Dump it Here

[Skate]

It's a good thing I like trading reversals because there's going to be plenty of them when the market sentiment turns bullish.

Many of the bullish 1st CAM-UP (green) and CAM-blue bars are also Morales & Karcher "pocket pivot" buy signals. I use them as a method to get into the trend before the obvious BO-HR.

Lets talk about strategy design & what a strategy hopes to achieve
@peter2 has made some great comments lately "thinking out loud" giving us an insight into his current line of thinking. A lot of forum members trade breakout strategies & I have noticed some are buying in this downtrend "which is hard for me to get my head around". It goes to prove as traders we are all different.

Lets talk about breakouts strategies
Most would have noticed that the most robust breakout strategies work poorly when markets are declining or selling off sharply. I know of no mechanical trend trading strategy that enters a declining market with low risk as breakouts tend to fail at a consistent rate. (shorting is not in the mix)

"Pocket Pivots" versus a breakout strategy.
Another quote from the book "Trade Like an O'Neil Disciple: How We Made Over 18,000% in the Stock Market" talks about using "Pocket Pivots" (in the pocket trading) versus entering using a breakout strategy in shallow, sideways or tanking markets. Breakouts to a new high have a high failure rate because the breakout fails to carry through in these types of trading conditions. (as they lead to false breakout signals)

A few more paragraphs
"The premise of the pocket pivot is simple, buying the bottom of a constructive base could offer optimal, low-risk entry points to begin taking a position, particularly if the stock is a proven market leader. The pocket pivot can give an investor a head start where standard breakouts are more often “fake outs” the pocket pivot buy point technique can get an investor into a stock at a lower-risk price point and thereby make it more possible for the investor to sit through a pullback if the all-too-obvious new- high breakout buy point fails initially and the stock retrenches, corrects, or sells off"

"When standard new high base breakouts that are not working in the shallow and sideways moving markets many initial buys at standard, new-high buy points can quickly turn into 7% to 8% losers within a few days. If investors had bought the breakout to new highs, the sharp pullback might cause them to be shaken out of their position. However, buying on the pocket pivot would give investors buying the stock a head start putting them in a better position to weather any pullback"

Summary
I'm with Peter on this one - I'll be returning to the markets "only" when the sentiment turns bullish.

Skate.

 

[Skate]

Worth trying(?), absolutely, they're the underlying idea for my "bullish bars". Many of the bullish 1st CAM-UP (green) and CAM-blue bars are also Morales & Karcher "pocket pivot" buy signals. I use them as a method to get into the trend before the obvious BO-HR. There's very little that's new in the market except for the new names that are created for classic robust patterns.

Well I've been thinking & testing
This post reaches beyond the beginner level but never-the-less it should have some educational value. @peter2 made a remark about using the 1st Green Up-Bar of the CAM Strategy (in a bullish market) sparked my interest in coding "Pocket Pivots" using the first green bar of the CAM strategy (for the entry condition)

The CAM Strategy versus 1st Green Bar Entry Strategy
I was interested to know how the two strategies would fare against each other - a match off (CAM Strategy "versus" 1st Green Bar Strategy)

Taking it one step further - 1st Green Bar Strategy "versus" Pocket Pivot Strategy
The match off - I'm now interested to find out how the (1st Green Bar Strategy "versus" Pocket Pivot Strategy) would compare.

Background information of finding "Pocket Pivots"
For those who are unaware of the idea of using "Pocket Pivots" as a low risk entry it's fitting for me to give you a bit of background of the idea. FYI - It also should be noted that there are a large variety, many ways to calculate the "Pocket Pivot" but I'll be concentrating on the simple standard pivot points (the garden variety) for my example. Pivot Pockets is commonly known as trading in the pocket. Pivots Points can be use to determine directional movement and potential support/resistance levels. Pivot Points is simply an average of the prior period's high, low and close to estimate future support and resistance levels. The idea is that "Pivot Points" can be utilised as a predictive indicator.

