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Fascinating to hear Prop Trading was in your past Duc. More than just hard won "amateur" trading knowledge we're benefiting from in that case.
 
Newt said:
Fascinating to hear Prop Trading was in your past Duc. More than just hard won "amateur" trading knowledge we're benefiting from in that case.
Click to expand...

@Newt, Duc is one smart bunny & has posted so many gems that I've found useful. Duc has also freely given me advice & help in private how to sharpen my exit strategy that now forms part of the Action Strategy strategy. Well, truth be told the Action Strategy is a combination of all his ideas, I've just added a few bells & whistle to pull all the ideas altogether. When @ducati916 talks I listen (intensely). I always read his posts more than once.

Skate.
 
while old, the Blob entries as per @ducati916 signature make for interesting reading too into Le Duc knowledge.
Thankful for all the little piece of gems Le Duc shares
http://leduc998.wordpress.com/
 
Newt said:
Fascinating to hear Prop Trading was in your past Duc. More than just hard won "amateur" trading knowledge we're benefiting from in that case.
Click to expand...
But we Aussies should not get too carried away, do not forget Le Duc resides in the island of the long clouds...be wary
 


Always nice to feel the love!

This thread is a very valuable resource for many and has re-ignited my interest in mechanical systems.

I remember back on Reefcap days when tech/a and (I think Daryl) were developing TechTrader, more or less live on their thread. At the time, I was a purely discretionary trader (which I still am to a degree) and had a fairly cynical view towards systems. I would pop up periodically on their thread and challenge some of their ideas.

The primary issue for me then was: the system is long only. What happens when the market turns? Their exit (at the time) seemed really lagging and I just couldn't get my head around why they would potentially risk so much 'paper profits'...sound familiar? The issue was something exactly like this year's collapse.

That issue seems now to have been solved by Mr Skate. The second issue (for me) has always been buying stocks that you know absolutely nothing about (hence my preference for ETFs) and the significant risk that that can engender. The 20, 30, 40 stock portfolio and quick exits, solves that issue.

The last issue, is the issue of actually executing and following the system. This was an issue that I also raised with tech/a back in the day: what if the market changes in some material way and the system is actually broken: how do you differentiate from a normal drawdown, to a fundamental change in conditions?

Now this may have already been addressed earlier in the thread. I only joined the thread after it was well underway and may have missed this discussion.

jog on
duc
 
ducati916 said:
how do you differentiate from a normal drawdown, to a fundamental change in conditions?
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And i doubt there is an easy answer here.
Backtesting is very useful in at least showing the variability between periods, same code glowing in some periods, not so in others.
i noticed some code consistently better in past years 2010-2015 than in recent times.
The world is changing so it is a given that any system has an expiry date.
When is it time to retire a system?
I retired Phoenix but because i had improved code for the same periods
This is different from a retirement due to obsolescence.and we all know that a DD is part of the life of even healthy systems.
Is this a good subject to discuss @Skate? Now or later
What are your views?
 
Hi Skate , with it being a weekly system how does it know trades are taken on Monday only and not during the week when back testing?
 
Would it be possible to leave open and see if it pulled back during the week?
Very interested to know why you don't
 

Ok, I'm fully subscribed now. My funds finally came through and there was a pull back today so I managed to acquire the remaining stocks at or less than the original bid price.
 

So if MYR has pulled back to or below the original auction price is there any reason not to buy it during the week.

i guess the answer will be don't f... with the system. However I can't imagine that a buy a few days later should have any negative outcome or skew on system performance?
 
qldfrog said:
This is different from a retirement due to obsolescence.and we all know that a DD is part of the life of even healthy systems. Is this a good subject to discuss @Skate? Now or later What are your views?
Click to expand...

@qldfrog asking me open ended questions encourages me to get on my soapbox. I'll answer your questions & some others I can think of as well as we have a new group of readers of this thread.

Why do we need a trading system?
Trading is not an exact science & it's my belief that to succeed in the financial markets you need to have some kind of trading system in place & the level of complexity has almost no bearing on performance. If you have a great trading system, one that consistently makes you money, it is mostly that you are the one that’s making the system work.

