Dump it Here

[qldfrog]

This made me laugh!

Look, we could discuss our beliefs until we are blue in the face, or dead. However, I would much rather agree to disagree and accept each other are going to do things the way they believe is right. I think @MovingAverage said this earlier, but everyone doing different things is what creates trading opportunites in the market. If we all did the same thing, the same way, our systems wouldn't work.

I appreciate you putting that up, even if you think it has no value.

Just one question from me.

Did you purposely design the systems to have approx. less than 50% exposure, or is that simply a bi-product of what I call 'curve-fitting' your system to more recent market data?

yes, we will carry on disagreeing and fair enough
Exposure
I noticed that too:
probably the effect of filters, SP and volume check etc on the earlier periods: in my 2019 onward BT, they are in the 50% to 80% range
If I can, I want high exposure..let the soldiers fight
So overall not disappointed by what i found out, and data should be ok now.
You will notice some flat behaviors for some system on some longuer periods, others where it is more a smooth constant gain etc;
My conclusion is that these systems as they are now must not be that bad to get these results on a huge period outside design optimisation range;
And as you noted, low exposure for decent returns gives great risk factored return

 

[Skate]

My conclusion is that these systems as they are now must not be that bad to get these results on a huge period outside design optimisation range;

Trading strategies change over time & need to be updated or modified (why?)
As @ducati916 has already explained, the main reason is that over time the market changes, it can be gradual at times or very sudden. Changes in the markets mean the core reason to jump on to patterns will change due to a variety of market conditions. I've noted that since (COVID) there has "not been" a gradual shift but more rapid swings in volatility, or is it just me?

Why do trading strategies work in the first place?
It’s because the strategy manages to identify re-occurring patterns with a change in market behaviour. A simple trading strategy does not need to be complicated in identifying trends & patterns because we have history on our side as these patterns have proven to have worked in the past. When these patterns shift or no longer produce the "edge" that you count on for profitability, a rethink of your strategy is required. The whole world is built on evolving developments to produce better outcomes & it's no different with a trading strategy. If you don't keep pace by tweaking your strategy, eventually it will lead you down the path of financial heartbreak.

Skate.

 

[qldfrog]

Trading strategies change over time & need to be updated or modified (why?)
As @ducati916 has already explained, the main reason is that over time the market changes, it can be gradual at times or very sudden. Changes in the markets mean the core reason to jump on to patterns will change due to a variety of market conditions. I've noted that since (COVID) there has "not been" a gradual shift but more rapid swings in volatility, or is it just me?

Why do trading strategies work in the first place?
It’s because the strategy manages to identify re-occurring patterns with a change in market behaviour. A simple trading strategy does not need to be complicated in identifying trends & patterns because we have history on our side as these patterns have proven to have worked in the past. When these patterns shift or no longer produce the "edge" that you count on for profitability, a rethink of your strategy is required. The whole world is built on evolving developments to produce better outcomes & it's no different with a trading strategy. If you don't keep pace by tweaking your strategy, eventually it will lead you down the path of financial heartbreak.

Skate.

100%;
your are preaching to a believer, as per my posts here, i actually believe anything pre 2006 is completely worthless and with an EMA style of relevance as we come nearer, most of my checks and designs are post 2019 which offer not only a good relevant recent sample but also some nice different trading periods:
crash, recovery boom, flat..what else do we want?
I actually believe the hard bit in systems trading is how to know when to stop and desist a system; Howard Bandy which I have the upmost respect for, did some serious work on this subject..I am just an amateur so before reaching that stage, i first have to create a decent set of systems, ->priorities first
But once you reach a cruising stage, [Note to self not there yet ;-) ] .will I ever? , that is the next step

 

[Skate]

What is a trading “Edge”?
I used the word "edge" in my last post, & I believe most would have passed over that word without a second thought. We throw around the word “edge” like it means something. But when that word is thrown about there is usually no follow up about what that name means "or" how we go about developing a trading edge.