Standard Pivot Points
Standard Pivot Points begin with a base Pivot Point. A base Pivot Point is a simple average of the high, low and close to establish support & resistance areas. It worth pointing out that the high, low and close are all from the prior period.

Standard Formula (AmiBroker formula is easily coded from this information)
To calculate the standard pivot point below is easy to understand. (coding it to AmiBroker is simple)
1. Pivot Point (P) = (High + Low + Close)/3 (the average)
2. Support 1 (S1) = (P x 2) - High
3. Support 2 (S2) = P - (High - Low)
4. Resistance 1 (R1) = (P x 2) - Low
5. Resistance 2 (R2) = P + (High - Low)

Pivot Points (Support and resistance)
Support and resistance levels based on Pivot Points can be used just like traditional support and resistance levels. The support and resistance levels become important when prices decline to a support level. A bounce off support (a successful test) with a bullish indicator helps to confirm the up-turn from support. It's also worthy to note that I have not used the standard definition or code to decide when prices stall (hitting resistance levels) to exit a position as my "StaleStop" code evaluates the situation much better than the normal bearish indicators used to confirm the downturn from resistance.

To free up this lengthy post
The two comparison charts will be in the next post being (a) the CAM Strategy versus 1st Green Bar Entry Strategy & (b) how the 1st Green Up-Bar Strategy compares to a dedicated "Pocket Pivots" Strategy.

Skate.

 

[Skate]

Weekly Strategy Backtest report (2 comparison backtests)
1. The CAM Strategy "versus" 1st Green Bar Entry Strategy
2. 1st Green Bar Strategy "versus" dedicated Pocket Pivot Strategy

Parameters of the Backtest - (three Calendar year backtest)
Weekly Strategy
Start Date: 5th March 2017
End Date: 5th March 2020
Portfolio Capital: $300,000
Positions in the Portfolio: 20
Fixed Position Sizing: $15,000 (No re-balancing)


1. The CAM Strategy "versus" 1st Green Bar Entry Strategy



2. 1st Green Bar Strategy "versus" dedicated Pocket Pivot Strategy



Summary
It's been proven to me that using the 1st Green Bar Entry Strategy (one backtest pass over a 3 year period) to enter a position works. The backtest results indicates that the CAM strategy "as-well-as" a dedicated Pocket Pivot Strategy works a little better than the 1st Green Bar Entry.

# For those who like to drill down into the results
I have attached the relevant backtest reports for the 3 weekly strategies in question.

1. CAM Strategy (three Calendar year backtest)





2. 1st Green Bar Strategy (three Calendar year backtest)





3. Pocket Pivot Strategy



Skate.

 

[Skate]

I wish to make a final post on "Pocket Pivots"
While researching "Pocket Pivots" it was soon apparent that there are multiple ways to calculate the "Pocket Pivot" & I was curious to find which calculation worked better (better is very subjective) & frankly the methods used to establish a "Pocket Pivot" is just pushing around the edges, meaning the differences don't really matter that much.

The book - "Trade Like an O'Neil Disciple: How We Made Over 18,000% in the Stock Market"
Pocket Pivots are featured in the book. Throughout the book "O'Neils disciples" explains in detail how O'Neil used "Pocket Pivots" in a discretionary manner. O'Neil's ability to read a chart ultimately decided the timing of the entry. Many times they refer to a base formation & strength of the position within a consolidation period. I find it very hard to code all the parameters that eventually goes into making a discretionary decision, frankly I believe it would be impossible with so many variables. Having a feel for the markets is not a parameter that can be coded & this "feel" is the very reason O'Neil was a freak trader.

I've been pondering the question - How to gauge strength in a position?
In the previous paragraph I referred to the strength of a position in base formations. How do I quantify strength?, how do you code that strength? as strength can be subjective. I believe O'Neil was looking for strength to make a discretionary call (the timing entry). I kept reading one paragraph over & over looking to garner a key word to lead me to my next move. I kept referring to the printed charts in the book looking for repeatable patterns - "then it clicked".

The solution was in the charts
The charts have a series of moving averages & under certain conditions they come into play - it was a matter of matching the play book with the moving average in play, sometimes it's a combination of moving averages, even reflection points within the averages.

