Dump it Here

[Skate]

Skate.

 

[frugal.rock]

Woops, I broke the trading rules...
Apologies Skate.

Ausnet sold.... my bad, but I love a bit of Discretionary Action in my Strategy?!

My reasoning, if a stock gets a signal, that's all it is, a signal.
An entry or exit is then based from the signal.
If a stock doesn't perform within 3 weeks of purchase/ signal, has it fulfilled it's original signal? (maybe/maybe not.)

We may not get a sell signal, but the SP can seemingly decrease substantially, degredate over time, without triggering a sell signal.
The stop loss isn't set for the above scenario.

The soldiers were languishing begging for a new battle.... the new fight for my Action Jackson's / Dirty Dozens? (LKE, Lake Resources)


Ready to receive my reprimand

F.Rock

 

[Skate]

Ready to receive my reprimand

Nah, all good.

Most traders understand the markets are based on human behaviour & our perceptions about what's happening.

Fear & greed is directly driving the markets

The more you trade you come to realise you are responsible for every trading decision you make, thus owning your own performance. You must believe that your system will make money long term or it will be all for naught. Trading requires a process & your one job is to simply concentrate on the process by following your system without making mistakes along the way.

Overthinking can sometimes steer you away from what works & overriding your system can be a recipe for disaster.

My posts are written in such a way to educate & condition people how to react when trading gets stressful.

Skate.

 

[Skate]

Skate.

 

[Skate]

The use of logo "at the start of a post"
To highlight the content of the post I'll use a logo as a precursor. The "Research Logo" signifies some of my research - whereas my "Soapbox Logo" is reserved for my thoughts that are turned into words & posted in a scattergun style.

Researching
I was recently challenged to find a more effective way of ranking buy signals but that is not what I'm going to post. The challenge set off a chain of ideas, one being, to search for a more efficient market filter to gauge the "sentiment of the markets" rather than using a garden variety moving average of the Index. (“Index Filter”)

Sentiment Filter
The next post will be about a method found from my research that has merit over an "Index Filter" (IMHO)

Skate.

 

[Skate]

Losing is always upsetting
Losing 70% of my profits this year was upsetting, to say the least. Dropping 19.76% of my equity whilst knowing the markets had dropped roughly 30% didn't help. Even when you have your emotions under control it still has a corrosive effect to some degree.

My trading strategies
I trade a variety of strategies & confess trading over the last five years has been kind & as they say, "so far so good". The "Virus Crash" made me re-evaluate all my systems & it was disheartening to find that my strategy code was not the issue & no improvements were required, "that's what I thought" fobbing it off as a "Black Swan" event. This got me thinking "is there a better timing method to use?"

Broad market timing in system formulas
Some trading systems may benefit from an attempt to time the broad market. A market-wide valuation, such as moving average, sentiment or some other mechanism may be used to tell if we should be in the market or not. The flexibility of AFL language allows creating rules or indicators, which are based on more than just one symbol. This enables us to introduce additional filters based on wide-market index performance. https://www.amibroker.com/kb/2014/09/20/broad-market-timing-in-system-formulas/

Skate.

 

[Skate]

The offer of my old "Donchian Strategy"
The response to my offer for one of my original trading strategies was overwhelming. One member offered to test the Donchian Strategy removing survivorship bias as my current Norgata Subscription level doesn't allow me to carry out this procedure. What an opportune moment.

I have been working on a new strategy
For quite some time I've been developing a new strategy & recently applied the finishing touches ready for the paper trading process. Moreover, I asked if the member would be kind enough to backtest the strategy removing survivorship bias & report his findings. I should say from the onset the member has advanced coding skills & through a collaborative effort, I'm positive we can take a good strategy & make it even better.

Skate.

 

[Skate]

Switching filter (Using a "Sentiment Filter" instead of an "Index Filter")
I've been trying to code a more efficient "Index Filter" only to realise that what I needed was a "market sentiment filter" rather than an “Index Filter”. The profitability & probability of success increases when we trade with the prevailing market trend, that's a given (we should only be buying when the overall market is rising). In order to filter trading opportunities therefore, we need a more efficient way of determining the current market sentiment.

A crude switching filter (“Index Filter”)
When defining market sentiment we really do need a better measure. A "sentiment filter" might be a better way to define the current state of the market than using a rather crude method like an “Index Filter”. It was important for me to find a better "switch" with the ability to gauge market sentiment quickly switching "on or off" as the (sentiment) turns.

Skate.

 

[Skate]

The crude "Index Filter"
The most commonly used filter by many traders & professional alike is the old trusty “Index Filter” that turns on & off in relation to a simple moving average, crude & effective to a level. It's purpose is to check whether the close price is above or below a simple moving average, nothing more, nothing less, but how does it really stack up in reality?