My definition
A trading edge describes patterns we can take advantage of. All traders believe they have an edge or else they wouldn’t risk money trading. But depending on your definition you need a trading "edge" or otherwise, it's called gambling.

The most accepted definition on this forum
An "edge" is a simple process of “winning more when you win than you lose when you lose” & "let your winners run & cut your losses short". Whatever definition you apply to your "edge" can mean something totally different. Having a diversified portfolio, investing & trading, or simply letting "time" in the markets are all varieties of an "edge". Whatever the "edge" it needs to be rigorously tested to make sure its a positive "edge" that consistently performs as expected.

Skate.

 

[Skate]

I actually believe the hard bit in systems trading is how to know "when" to stop and desist a system.

@qldfrog has raised a very important subject. How do you know when the strategy is only in drawdown rather than the strategy has stopped working. Back to his comment about "when". When do you make a decision that the strategy has stopped working completely & desist with the system?

How Do You Know If a Strategy Has Stopped Working?
After the development of a strategy that has passed your testing criteria, you decide to trade it.

Think about this
What if those signals dipped right after you went live, how many traders would panic & turn it off immediately? This is where experience comes in as experienced traders know that drawdowns are a natural part of trading. They occur with such regularity, sometimes so small that they go unnoticed, & other times large enough that might make you question your strategy.

Skate.

 

[Skate]

I first have to create a decent set of systems, so priorities first

Curve Fitting (it's not a Bad, Bad, word after all)
@Cam019, touched on “Curve Fitting” previously which is a good point to consider. But with all strategies, they have a "certain degree" of curve fitting to suit the market being traded. Trading strategies define certain market behaviour & it's these behaviours that we try to take advantage of in our trading.

Knowing the market is not enough
However, when we analyse market data, we have a tendency to concentrate on picking the entry sweet spot. But what we also should be doing at the same time is working out ways to try & reduce the random noise that comes as a parasite with those signals. (Elimination of the noise is beyond my pay grade, but I try my best)

When signals keep failing, what do I do?
Unfortunately, there is no way you can tell with 100% certainty that once a strategy goes into drawdown, whether it's the beginning of the end or merely another dip in the curve. Frankly, no one knows.

You can't know
Therefore, you need to set a stop loss on the strategy level. When the strategy hits the stop loss, you just stop trading it without hesitation. The strategy might start working again, & in that case, you preferably should wait for confirmation that the upswing is not just temporary. Yesterday @finicky remarked "Invest for the Future" & hyperlinked to a short (15 minute) video about how to use "stop losses". It's worthy of a look as it explains clearly how "nothing" works well all the time.

Skate.

 

[Skate]

Catchphrases without a detailed explanation fall well short of educational value
I trust all our trading strategies have been rigorously tested to make sure they have a good chance of continuing to make profits well after its initial development. Catchphrases have value only when you understand how they can be applied in relation to your trading methodology.

Parasite in trading
It's unfortunate that signals don't work or follow through all the time. Fifty per cent of trend following signals are just parasites Therefore, it is crucial that we "do not" build our trading strategies around market noise but rather we employ filters to separate the weak from the strong.

Filtering signals
In doing so, filtering gives not a "better strike rate" but signals that have a better than average chance of going to the moon. These are the signals we are seeking by selecting only the strongest. Without filtering the signals, we can expect no better than picking entries & exits randomly. As mechanical system traders, we need to eliminate the noise so we don’t buy false breakouts that originate from the standard “ebb & flow” of prices.

Skate.

 

[Skate]

could you please ask Santa for a few buckets for me also , i am getting compulsory draw-downs via M&A activity .. SKI , AST , ONT , API , YFZ , possibly ZEL and maybe some more yet and i can't even tweak the formula. so am looking at maybe 5-10% of the portfolio sitting in cash at the bank .. hoping the banks don't freeze up in a credit-crunch but valuation metrics are in crazy places , do we permanently live in crazy land , or does reality bite , eventually

i hold MQG ( 'free-carried' ) ( and participate in the DRP )
since my theoretical av. SP is $26.76 , i am NOT unhappy with the div.

