lets sell when there are 5 lower highs from the entry. I've used the usual Index filter, ROC filter, Price Filter, Turnover Filter & Volume filter, & a 20% trailing stop with the stop provided above to give the strategy a fighting chance of being a tradeable strategy.

Lets see how the "High5 Strategy" performs
RECAP: enters on a higher high of the previous 5 periods & exits when there have been 5 lower highs since entry. The strategy is so simple its hard to believe that "Any Relevant Entry" will do & if the positions make 5 lower highs in 5 periods we will cut that sucker loose.

Lets see how it would have handle ASX:LIC
I'll attach a screen capture of the entry & exit of the position discussed by @peter2 in "qldfrog-weekly-skate-inspired-system" thread for a direct comparisons that can be found here: https://www.aussiestockforums.com/posts/1051654/

Backtesting
1. The last previous year (8th Jan 2019 to 8th Jan 2020)
2. $300k Portfolio
3. 20 positions (20 x $15k positions)
4. Index filter
5. The EXIT (the stop) will be conditional on 5 lower highs (I'll call this my StaleStop) or a 20% trailing stop (whichever is hit first)

RESULTS





Chart of ASX:LIC



Skate.
 

Time beat me to EDIT my previous post..

Additional statistics
Additional stats for those who like to crunch the numbers like me - this additional information forms part of my backtesting results & is very important to me. In fairness & full disclosure I will share this additional information for the "High5 strategy" that has been discussed above.

Important info on the performance of a StaleStop



Another strategy for the trash bin
The "High5 Strategy" is nothing special with so-so performer results. The strategy lacks "Expectancy" - the expectancy is the return from $100 dollars invested - a low expectancy figure of $8.24 per $100 invested just doesn't cut it for me (AFAIC)

The advantage of using any StaleStop in your exit strategy
Let me be upfront - if any position is not up-trending (meaning, the position is going side-wards or heavens forbid dropping) I'm out of the trade & into another looking for something better (Trends are coming along all the time). Adapting a simple stalestop strategy of "5 lower highs" as in the "High5 Strategy" the stalestop exited the position 74 times verses 21 exits for the trailing stop - I use a more refined StaleStop but for demonstration purposes the stalestop in the "High5 Strategy" was to demonstate you don't need anything fancy to exit trades that are not performing. Traders will give positions more time than they deserve & I'm always amased why traders persist in holding positions that are not up-trending. I guess each to their own, as traders we are all different.

Stepping down off my "soap box" now..

Skate.
 
It's always informative reading one of your "soapbox" series of trading systems. In a thread as long as this one it's a pity I can't bookmark the posts I may want to reference in the future. I've so many thoughts to express.

Thanks for the edit. I managed to call the banker in time to cancel the loan application. I told him that my business plan with an 8% expectancy and generates +58% for the year wasn't good enough.

You made an interesting point with the # of stale exits vs trailing stop exits. This ratio is probably due to the current sideways market that we've experienced for a while.

I'm guilty of staying too long in a sideways market, provided the range is narrow compared to the prior move up. My view is that as long as the range is shallow I'm not losing too much open profit and I'll be in it when it takes off again. Thinking about that view, price will probably create another buy signal when it takes off again. An earlier stale exit would provide capital for redeployment and would reduce losses if price falls instead of going higher. These break downs can be a false break (engineered by the instos) or swift (DCG). Being a day late with the sell can be costly. All avoided by the earlier stale exit.

All this talk of mech systems has me noting the criteria for many of my buy signals. They can be coded even if there's a few of them (hybrid approach ). I'm going to try to code a buy signal indicator that appears on my charts when all the criteria are met.
 
peter2 said:
Thanks for the edit. I managed to call the banker in time to cancel the loan application. I told him that my business plan with an 8% expectancy and generates +58% for the year wasn't good enough.
Click to expand...

Another strategy for the trash bin
The "High5 Strategy" is nothing special with so-so performer results. The strategy lacks "Expectancy" - the expectancy is the return from $100 dollars invested - a low expectancy figure of $8.24 per $100 invested just doesn't cut it for me (AFAIC)

@peter2, rewording of the above paragraph is in order.

Rewording of the paragraph
The "High5 Strategy" performance results are well below the "Expectancy" of the 3 systems already being traded & therefore would "not-at-this-time" make my trading team. I have at the moment a suite of much better performing strategies under evaluation that runs rings around the "High5 Strategy" a strategy that I quickly coded for @qldfrog - the "High5 Strategy" was the first idea that sprung into mind after @qldfrog requested "Any Relevant Entry".

Bull Markets
Getting into a trend is easier than most traders think especially in a Bull Market (last year was rip snorter). Timing the exit is another matter, that takes finesse. Any trader who is not rolling in it at the moment should be re-evaluating their strategy to understand why they missed a great trading opportunity. Sure, I'll be first to admit trading was bumpy at times in the last 12 months but a stalestop eliminates this stress. Winners don't seem to carry the same stress as losing trades. Weekly re-balancing of my position-sizing is another of my personal favourites by putting every dollar to work (soldiers should be out there fighting the good fight not laying idle in the barracks)

EXAMPLE of my PANDA strategy
As the "PANDA Strategy" was the first to post a chart in the "qldfrog-weekly-skate-inspired-system" thread I'll post a backtest results for the same period as an example of a trading strategy. The period is from (8th Jan 2019 to 8th Jan 2020) for an evaluation why the "High5 Strategy" misses the cut & has landed in the trash bin.















