Dump it Here

[MovingAverage]

@Skate what's the basis of your profit exit? Are you just using x% above entry price and are you also doing profit exits intra bar (not just exit on next days open)?

 

[Skate]

So many questions--what universe of stocks are you trading? Have you done any proper MC analysis on that system as I'd love to see the spread.

@MovingAverage those are all valid questions. I only trade the "XAO". In response to your idea of ditching a traditional "Index Filter" I posted an alternative demonstrating by using a stock's "Relative Strength" of a stock's "price-performance" versus the index means only new positions that are making new highs within a consolidation period are selected.

@Skate what's the basis of your profit exit? Are you just using x% above entry price and are you also doing profit exits intra bar (not just exit on next days open)?

Profit exit
I use a "take profit stop" using a weekly (ATR) multiplier measured bar-by-bar, simple & effective. The "Frogs on Toast" weekly strategy is a handy strategy that I have been trading for some time. The link I posted in the Amibroker forum is a way to plot the (RSL) which is handy to some degree but useless as a trading strategy. I'm just throwing ideas out there that I use as a way to answer questions or promote an old idea by making it new again.

Trailing Stop
The fallback "trailing stop" that is traditionally used in most strategies is rarely hit in the "Frogs on Toast" weekly strategy. By only selecting positions with a close above an upward sloping (RS) line means that the stock's price is outperforming the Index which can lead to a powerful breakout. Also using a unique "Stale Exit Stop" helps in getting exiting a position quickly which is also a nice feature of this strategy.

Skate.

 

[MovingAverage]

@MovingAverage those are all valid questions. I only trade the "XAO". In response to your idea of ditching a traditional "Index Filter" I posted an alternative demonstrating by using a stock's "Relative Strength" of a stock's "price-performance" versus the index means only new positions that are making new highs within a consolidation period are selected.



Profit exit
I use a "take profit stop" using a weekly (ATR) multiplier measured bar-by-bar, simple & effective. The "Frogs on Toast" weekly strategy is a handy strategy that I have been trading for some time. The link I posted in the Amibroker forum is a way to plot the (RSL) which is handy to some degree but useless as a trading strategy. I'm just throwing ideas out there that I use as a way to answer questions or promote an old idea by making it new again.

Trailing Stop
The fallback "trailing stop" that is traditionally used in most strategies is rarely hit in the "Frogs on Toast" weekly strategy. By only selecting positions with a close above an upward sloping (RS) line means that the stock's price is outperforming the Index which can lead to a powerful breakout. Also using a unique "Stale Exit Stop" helps in getting exiting a position quickly which is also a nice feature of this strategy.

Skate.

Checking out relative strength has intrigued me for some time and is on my "to do list" to see what benefits it offers. I'm not a huge fan of traditional index filters as I think they are indiscriminate--yes they work but to me they are rough and a bit like using a sledge hammer to hit a nail. Interesting on your ATR profit exit--I've only ever messed with that on a stop loss so will have to look as that a little more. I use a profit exit in one of my live system but it is based on standard deviation. Always good to have a trailing stop in place, especially for breakout system which can often pull right back after taking the position--profit exit alone will not help you in that case . Good work @Skate. Would love to see proper MC done on frogs on toast.

 

[peter2]

I really like the idea of incorporating a market sentiment indicator in our market filter rather than the popular moving average. As we've seen the MA is great when it's trending but near useless when the market stays in a range (typical accumulation or distribution zone). I'm a big fan of relative strength as you may have seen in my charts within the new weekly pullback strategy thread. I've always had the relative strength charts available, I've just not included them in most of my chart posts.

Another sentiment indicator worth considering is the % of stocks above an MA. This one is useful but works better as a divergence indicator.

I suppose it doesn't have to get complicated. It can be as simple as sell all the losing positions when the index falls 6%, sell all when the index falls 10%.

I haven't worked out the best one for me yet.

The name "Frogs on Toast" made me chuckle.

 

[MovingAverage]

@MovingAverage let me beat you to the punch
So there is no "cherry-picking" I've used a backtest comparison for this financial year (1/7/2021 to the end of trade today) My apologies to @qldfrog for the strategy name (it's the name of an old musical band).

Important metrics
I have highlighted a few metrics in red for comparison. I should also say "The Platinum Strategy" is not a slouch by any means, even though the performance of the last 22 weeks has been lackluster.

View attachment 142251

Also
The (Net Profit %) as well as the (P&L for closed trades) should not be discounted in those metrics. The use of an (RSL) is food for thought rather than using a "Traditional Index Filter". Without @peter2 realising his way of selecting "pullbacks" incorporates the idea of selecting positions within a consolidation period. Whereas the (RSL) selects positions that are making new highs within a consolidation period.

Skate.

@Skate let me come back to the point I raised earlier about using the MA slope gradient as an index filter...I may have missed it but does frogs on toast use that technique?

 

[MovingAverage]

Another sentiment indicator worth considering is the % of stocks above an MA.

Norgate provide a number of these indicators and I've been incorporating a few of them into my system to see what impact they have...very early days for my evaluations but they seem to have a very positive influence on my systems' performance. Definitely worth taking a close look at.