@divs4ever trading has runs, sometimes the share price runs up as well as down. Trading is all about timing, you have to time the entry as well as the exit. When investing, as with (MQG) it's all about the time in the market. Investing in good quality companies that pay dividends you enjoy not only those dividends but the capital gains with the passing of time.

Trading the bounce (the blue bars) has been a profitable strategy
"The Ducati Blue Bar Strategy" when it comes to a trading strategy is simple in design & structure as it incorporates (volatility & volume). As traders, we don't need a fancy strategy to make money. If you traded nothing but the blue & red bars of the "The Ducati Blue Bar Strategy" you would be tripping over yourself going to the bank. "The Ducati Blue Bar Strategy" is uncannily accurate when applied to all timeframes, the signals are fast & snappy. Adding prudent "Money management" with a sharp "PositionScore" brings this strategy to life.

Back to timing the markets
Other than (YFZ) the entry & exit positions are clearly displayed using "The Ducati Blue Bar Weekly Strategy". I have made a stack of posts on how accurate this strategy picks the turn in momentum in real-time.

You have highlighted a few securities of concern
I'll post the charts for (SKI, AST, ONT, API, YFZ, & ZEL) so you can compare the signals of the "Ducati Blue Bar Strategy" with your entry & exit points. Systematic Trend Trading depends on nailing not only the entry but also the exit.

Chart for (SKI)





Chart for (AST)





Chart for (ONT)





Chart for (API)





Chart for (YFZ)





Chart for (ZEL)




Skate.

 

[divs4ever]

cheers , my usual issue with trading , is distractions , whether it is medical appointments , work times ( before 2017 ) unreliable internet , and i am just bad at it ( wasn't even looking at WOR earlier this week when it went below the target price .. i guess i will have to wait longer

for example many years back i was stalking BPT but LNC went plummeting past so i grabbed some now that adventure worked out for me eventually i even got some BPT well below the target price ... three years later

it seems the harder i plan the more instinct gets in the way and i just have to figure out how to make the best of it ( but don't worry i have made some spectacular messes as well .. but you can only loss one hundred percent of the capital if you don't use leverage

and yes some falling knives miss the hand completely and pin my foot to the floor

i normally aim to hold SOME of that share 'forever ' ( when deciding to buy in )

ZEL bought in November 2018 @ $5.00

and added in November 2019 @ $4.75 looks like i will crystallize a loss ( unless the sale falls through )

SKI bought in October 2011 @ $1.20 , yes i will do OK but i was after a good steady stock , can i find a replacement ( not in the Oz utility market i suspect )

AST bought as SPN very much the same story as SKI

YFZ was a short stay for me ( about 100% gain crystallized ) i liked the business model , but someone liked it better ( and the majority loved the offer )

ONT was slow work picking the dips in an illiquid stock another profit made , but i wanted a stock capable of paying divs when the market was in turmoil ( i hold PSQ and have already rescued the investment cash what is the chance of it going sub $1.25 again , so i can place the ONT profits )

API ( more than SIG ) was bought as a sector exposure and had accumulated a big ( for me ) position , now sure i will ( most likely ) crystallize a healthy profit but how will i replace it , surely not with extra SIG which has taken me 10 years to accumulate a holding only 12% of the API position

now sure other opportunities MIGHT come along in my lifetime

but this M&A activity has put big holes in the strategy well before the market has actually imploded

i mean sure during a meltdown i am liable to get some BHP cheap ( but i already have a comfortable amount ) and the same with several of my winners between some lucky picks in 2011 , and have spare cash in 2020 some drops will have to be insane to create a tempting price

CLV near 17c

BPT near 40c

DTL near 90c

OZL below $5

TPG near $1

PDL near $2

SNL near $2.50

now sure SOL might come back to $13

but many others have little chance of coming back to a 'nice price ' even if the overall market drops by 60%