I'm not fully there yet
Coding & adding these additional reflection points to my original strategy has given me a clearer picture "an insight" to better understanding why "Pocket Pivots" worked so well for the O'Neil disciples. I'm going to post the results of a new version "PocketPivots Strategy + Strength". I've burnt too many brain cells on this project already knowing that I won't be using this strategy going forward - "it was just an exercise to satisfy a curiosity" I'm like a dog on a bone, somethings I find it hard to let somethings go. (putting it down on paper certainly helps)

Pocket Pivot Strategy "versus" PocketPivot Strategy + 'Strength'


# For those who like to drill down into the results
I have attached the relevant backtest reports for comparisons. I've placed the new & improved PocketPivots + Strength Strategy backtest results first. The second report is a carbon copy from the previous post.


1. PocketPivots + Strength Strategy (three Calendar year backtest)







1. Pocket Pivots ORIGINAL Strategy (three Calendar year backtest)



Phew..
My reporting on Pocket Pivots is now complete..

Skate.

 

[Newt]

Fascinating posts - thanks for sharing all those thoughts Skate.
There is a lot of useful info on what constitutes tradeable volume in those books too, but very interesting to hear your thoughts on coding the price structures, particular some strategies compared to CAM.

 

[peter2]

Thanks for sharing this project on "pocket pivots". I was interested in how you were going to code the pocket pivot (PP) The PP seems to be a better entry into a trend than the regular break-out of horizontal resistance. The main benefit is the smaller initial risk when compared to the standard BO-HR. Smaller initial risk allows for larger size winners.

My recent project to code the CAM, MAP and P2 alerts into my charts highlighted the difficulty. The PPs are easily seen in hindsight but coding them was difficult. Some PPs are the same as a BO-HR bar, some are indicated by the CAM blue or green bars and others are marked by the MAP and P2 alerts.

As mentioned, some of the PPs are the BO-HR bars while others appear in the first shallow price pull-back that tests the prior BO. The PPs that provide the best RR form below the HR and before the BO (MAP, CAM-blue).

Your Hybrid system with its triple setups probably finds a lot of PPs and this contributes to its overall success.

 

[qldfrog]

I wish to make a final post on "Pocket Pivots"
While researching "Pocket Pivots" it was soon apparent that there are multiple ways to calculate the "Pocket Pivot" & I was curious to find which calculation worked better (better is very subjective) & frankly the methods used to establish a "Pocket Pivot" is just pushing around the edges, meaning the differences don't really matter that much.

The book - "Trade Like an O'Neil Disciple: How We Made Over 18,000% in the Stock Market"
Pocket Pivots are featured in the book. Throughout the book "O'Neils disciples" explains in detail how O'Neil used "Pocket Pivots" in a discretionary manner. O'Neil's ability to read a chart ultimately decided the timing of the entry. Many times they refer to a base formation & strength of the position within a consolidation period. I find it very hard to code all the parameters that eventually goes into making a discretionary decision, frankly I believe it would be impossible with so many variables. Having a feel for the markets is not a parameter that can be coded & this "feel" is the very reason O'Neil was a freak trader.

I've been pondering the question - How to gauge strength in a position?
In the previous paragraph I referred to the strength of a position in base formations. How do I quantify strength?, how do you code that strength? as strength can be subjective. I believe O'Neil was looking for strength to make a discretionary call (the timing entry). I kept reading one paragraph over & over looking to garner a key word to lead me to my next move. I kept referring to the printed charts in the book looking for repeatable patterns - "then it clicked".

The solution was in the charts
The charts have a series of moving averages & under certain conditions they come into play - it was a matter of matching the play book with the moving average in play, sometimes it's a combination of moving averages, even reflection points within the averages.