 

[peter2]

Another idea to float here before it sinks out of consciousness.

Relative strength could be quite valuable when used with a "stale" or timed based exit. I'd be happy holding rather than selling a position while the position remains relatively strong vs the index. Once this relative strength disappears then I'd be happy to sell it.

A stale exit would have both a momentum component and a relative strength component.

 

[Skate]

I really like the idea of incorporating a market sentiment indicator in our market filter rather than the popular moving average.

Frogs on Toast
This strategy is simple in construction & design & is a nice long-term performer. I'm now talking about professional traders who are not hamstrung by a "SMA of the Index" that's crude at best & highly ineffective most of the time. Even when the market is "down/off" there are some positions making new highs that we can all capitalise on.

@Skate let me come back to the point I raised earlier about using the MA slope gradient as an index filter...I may have missed it but does frogs on toast use that technique?

It's all about the (RSL)
Forget all the other filters that I employ in this strategy, the most important hurdle for the "Frogs on Toast" to meet & beat is the individual stock's "Relative Strength price-performance" being well above the index & sloping upwards making new highs within a consolidation nPeriod.

Simply a stock's "Relative Strength Line" compares a stock's price performance versus the index
The (RSL) line is derived by dividing the stock price by the Index value. An "upward sloping line" means that the stock's price is outperforming the Index. It simply measures the price performance against the index, meaning there are some positions making an all-time high no matter how the index or market is traveling.

Skate.

 

[Skate]

Another idea to float here before it sinks out of consciousness. Relative strength could be quite valuable when used with a "stale" or timed based exit. I'd be happy holding rather than selling a position while the position remains relatively strong vs the index. Once this relative strength disappears then I'd be happy to sell it.

A stale exit would have both a momentum component and a relative strength component.

@peter2 uncannily you have nailed exactly two parts of the strategy that is incorporated in the "Stale Exit". Well done.

The "Stale Exit" of the Frogs on Toast strategy works quickly
When a "Trailing Stop Exit" takes out a position it's because an unfortunate event has caught the system wanting. Most of the time the "Trailing Stop Exit" rarely takes out a position.



Skate.

 

[MovingAverage]

Another idea to float here before it sinks out of consciousness.

Relative strength could be quite valuable when used with a "stale" or timed based exit. I'd be happy holding rather than selling a position while the position remains relatively strong vs the index. Once this relative strength disappears then I'd be happy to sell it.

A stale exit would have both a momentum component and a relative strength component.

Isn’t a risk with that approach that whilw the stock itself might be in a good up trend if the index momentum picks up (even though the stock’s trend remains solid) the relative strength will decrease forcing an early exit? Or am I missing something

 

[Newt]

Funny, I was almost going to re-write a couple of systems around Relative strength "just to see what happens" last weekend. Fascinated and energised by the flurry of posts today. There's no holy grail, but you never know when you might find a valuable fleck of gold to incorporate as a screening factor, filter etc to contain future risk, boost future returns......

 

[peter2]

Isn’t a risk with that approach that whilw the stock itself might be in a good up trend if the index momentum picks up (even though the stock’s trend remains solid) the relative strength will decrease forcing an early exit? Or am I missing something

You've got it right. The index could go up while the stock trade price remains steady. The combination of the paused momentum and the now weaker relative strength will trigger the stale exit. (@Skate has other criteria in his stale exit, eg ROC). The exit under these conditions isn't a forced early exit, rather a planned (enforced) correct stale exit.

My understanding of skate systems is that trend strength isn't a criteria. The "soldier" is quickly redeployed when momentum pauses (ROC decreases) and the relative strength weakens (plus other criteria).

Skate uses his trailing stop as a disaster exit that triggers when the price reverses quickly without stalling.

 

[Skate]

All trading carries risk, but is the index potentially signaling an inability to hold above this key level over the near-term? - it will be interesting if it can put together a rally and breakout within the coming days, as this would likely open the door to a strong move higher. XJO seems unable to overcome the selling pressure around 7200, although it isn't all that surprising to see such a strong resistance form at this key psychological level.

It's hard to keep up with the markets
There has been some interesting banter in "the-official-asx-is-tanking-panic-thread" that goes to the very heart of trading. We all speak of bear & bull markets but rarely can pinpoint them accurately in the heat of trading. There are some experienced fundamental traders who tend to have the ability to discern the information accurately. Their conviction speaks volumes. Then there are those who use mathematics to calculate the market pivots using those to decide when to enter & exit a position, a combination of learned experience & gut feelings. Then there are system traders relying on pure mathematics.

What we know about trading could be all wrong
@CityIndex in the last few days made some great points that resonated giving rise to this post & a few others. Scattered throughout the "Dump it here" thread is a series of posts trying to explain risks & nuances with regard to trading. I remember years ago reading an article that goes on to explain that "what we know" about trading or the markets could be all wrong.

More to follow.

Skate.