Puffing
I try hard not to post my trading results as it comes across as "puffing" but there would be some serious traders on this forum making serious coin from trading. Trading is not a shoulda-coulda-woulda endeavour - it's a game of mathematics, it's a game of probabilities, it's a game of calculated risk but most importantly it's a game of emotions.

Words from my old Boxing coach
My boxing coach expected me to time-my-punches, hit hard & be patient (boxing is a game of timing & skill). I would get the same reminder before every fight (a) "Don't get in the ring if you don't want to be hit" & before the start of each round he would say, (b) "Don't let him put you on the canvas & "ALWAYS" keep throwing punches" (otherwise the ref will stop the fight) I was only knocked out once (TKO really) as I never hit the canvas - I got tangled in the ropes. When I came to & regained my sight I preceded to argue with the ref that I was right to keep going. The Ref said I had been counted out but in my defense "I didn't hear it"

Analogy to trading
When you take a few hits in trading, making the next trade becomes much harder as you won't be thinking clearly. To stay in this game you need to keep taking the trades as they come along because no one is interested in how you feel or what you might think will happen next.

I also try hard to measure my responses but sometimes getting on my soap box is a hard habit to break.

Skate.
 

Lets talk about mail
My wife & I have been working away for the last 6 months & arrived home a week ago. Technology allows me to trade no matter where we are in the world & after looking at my mail when we returned home it's a blessing that I'm able to update my Share Registry details on-the-fly without responding to a letter requesting to do so. Our neighbour was kind enough to collect our mail & delivered it to me in a overflowing milk-crate. I tipped the mail onto the office floor to return his crate & now kick myself I didn't take a photo of the enormous amount of mail (all trading related) spread all over the floor. The photo below is the mail opened & in a pile waiting to be shredded. The pile of papers is an accumulation over a 6 month period. I'm now in @Gringotts Bank corner stating the obvious "There's too many letters - it's ridiculous if you're trading" - I'm a weekly trader image the volume if I traded a Daily Strategy.



Skate.
 
wow skate the PANDA backtest is impressive! what are the long term results of the backtest? say 2005-now? Also are you using Norgate data with the historical database?

Nice one
 
Share the feeling
But how do you think compushare makes profit: by billing companies for mailing.
There is no real want by these chess manager to reduce
Why would i need to have a specific email, bank account, tfn per share traded, could not we have a default setup atyached to our hin?
Yes we can but where is the money....
 
Roller_1 said:
wow skate the PANDA backtest is impressive! what are the long term results of the backtest? say 2005-now? Also are you using Norgate data with the historical database? Nice one
Click to expand...

The PANDA Strategy
The PANDA strategy fits nicely into my stable of trading strategies - A bit of trivia: All my strategies have their own logo & the PANDA Strategy logo is the logo on the front cover of my free eBook (the link to the free eBook is in the tag below my user name if interested) or found here - https://www.aussiestockforums.com/posts/1014728/ The PANDA Strategy is my top performer & is very different to my other two strategies, being The HYBRID & CAM Strategies (Footnote: I'm very impressed by the results of the CAM Strategy to date - more than I expected or hoped for). The PANDA Strategy stands head & shoulders above the other two in "Consistency of results". When I develop a strategy - "consistency" - is the main measure - profit performance 'not so important' as there is a direct correlation between consistency & performance, meaning get the consistency right & the performance naturally follows.

What makes the PANDA Strategy different?
I have used an extensive amount of mathematical gymnastics to arrive at an entry point in the PANDA Strategy - a mathematical trick that modifies a section of an EMA that automatically updates the variables of the coefficient that greatly smooths the magnitude of price changes. In summary, it turns the EMA into an adaptive moving average that features rapid adaptation to volatility in price movement. I use this trickery because trading is about getting into a "confirmed trend" quickly (the mathematical trickery handles the entry) & just as important or if not more importantly to quickly exit when the move starts to stall - why? - so funds can be better deployed elsewhere (my StaleStop & trailing stop handles the exit) The StaleStop attached to the PANDA Strategy requires heavy looping to constantly reference the entry bar. The Trailing stop & StaleStop code is integrated/entwined in the same looping formula. (the power & versatility of AmiBoker is nothing short of amazing)

Norgate Data - Silver package
@Roller_1 my strategy development days are over, I currently have 3 Norgate licences (Silver package only). When I was in the Strategy development phase I had the advantage of the Platinum package with 25 years of Historical Data that included access to delisted securities and historical index constituents. The data of the Norgate Silver Subscription has 10 years of data as standard but as I started trading on the 1st July 2015 - I'll use that start date for the backtest.

Backtesting means JACK
I've stated before, backtest results mean "Jack" - but they do give an indication between test results using different parameters for evaluation. Also, I'm not a lover of pyramiding into a position or adding to an existing position (others can argue the case for pyramiding but with a "Take Profit Stops" or "Pyramiding" neither work for me) Moreover: I'm a TRUE believer in "pyramiding" my Position-sizing (I've discussed this many times in this thread) "Position-sizing Pyramiding" is handle by re-balancing my weekly position-sizes. How? - Position-sizing uses my trading Bank balance - the Bank feed is sent to a parameter setting within the strategy code. It's simply way of putting every dollar to work.

The PANDA Strategy backtest results (from 1st July 2015 - my trading start date)
















Skate.
 
PANDA certainly looks like another impressive addition to the stable Skate!

How are you doing those extended Backtest stats including Expectancy please - guessing they are custom user metrics coded onto your reports?


Re your mail crate - gosh that's a lot of paper to wade through. Quite depressing to confront after such an absence.
 
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