I'm not fully there yet
Coding & adding these additional reflection points to my original strategy has given me a clearer picture "an insight" to better understanding why "Pocket Pivots" worked so well for the O'Neil disciples. I'm going to post the results of a new version "PocketPivots Strategy + Strength". I've burnt too many brain cells on this project already knowing that I won't be using this strategy going forward - "it was just an exercise to satisfy a curiosity" I'm like a dog on a bone, somethings I find it hard to let somethings go. (putting it down on paper certainly helps)

Pocket Pivot Strategy "versus" PocketPivot Strategy + 'Strength'
View attachment 101004

# For those who like to drill down into the results
I have attached the relevant backtest reports for comparisons. I've placed the new & improved PocketPivots + Strength Strategy backtest results first. The second report is a carbon copy from the previous post.


1. PocketPivots + Strength Strategy (three Calendar year backtest)

View attachment 101005





1. Pocket Pivots ORIGINAL Strategy (three Calendar year backtest)

View attachment 101006

Phew..
My reporting on Pocket Pivots is now complete..

Skate.

Just to confirm:
Results are for 5/03/2017 to today?

 

[Skate]

Just to confirm:
Results are for 5/03/2017 to today?

Correct.

A three (Calendar) year backtest for smoothing
Start Date: 5th March 2017
End Date: 5th March 2020

Skate.

 

[Skate]

The ZIG Weekly Strategy
Start Date: 1st January 2020
Portfolio Capital: $300,000
Positions in the Portfolio: 20
Fixed Position Sizing: $15,000 (No re-balancing)

Weekly Update Format
1. The "Share Trade Tracker" Dashboard
2. Portfolio performance line chart
3. Open Summary
4. Pending buy & sell positions























This weeks sells
EHL
RMC

Skate.

 

[Skate]

The MAP Weekly Strategy
Start Date: 1st January 2020
Portfolio Capital: $300,000
Positions in the Portfolio: 20
Fixed Position Sizing: $15,000 (No re-balancing)

Weekly Update Format
1. The "Share Trade Tracker" Dashboard
2. Portfolio performance line chart
3. Open Summary
4. Pending buy & sell positions






















This weeks sells
ADH
AVZ
CDA
EHL

Skate.

 

[Skate]

The FLIPPER Weekly Strategy
Start Date: 1st January 2020
Portfolio Capital: $300,000
Positions in the Portfolio: 20
Fixed Position Sizing: $15,000 (No re-balancing)

Weekly Update Format
1. The "Share Trade Tracker" Dashboard
2. Portfolio performance line chart
3. Open Summary
4. Pending buy & sell positions























This weeks sells
AVZ
CGL
EHL
RMC
VUK

Skate.

 

[Skate]

The BBO Weekly Strategy
Start Date: 1st January 2020
Portfolio Capital: $300,000
Positions in the Portfolio: 20
Fixed Position Sizing: $15,000 (No re-balancing)

Weekly Update Format
1. The "Share Trade Tracker" Dashboard
2. Portfolio performance line chart
3. Open Summary
4. Pending buy & sell positions























This weeks sells
ADH
CAT
CCX
EOS
MCP
MNY
RMC

Skate.

 

[Skate]

Skate.

 

[Skate]

Let’s talk about how changes in circumstances make us reflective
An adverse medical diagnosis can cause us to reflect about current life choices & relationships. When adverse situations arise we tend to be more reflective & focused on both, life choices & relationships. The fear of the coronavirus has served such a purpose & it’s a timely reminder that the markets can plunge unexpectedly causing panic & mayhem. As traders we become reflective of our trading plan & even our trading strategy resulting in fiddling with our strategies when no fiddling is required as most strategies don't play well when the unexpected happens. (that's just a fact, not a failing)

Let’s talk about trading plans
With trading there are no rules & having no rules is scary. Some traders fail to do the “what if” scenario when they are formulating their trading plan. Traders without a solid trading plan wonder how to respond or what do after the horse has bolted. Seasoned traders are constantly monitoring that the horse is corralled securely on an ongoing regular basis.