Have the markets changed?
The markets are merely an accumulation of human emotions & these emotions never seem to change. I often hear that markets have changed & new rules are needed, well the markets do change but the underlying fundamental rules for success don’t seem to, well not to me at least but I have to concede the markets are becoming more efficient & there is less profits available to go around.

Why is some volatility good & too much isn't?
I posted about volatility yesterday & the importance it is to the Action Strategy (that relies on it). As traders we need enough volatility to offer some profit but not so much that risk is excessive. I also want to point out that I believe systematic trading with a well developed system is much more accurate & consistent than the subjective decisions made by people, in saying that, some people have good results over some periods using "subjective judgement" but unfortunately it's not for me.

Why do we need to be in touch with our feelings?
No matter how successful a system is or how good your rules are, consistent profits will be difficult to obtain without training yourself to be aware when your emotions start to rise to the surface taking over your decision process. Many new members are joining the Aussie Stock Forum as a response to working-from-home, growing unemployment, or some who find that they have "additional time on their hands" who want to better understand trading - this is why I encourage them to grab a copy of my ebook that I believe will help these new traders with their learning curve.

The future will resemble the past, won't it?
System traders rely on the fact that the future will resemble the past. New traders will quickly formulate a system & often trade it in haste only to find out that the strategy doesn't perform as expected resulting in licking their wounds & quickly "retiring" the strategy, then they rinse & repeat the same problem. I've never found a good system "yet" to experience obsolescence, nope, never once. I don't claim to be an expert, far from it & I've made my fair share of mistakes along the way, but the important thing is that I have learned from my mistakes & have become a better trader.

Who are we trading against?
After reading a few posts I get the feeling other don't share my views that we are competing against traders who have much more experience, information & better systems than we do putting us at a disadvantage straight away. I'm genuinely interest in hearing more about how others go about evaluating the markets & this is Duc's contributions have been an eye opener as far as I'm concerned.

What is risk & reward?
Formulating the Action Strategy was not about seeking the best or ultimate returns but seeking to find the "Goldilocks parameters" to suit this strategy as always it's always a trade-off to some degree. Strategy development is always a constant balancing act between "risk & reward" or as Duc would say "volatility & volume". Every trader will make their own determination about the risk they are willing to tolerate helping them to decide what to trade, how to trade, how to develop techniques that will build their confidence to trade. As traders we are all different walking the same path.

Why are some traders successful where others aren't?
Unsuccessful traders tend to think about losing money more often than not, constantly passing up potential opportunities that a measured risk provides. Traders will continue to pass up on potential opportunities because they are too scared to lose or have a go.

Getting off my soapbox..

Skate.
 

@Rsthree you have raised some important questions & you have managed to answer one yourself. You may have also missed Duc's comment earlier today that's worth repeating.

ducati916 said:
The last issue, is the issue of actually executing and following the system.
Click to expand...

MYR
1. "So if MYR has pulled back to or below the original auction price is there any reason not to buy it during the week"
It's not about a "negative outcome or skewing the system performance" it more to do about "unconditionally" following the trading rules. System trading is usually most effective when "implemented consistently". One problem frequently encountered by individual traders is the "difficulty" in following the rules or the system. Sticking to a system requires discipline & discipline is often difficult to maintain when their is confusion what to do next. Traders may be tempted to second-guess or modify the rules as they go along, lets not do that.

2. "I can't imagine that a buy a few days later should have any negative outcome or skew on system performance"
Yes it can, if you purchase MYR you will not be in a position to take the next signal as your portfolio will be full. Break your rules once & you will do it again & again starting one of many bad habits.

When there is "no buy" there is "no sell signal"
In saying this you can buy MYR the only issue that I can see is that the Action Strategy will never give you a signal to sell.

Skate.
 