( good luck holding your breath for MQG to hit $20 again as an example )

and to boot would i really tip more cash into my current big losers ( like CCE ) i think not

so mostly new stocks in the middle on what could be sheer carnage ( even if the market circuit breakers limit the overall drop to 10% per day )

but it is all fun and games until someone loses an eye

 

[ducati916]

Trading strategies change over time & need to be updated or modified (why?)
As @ducati916 has already explained, the main reason is that over time the market changes, it can be gradual at times or very sudden. Changes in the markets mean the core reason to jump on to patterns will change due to a variety of market conditions. I've noted that since (COVID) there has "not been" a gradual shift but more rapid swings in volatility, or is it just me?

Why do trading strategies work in the first place?
It’s because the strategy manages to identify re-occurring patterns with a change in market behaviour. A simple trading strategy does not need to be complicated in identifying trends & patterns because we have history on our side as these patterns have proven to have worked in the past. When these patterns shift or no longer produce the "edge" that you count on for profitability, a rethink of your strategy is required. The whole world is built on evolving developments to produce better outcomes & it's no different with a trading strategy. If you don't keep pace by tweaking your strategy, eventually it will lead you down the path of financial heartbreak.

Skate.

Some data to consider and analysis of that data:



Although the compounded average annual change in the stock market is near 5% over the past century, the range of dispersion in annual returns is dramatic. This chart presents the distribution of yearly index changes within the single-digit range of -10% to +10% during the past century overall and during the secular bull and bear cycles. In addition, a second range was determined to include half of the years within the range and half of the years outside the range. More than 50% of the years ended with changes in the index exceeding +/-16% (either greater than -16% or greater than +16%).



This analysis presents an uncanny relationship between stock market performance and the volatility of the market. We do not assert a causal relationship; rather, the coexistence of the relationship implies that many measures of risk actually compound in declining markets. By contrast, the reward-to-risk relationship improves significantly in strong markets. In the context of secular bull and bear markets, this relationship further emphasises the need to consider risk as well as reward in an investor’s investment decisions.


jog on
duc

 

[ducati916]

Trading strategies change over time & need to be updated or modified (why?)
As @ducati916 has already explained, the main reason is that over time the market changes, it can be gradual at times or very sudden. Changes in the markets mean the core reason to jump on to patterns will change due to a variety of market conditions. I've noted that since (COVID) there has "not been" a gradual shift but more rapid swings in volatility, or is it just me?

Why do trading strategies work in the first place?
It’s because the strategy manages to identify re-occurring patterns with a change in market behaviour. A simple trading strategy does not need to be complicated in identifying trends & patterns because we have history on our side as these patterns have proven to have worked in the past. When these patterns shift or no longer produce the "edge" that you count on for profitability, a rethink of your strategy is required. The whole world is built on evolving developments to produce better outcomes & it's no different with a trading strategy. If you don't keep pace by tweaking your strategy, eventually it will lead you down the path of financial heartbreak.

Skate.

Some further data (pretty self-explanatory).




jog on
duc

 

[Skate]

I deleted heaps of posts before clicking send.
The only negative is that it leaves no place to humour.

@qldfrog a bit of humour never goes astray.

A woman is following a grandfather and his badly-behaved grandson at the supermarket
He has his hands full with the child screaming for sweets, biscuits – all sorts of things.
The grandad is saying in a controlled voice,
“Easy, William, we won’t be long … easy boy.”

Another outburst & she hears the grandad calmly say,
“It’s okay, William. Just a couple more minutes & we’ll be out of here. Hang in there, boy.”

At the checkout, the little horror is throwing items out of the trolley. The grandad says again in a controlled voice,
“William, William, relax buddy, don’t get upset. We’ll be home in five minutes, stay cool William.”

Very impressed, she goes outside to where the grandfather is loading his groceries & the boy into the car.