It’s time for discipline
When you buy a position your control is now limited to executing the sell. The uncertainly of not knowing what will happen next after placing a buy order is the scary part of trading. Being disciplined by following your trading plan may at times "override your trading strategy". Most traders fail to make the distinction between their "trading plan" & their "trading strategy" - failing at time to understand that their "trading plan" overrides their "trading strategy" as trading is all about "capital preservation". How you handle your positions while controlling your emotions (the mental gymnastics) will eventually decide how successful you will be as a trader - the decider if you will live to fight another day. Trading has a high attrition rate when the going gets tough.

Skate.

 

[Skate]

Emotions at work
Multiplying the emotions of all the traders in the past few weeks & you'll soon get a sense of the complexity of the psychological forces at work in the markets at the moment. Panic can quickly turn into depression, soul searching if you have just made the correct trading decision. Making these decision can take on a new intensity when your hard earned cash is on the line, sometimes it's money “you can’t afford to lose” - the very reason why trading is so scary for beginners. These emotions can have serious consequences that can generate similar strong feelings in all of us causing a reaction to buy, double down or sell "overriding our trading plan" because we have suffered large losses while still holding a number of positions that are falling.

Mechanical weekly system traders has had a check these past two weeks
There are times when trading can go south for no good reason & at other times the **** can hit the fan that will be unavoidable. Traders with strategies that have inherent risks should take this time to reflect & make minor adjustments if needed, so they can take full advantage "when" (not if) the market rebounds. Strategy adjustments shouldn't be ignored when trading improves as fine tuning of a strategy is a never ending process.

There is a saying..
If you think your diet is going well, get into a bathing suit – then make your re-assessment. It’s the same with trading, if you think you have a good strategy, backtest it against 2011 & make your re-assessment. Meaning 2011 was not a kind year for trader's. If your strategy backtests well over this period I believe you have a good strategy for further development. (adjustments & improvements without curve fitting is essential)

Skate.

 

[Skate]

Are we there yet?
It's never clear when the markets start a correction phase, the "not knowing" is the concern of many traders trying to understand if the correction will be minor & short lived. Some traders are pessimistic by nature having a gut feeling that this correction will turn into a sharper decline lasting longer than the normal fluctuations of the markets adding to the problem. We all know & accept minor corrections are a regular occurrence but it’s worth noting that deeper corrections seem to happen every few years. These deeper corrections can last for months with losses of 20% to 30% - a recent case of the GFC in 2007/2008 losses of 50% were experienced. (ouch!!)

There will be a next time
Taking corrective action now & being prepared for the next downturn at some point in the future.

By making sure your investments aren’t too aggressive for your risk tolerance, the key to longevity as a trader, mental preparation is another so you can calmly execute your trading plan to the letter.

What lies ahead ("in my opinion")


Skate.

 

[Skate]

There is a saying..
If you think your diet is going well, get into a bathing suit – then make your re-assessment. It’s the same with trading, if you think you have a good strategy, backtest it against 2011 & make your re-assessment. Meaning 2011 was not a kind year for trader's. If your strategy backtests well over this period I believe you have a good strategy for further development. (adjustments & improvements without curve fitting is essential)

Let's put a few strategies to the test & see how they handle trading in 2011
2011 is my benchmark test, my "acid test" to evaluate any new strategy or idea. Curve fitting a strategy to handle 2011 is not the point (& discouraged) as I use 2011 exclusively for all my "Out Of Sample" testing (OOS) Recently I did a lot of work coding, testing & reporting on a dedicated "Weekly Pocket Pivot Strategy" & the virtues, methodology & formula behind the strategy.

I'm not fully there yet
Coding & adding these additional reflection points to my original strategy has given me a clearer picture "an insight" to better understanding why "Pocket Pivots" worked so well for the O'Neil disciples. I'm going to post the results of a new version "PocketPivots Strategy + Strength". I've burnt too many brain cells on this project already knowing that I won't be using this strategy going forward - "it was just an exercise to satisfy a curiosity" I'm like a dog on a bone, sometimes I find it hard to let somethings go. (putting it down on paper certainly helps)