One thing I have noticed with my system is that when back testing it takes the open on Monday as the entry price even if is higher or lower than the close of previous week. Then works out the position size to suite, which is a little difficult when live trading.
 
willoneau said:
Hi Skate , with it being a weekly system how does it know trades are taken on Monday only and not during the week when back testing?
Click to expand...

@willoneau Amibroker by default uses Monday as the start of the week. Monday is a very liquid trading period suitable for pre-auction trading. You can select any day if you think you can glean an advantage. https://www.amibroker.com/kb/2015/02/14/choosing-first-day-of-the-week-for-weekly-compression/
willoneau said:
Would it be possible to leave open and see if it pulled back during the week? Very interested to know why you don't
Click to expand...
What if the reverse happened & the position takes off to the moon without us, how would you handle that?

Mechanical system trading
To have confidence trading your system you have to be confident how it performed in the past & deviating from the plan most certainly would be a recipe for disaster.

The CAM Strategy buys pull-backs
The CAM strategy might be more suitable as it buys pullbacks in existing trends and buys countertrends when the rally continues as you have suggested. You can find a repository of my strategies & brief description of them here: https://www.aussiestockforums.com/posts/1052205/

Skate.
 
Is your 3% limit price in your system so that if Monday's open is higher your trade is scratched?
It just seems you are using a daily entry on a weekly system?
 

@willoneau AmiBroker backtesting results are calculated using the opening price. To replicate your backtest results it's vital to snag the opening price & a limit order is the tool, other than that you will find it difficult to secure the opening price & replicate the backtest performance.

Getting your head around it
It may require you to read the next few paragraphs a few times to fully understand how I secure the opening price & how I trade the pre-auction.

Trading in the pre-auction (+/- 3% premium)
1. Buy positions - the maximum dollar cost is know if the +3% premium is fully exercised. (usually it isn't)
2. Sell positions - the minimum dollar value income is known if the -3% premium is fully exercised. (usually it isn't)

QTY of shares is the only known
The quantity of shares being purchased is FIXED but the share price (the opening price is UNKNOWN) theoretically the position will be filled but the amount invested is unknown till the trade happens.

IMPORTANT
If a 3% premium is unsuccessful to secure a buy (due to a gap-up) like MYR it’s a condition of the Action Strategy plan not to chase a price. The buy order is open for one day only.

Pre-auction
I place my orders in the pre-auction to secure the opening price. The value weighted average price (vwap) is used to determine the opening price & is displayed for each security in question “well before the opening” of trade. I have made many posts on the subject & I have listed a few hyperlinks below. Please don’t speed read them.

Have a read here:
https://www.aussiestockforums.com/posts/1041996/ & here https://www.aussiestockforums.com/posts/1029737/ & here https://www.aussiestockforums.com/posts/1041230/ & here https://www.aussiestockforums.com/posts/1041166/ & here https://www.aussiestockforums.com/posts/1030873/ will give you an idea how I enter & exit a position using the 3% premium/discount rule.

Sometimes
Others sometimes don't take the time to fully understanding what I've written (it consumes a lot of time & effort to give a measured response)

Skate.
 
I understand how you open and close your positions after doing it on the pre auction on Monday. I guess what I am trying to get my head around is the fact as a weekly system you wait until the end of the week to action your system. Either close position if stop triggered or enter new position if available or am I right in saying both entries and exits are taken on Monday's only?
I did read that you close a position at Market by 10:30am if unable at pre auction on Monday.
 
Thanx Skate the links you provided helped clear a lot up, I usually read every Dump it here post but didn't recollect those.
 

Correct - both entries & exits are always placed for Monday's pre-auction using the (+/- 3% premium). The 3% premium will either secure the opening price or it won't. With a "buy order" not being executed has no consequence or bearing to the profitability of long term strategy holding 20 positions in the portfolio. (In summary, it just misses buying that position)
willoneau said:
I did read that you close a position at Market by 10:30am if unable at pre auction on Monday.
Click to expand...
Correct - If the position is still open after 10:31 am - I sell immediately "at market" as I want to be off the sucker at any price. I wait till 10:31 for the markets to settle down. (that's all)

Skate.
 
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