 

[Skate]

I really like the idea of incorporating a market sentiment indicator in our market filter

What keeps the markets sane?
Let me give you the answer first & then add some context to underpin my answer. First up, the answer is simple with some finding it hard to believe that "Market Sentiment" keeps the market sane.

As traders, we are all psychologically different
Humane nature ensures that we all have differing levels of risk aversion "the fear of losing money" which goes a long way in keeping our own trading safe to some degree. Everything that lifts the markets (not individual stocks) is usually driven by "greed" or the "fear of missing out" (FOMO). Everything that drops the market is FEAR.

More to follow.

Skate.

 

[Skate]

Bull markets are not that easy to trade
Some traders who enter this game, enter with a lack of caution about what the markets can do to their personal wealth (crypto comes to mind to reinforce the point I'm making, but let's not stir that hornet's nest). Now mix that "lack of caution" with "over-exuberance" & "wham-bam-thankyou-mam" the markets can be driven higher to dangerous levels. Now place those two traders (pessimists & optimists) in a trading room together & it's no wonder we have the markets whipsawing all over the place.

By the way
The combination of each of these participants drives "market sentiment" keeping the markets "sane" to some degree, which is debatable. Add fundamentals & technical analysis into the mix & it becomes "open slather" as there are no rules when it comes to trading. We might never be happy with our trading results, they may flounder at times but it has been proven if you stick with your system in the long run it will make money just by the very fact that "father time" lifts the markets.

More to follow.

Skate.

 

[qldfrog]

I like this discussion: had some thoughts this week which are seen probably as pure heresy for a system trader.
Will hopefully have time to express these this weekend here or on my thread to avoid polluting Mr Skate 's thread.
Thanks for all the input here

 

[Skate]

I like this discussion

Sometimes I just want to have my say
@qldfrog I resist making personal statements because most have read it all before either in this thread or somewhere else. Sometimes, when I read the words of others it's the catalyst to express my views. Sometimes, I'll add a view from my perspective to reinforce what I've read or to add an alternative view. At times I'll play the "devil's advocate" to keep the discussion going or for others to view the facts from a different angle or perspective.

Does it really matter what drives a trading decision?
There are those who believe that asset prices are all about the fundamentals that drive the price but that's only half the picture. The price is based on fundamentals that's for sure to some degree but in reality, the price is driven by traders who view those fundamentals. Traders see rising stock prices as a positive sign of things to come & as system traders that's what we are trying to achieve with all our mathematical gymnastics.

You know, our perception really drives our reactions
Whether we believe we are in a bear market or a bull market psychology drives our perception & our perception drives our reactions. To conclude most traders have trouble understanding that the gains & losses to date are forward-looking some 3 to 30 months into the future, some even longer. Meaning the profits & losses you are experiencing at the moment are from future returns.

I've had my say
I'll step off the soapbox now.


Skate.

 

[Skate]

Skate.

 

[Skate]

"Index Buy Filter"
The recent series of posts on the shootout between the "Flying Bat Strategy" & "Platinum Strategy" was solely an exercise to determine whether to trade with or without an "Index Buy Filter". Even though the "Flying Bat Strategy" looks unimpressive at the moment having a higher drawdown than the "Platinum Strategy" is not the reason these two strategies will be parked come the 30th June 2022.

The real question
Should you trade when the market is not trending upwards?

Switching filter (Using a "Sentiment Filter" instead of an "Index Filter")
I, like most, believe we have a more efficient "Index Filter" than most others who trade systematically only to realise by recent trading activity that a "market sentiment filter" rather than an “Index Filter” would give an increased or a greater edge when it comes to entering or exiting positions.

Trade with the trend
The profitability & probability of success increases when we trade with the prevailing market trend, that's a given. It's my belief that we should only be buying when the overall market is rising or when an individual position are busting higher.

At times there is something better than an Index Filter.
Using the Relative Strength of individual positions eliminates the concern for an Index Filter. Traditional "Index Filter" discounts that sometimes there are positions that are "jumping out of their skin" & busting higher & those are the ones we need to keep a lookout for. In order to filter trading opportunities, we need a range of efficient ways of determining the current market sentiment. The (RSL) filter that I've explained in a recent post goes some way to achieving the desired result of a "defined strategy" but as @Newt said, "there's no holy grail".

Skate.

 

[Skate]

Do Beetles fart?
I was wondering if beetles farted some while back & Mr "Google" was kind enough to supply the answer. All I'm saying is this "if you can think of a question" it's most likely already been answered. Meaning if you are unsure of what you have read & failed to grasp what you have read in this thread or any others, "Google it" to better understand it. Expanding your knowledge on any subject allows you the freedom to understand it from many angles.

Index Filter, Sentiment Filter, or Relative Strength Filters is clutching at straws
Each word in the paragraph heading has the word "FILTER" & that shouldn't be lost in the recent series of my posts. Contributors have their own unique way of expressing their line of thinking that shouldn't be discounted at any cost even when you don't agree.

Sharing (trading information) is caring
It also should be noted, that those who are sharing the information are sharing information they already know. It's those follow-up responses that add incredible value & increased our knowledge & understanding.

Skate.