The Pocket Pivot strategy is not for me
I explained that I wouldn't be doing anymore development of the "Pocket Pivot" strategy even after the results proved impressive. I made the comment "I won't be using this strategy going forward". My comment may have been "overlooked" as there was no curiosity why. A similar strategy traded by O'Neil & his disciples made them a fortune over a 7 year period. (averaged 110% per year over 7 years, not too shabby at all) If that is the case - why wouldn't I want to develop it further eventually trading it ? (as there was no interest I'll keep the reason a secret)

# Let's put the "Pocket Pivot" strategy to my ultimate test (300k portfolio X 20 positions)
I always use the backtest period from 1/7/2010 to 30/6/2012 - 6 months either side of 2011 - why? to be loaded with positions 6 months prior to 2011 & how those positions carried over into the next 6 months (2012). It's a simple but effective first step in strategy development. (the acid test)

The Weekly Pocket Pivot Strategy
Portfolio: 300k
Positions: 20
Start Date: 1/7/2010
End Date: 30/6/2012






# How did my CAM Strategy handle 2011 (300k portfolio X 20 positions)
Yes, it handled 2011 with flying colours. The backtest is not looking at the percentage achieved overall "but" rather if the strategy was profitable in this narrow period range.

The Weekly CAM StaleStop Strategy
Portfolio: 300k
Positions: 20
Start Date: 1/7/2010
End Date: 30/6/2012







# Let's now give the MAP Strategy a go (300k portfolio X 20 positions)
There has been interest in the MAP Strategy so I've included the backtest results for the same period. The results proved that this strategy is effective, worthy of being traded on the results achieved. But as usual "backtesting" means "Jack" to me. Backtesting is just a starting point in system development. It's so important to paper trade an idea or strategy before committing real money. Backtesting has its place & merits but paper trading is worth so much more.

The Weekly MAP Strategy
Portfolio: 300k
Positions: 20
Start Date: 1/7/2010
End Date: 30/6/2012



Here is a request &/OR challenge
Backtest your strategy & post your results in the same format that I have.

It's really not confidential
Rest assured by posting your results there is no information about your strategy or "secret sauce" on display. The small window of the backtest will demonstrate how your strategy would handled my "acid test". As I said before the profit percentage "isn't important" at all - but a "positive result" for 2011 is.

I'm hoping for some involvement
Without member involvement the "Dump it here" thread becomes less relevant. I'm doing my best to encourage an interest in systematic trading, a thread dedicated to all things educational. Mechanical system trading has been a passion of mine for a few years & I know it's a passion of others as well. Hopefully by bouncing a few of my ideas around may spark some interest in others - who knows.

It's worth remembering
When I post - I'm just posting information I already know.

Skate.

 

[peter2]

Arrgh! Don't remind me about 2011.
Apologies as I'm not posting results of a backtest. I'm happy sharing my real time performance for that time because I learned something very important.

I established my SMSF in June 07 and decided to manage it myself. As a complete newbie I handled the GFC like a champ. My market filter kept me safely out of the market and when the market recovered I pounced on the opportunities. I was into my fourth year of managing my SMSF and was feeling really good about my performance.
Then, 2011 started. This was the year of my max DD -17%.
I struggled to beat the market. I didn't stand aside like I did during the GFC but traded through it. What a dummy. From champ to chump. The DD happened in slow motion and I didn't see it happening.

 

[peter2]

My comment to the systematic traders and wannabe systematic traders is that you don't know how you're going to handle yourself in a larger draw down situation until you've traded through one and come out the other side.

Backtest draw downs are meaningless. They're just numbers. It's vital that you stick to your proven systems when you experience a draw down like we're all going through currently. The current fall in the market is putting us to the test. It's a good opportunity to see if we've got what it takes to be profitable traders.

 

[Saqeeb]

@Skate 's post prompted me to see how my MAP Strategy fared during the 2011 down turn.
Below are the backtest results. As @peter2 rightly noted these are just numbers and mean nothing unless I am able to stick to my system. They, however, give me confidence to trade this system!

Backtest settings:
Portfolio: $30,000
Positions: 20
Commission: $6.60
Start Date: 1/7/2010
End Date: 30/6/2012