Sentiment Filter
Thinking about it a little deeper is there a better measure? What if we change our thinking from an “Index Filter” to a “Market Sentiment Filter” by looking for a filter that not only has the ability to define a bull market from a bear market but reactive enough to identify conditions quickly. The stability of such an indicator has to ensure "whipsawing" is eliminated. There are of course many indicators that would fit the bill, but we have to start somewhere, so here’s one idea of using the (MACD).

Skate.

 

[martyjames]

Your posts are extremely educational Skate, thanks so much for them. I have been working hard on my daily system and have incorporated many of your concepts into it and its looking pretty good so far (unless there is a coding error!).

cheers
Marty

 

[Skate]

Sentiment Filter
What if we change our thinking from an “Index Filter” to a “Market Sentiment Filter”. There are of course many indicators that will do the job but I want to concentrate on the (MACD) as the switching indicator.

Moving Average Convergence Divergence
By using one set of parameters for the (MACD) to catch the upside sentiment (filter ON) we can now use a different set of parameters to catch the downside sentiment (filter OFF). Rather than using the closing price above or below a moving average as the switch (a line in the sand), we can define the (MACD) as a combined "switch & sensor". My research results "so far" have been pleasing & works in all time frames.

Goldilocks parameters
There is a fine line between "reaction time" & "signal quality". If we tune the (MACD) for speed there is a downside, meaning it’s faster to react (which on face value is a good thing) but it becomes choppy & creates whipsawing. The whipsawing constantly has you entering & exiting the markets exposing you to additional commission & slippage charges which is large impost to your trading results. Throttling back the (MACD) too far achieves undesirable results as well, there is a trade-off when striving for the goldilocks parameters.

Summary
Just based on my limited research, it appears something as a "simple moving average" can be useful as a market filter but it might not be the most optimal to use. There are of course many more indicators you could use before deciding which is the best filter for your own Strategy. For example, you could use other types of moving averages, (EMAs, WMAs) or you could even use oscillating indicators, such as "RSI or Stochastic".

Thinking outside the box can be "beneficial at times" increasing the probability of success, something we all desire. (END)

Skate.

 

[Skate]

Practical example
This is a backtest from 1st July 2019 to 5th June 2020 as a direct comparison between an "Index Filter" & the "MACD Sentiment Filter" (The results speak volumes) Using the MACD the exposure reduces as a matter of course.


Skate.

 

[willoneau]

Hi Skate , how does it compare when taken from the start of the year?. As there was good gains at the beginning of the year.

 

[Newt]

Yes, was wondering same thing - or even further back.....

 

[willoneau]

Also the large reduction of trades taken, would that have a large reduction of return as well?

 

[Saqeeb]

Week 16: Update on my MAP paper trading portfolio.

This portfolio lost $952.00 last week.

BUYS:
I was only able to enter into 3 out of the 4 buy signals, PNR, DTL and EVN. The other buysignal was for BGL which gapped up on Monday open and never traded at my maximum offer price for the whole day Monday. The order was then purged out at close of trading the same day.

3 buy signals this week

SELLS:
No sells this week

 

[Skate]

Hi Skate , how does it compare when . As there was good gains at the beginning of the year.

MACD Sentiment Filter - From 1st January 2020 to 5th June 2020
MACD Filter: Net loss: $-852.03
Net Loss: -0.28 %
Annual Percentage Return: -0.66%







Index Filter - From 1st January 2020 to 5th June 2020
Net loss: $-55,663.66
Net Loss: -18.55 %
Annual Percentage Return: -37.94 %



Skate.

 

[Skate]

Yes, was wondering same thing - or even further back.....

Backtest period 1st January 2018 to 30th December 2019
@Newt, this backtest period includes it all. Two combined calendar years for the averaging effect.

Also the large reduction of trades taken, would that have a large reduction of return as well?

This is the very idea of the MACD Sentiment Filter
The "MACD Sentiment Filter" only lets you trade when there is a positive market sentiment rather than using a "rusty" Index Filter that uses a simple moving average.

MACD Sentiment Filter - From 1st January 2018 to 30th December 2019
MACD Filter: Net Profit: $198,784
Net Profit: 66.26 %
Annual Percentage Return: 29.35%






IndexFilter - From 1st January 2018 to 30th December 2019
MACD Filter: Net Profit: $174,768
Net Profit: 58.26 %
Annual Percentage Return: 26.16 %



Skate.

 

[Skate]

Week 16: Update on my MAP paper trading portfolio.

This portfolio lost $952.00 last week.

You can never pick it
The "Action Strategy" struggled this week as well, whereas my trading built from the opening on Mondays & increased every day to achieve one of the biggest weekly results ever, go figure.

Keep up the good work
I enjoy watching your weekly progress, let's hope your MAP Strategy can build from here.

Skate.

 

[Saqeeb]

Thanks @Skate, it is your motivation and the conditioning from this thread that has helped me a long way into this journey of trading. I realise that every strategy is different and one has to have the trust in their system / strategy to keep following it in order to achieve positive expectancy. Paper trading gives you this confidence in a system, even though less emotions are attached with paper trading.