She says, “It’s none of my business, but you were amazing in there. I don’t know how you did it. That whole time you kept your composure, & no matter how loud & disruptive he got, you just calmly kept saying things would be okay. William is very lucky to have you as his grandad.”

“Thanks,” says the grandpa. “But I am William. The little bastard’s name is Kevin.”

Skate.

 

[Skate]

an uncanny relationship between stock market performance and the volatility of the market.

Mr flippe-floppe-flye
This is not Duc's quote of the day but it should be. (lifted without permission)



Skate.

 

[Skate]

Volatility
It doesn’t matter what system you are trading - the best way to handle volatility is to just accept it.

"Famed investor Jim Rogers has seen quite a few bear markets in the last half-century, but he fears the biggest one yet could be right around the corner".

sure Jim Rogers is a scaremonger and doom merchant but valuation metrics are in crazy places , do we permanently live in crazy land , or does reality bite , eventually

Quote of the day (reposted without permission)
@ducati916 said today:
"In the context of secular bull and bear markets, this relationship further emphasises the need to consider risk as well as reward in an investor’s investment decisions".

The Duc succinctly "nailed it"
When others comment that they can handle big drawdowns they need to read Duc's paragraph not once, not twice, but many times till it starts to sink in. Notions to the contrary make little sense.



Skate.

 

[divs4ever]

my main problem so far with big market drops ( but i only have been investing since the start of 2011)

is i tend to get overwhelmed by a choice of potential targets

while March 2020 was NOT a disaster for me , i had some cash courtesy of prudent reductions in the previous two months ( September 2019 and Repo Madness made me very nervous ) and probably could have done a better job in the bargain hunting department , but the cash i couldn't find a home in March/April 2020 came in quite useful later in the year so i rate my efforts in 2020 a D or maybe C , could have done better but also could have done much worse

the current problem is valuations in many companies are very high and i don't see a near term lift in earnings to justify those valuations

 

[Skate]

the current problem is valuations in many companies are very high and i don't see a near term lift in earnings to justify those valuations.

Fair enough.

( I hold BHP and WPL )

Is there no "long-term" value here (FMG)
The iron ore producer, along with other base metal miners, traded higher as Reuters reported that the Chinese government would allow some Chinese banks to provide more loans to property developers for project development.



Even though you have slightly missed the boat
There is still a nice entry at $17.13 (at the time of posting) according to the "Ducati Blue Bar Weekly Strategy"



Skate.

 

[divs4ever]

i didn't 'miss the boat ' on FMG , but late to the party absolutely my av. SP is $17.05

with buys at $19.90 ( cum dividend )

$17.60

and $14.90 all done in August/ September this year

have i stopped buying .. probably not , but maybe no more FMG this year ( although sub $14.50 ..... )

by the way FMG dipped below $17 today a few minutes ago

but a blue chip with that sort of volatility must attract a few cashed up traders

plenty of uncertainty ahead and FMG has some pluses in the coming years ( but possibly some negatives as well )

 

[Skate]

Skate.

 

[MovingAverage]

the current problem is valuations in many companies are very high and i don't see a near term lift in earnings to justify those valuations

I often think about this. Reckon the reason valuations are off the planet is that interest rates are so low and there is a lot of money floating around...a "where else do I put my money" is no doubt driving folks to seek out returns from the stock market which is pushing up valuations. I wonder whether the current valuations will pull back once interest rates start to creep up.

 

[qldfrog]

I often think about this. Reckon the reason valuations are off the planet is that interest rates are so low and there is a lot of money floating around...a "where else do I put my money" is no doubt driving folks to seek out returns from the stock market which is pushing up valuations. I wonder whether the current valuations will pull back once interest rates start to creep up.

Another reason these can not go up smoothly.if rba or fed push up rate, market crash, panic sets in with all the BTD retail crowd..AND governments become insolvent due to monstrous debt size...smooth then horror crash...