Dump it Here

[Skate]

It takes "time" to get it right
From the initial idea to the final live trading phase, the entire process can be lengthy and challenging. The "Volatility Bounce Strategy" (VB Strategy) is one such example. This strategy has been in development for just over two years, and it's finally ready for live trading. But what does that process look like?

#1. The Idea
The first step in developing a trading strategy is to come up with an idea. This can involve exploring different technical indicators or combining different approaches. In the case of the VB Strategy, the idea was to create a system that can identify stocks that are in an uptrend, have strong momentum, and are bouncing off a support level.

Skate.

 

[Skate]

#2. Coding
Once you have a trading idea, the next step is to code it. The "VB Strategy" code uses various indicators and rules to generate buy signals that are based on volatility, trend, momentum and a bounce off a support level. The "VB" code also uses RSI as a filter to avoid buying stocks that are overbought or in a downtrend. The buy parameters are part of a larger trading system that has other sections for defining sell signals, stop-loss levels, Stale and take profit exit. Position sizing and risk management are the primary considerations.

Skate.

 

[Skate]

#3. Testing
After coding, the strategy needs to be tested. This involves simulating trades using historical data to see how the strategy would have performed in the past. This step is crucial in determining the strategy's effectiveness and identifying any potential issues. In the case of the "VB Strategy", it was an extensive time-consuming process.

#4. Paper Trading
Once the strategy has been tested, it's time to move on to paper trading. This involves simulating trades using real-time market data, but without actually risking any capital. Paper trading allows you to fine-tune the strategy, make adjustments, and see how it performs in real-world conditions. The VB Strategy has now completed its 12-month paper trading period, and I've been monitoring its performance closely.

Skate.

 

[Skate]

#5. Live Trading
Finally, after all the hard work, the strategy is ready for live trading. As a "reformed" system trader, I would have been excited to see how it would perform in the live market. I'm confident that it has the potential to deliver strong returns, but for the time being, it will be parked.

The Takeaway
Developing a trading strategy is a time-consuming process that requires (a) patience, (b) hard work and (c) determination (PhD), and a willingness to learn. The "VB Strategy" is a prime example of this, taking just over two years to complete the journey from idea to being match fit for live trading. The payoff of system trading can be substantial, with a well-developed strategy that has the potential to deliver consistent profits. I'm convinced that this way of trading would beat an investment strategy hands down.

Skate.

 

[Skate]

For the number crunchers
It takes little time to correlate the performance metrics and upload the Amibroker Exploration Signals of the buy and sell positions. The "VB Strategy" was paper traded using a $100k portfolio with a max position of size of 10.










Amibroker Exploration Raw signals
As there are 12 months of joined signals the quality is poor but they can be referenced with the buy and sell signals from Share Trade Tracker.






Skate.

 

[Skate]

Investment Portfolio (quick update)
I've made some adjustments to my investment portfolio. I've reduced the number of positions from 6 to 5 by selling MFG and redirecting the proceeds to WDS. Additionally, I've reweighted the portfolio to ensure that BHP is no longer overweight, selling some shares and adding the proceeds to WDS.

I had planned to do a mid-year update, but given the recent changes, I thought it was worth sharing an update now. I'm feeling confident about the adjustments I've made and I'm looking forward to seeing how my portfolio continues to perform in the future.

volatility of share prices doesn’t phase me.

I'm in the same camp as @Value Collector
7 weeks down and the volatility is already on show.












Skate.

 

[peter2]

@Skate Thanks for those system results.

I've been looking at a different way to visualise my trade results. I've transferred your system results into my new trade format to see how they look. The xls is too large to post as one image and I've zoomed out to fit it in.



What I didn't show is the three month wait before your market filter allowed buying in early April. No trades in Jan, Feb and March. How would a new system trader handle that I wonder? Armed with a winning sys but no trades for 3 months?

What is noticeable is that there were three occasions that the portfolio went to 100% cash (no open positions).
On the 1st occasion the batch of trades earned 11% profit.
On the 2nd occasion the new batch earned more profit totaling 16%.
On the 3rd occasion the cumulative profit was 23% and at the end the cumulative profit was 39%.

Nicely done. Your system earned profits each time it invested into the market. The batch of 10 trades got into some very profitable trades each time. Of course there are losses as well. You can easily see the red amongst the green.

The system nailed the nuclear rally with 24.5K of 39K coming from the uranium stocks.

 

[Skate]

What I didn't show is the three month wait before your market filter allowed buying in early April. No trades in Jan, Feb and March. How would a new system trader handle that I wonder? Armed with a winning sys but no trades for 3 months?

After I was satisfied with the backtest results, I decided to paper trade the strategy (starting on the 1st of February 2023).

@peter2, I understand your point about the waiting period, and I agree that it can be challenging for traders who are eager to start trading.

By waiting for the right conditions, we can increase our chances of success and minimise the risk of losses. While the waiting period may seem long, it's important to remember that it's a small price to pay for the potential rewards that come with successful trading.




Skate.

 

[Skate]

What is noticeable is that there were three occasions that the portfolio went to 100% cash (no open positions).

Yes, timing the market can be challenging, and the buy filter turning "on and off" presents both profit opportunities and a mechanism to protect portfolio capital. In 2023, the market presented several challenges for system traders, with limited opportunities for profitable trades.

One approach that works well for me is being selective about when to trade and using a multi-exit strategy when things turn south. By being selective when to trade, I can avoid periods that are unlikely to be profitable and instead focus on trades that have a higher probability of success.

This approach has been particularly useful in 2023 when the market has been characterised by high volatility and sudden changes in sentiment. By having a plan in place for managing risk and protecting capital, I've been able to navigate these challenging market conditions.

Skate.

 

[Skate]

Nicely done. Your system earned profits each time it invested into the market. The batch of 10 trades got into some very profitable trades each time. Of course there are losses as well.

Thank you, @peter2, for sharing the performance metrics of the VB Strategy. I'm delighted to see that it has generated a positive net profit of $37,297 from 54 closed trades, with a profit factor of 2.91. This indicates that the strategy has been successful in terms of both profitability and risk management.

However, as you rightly pointed out, the strategy has faced some challenges, particularly in terms of enduring several losing trades. This highlights the importance of having a robust risk management plan in place to ensure that the strategy remains profitable in the long run.

I have to admit that the strategy's performance is not solely due to its ability to "time" the market. Rather, it's the combination of "timing the market" and using a "multi-exit strategy", that has contributed to its overall success.

Skate.

 

[Skate]

Achieving financial freedom
One of the ultimate goals of investing is to achieve financial freedom. As you age, you'll eventually need to stop working full-time, and your investments can serve as a reliable income stream. Starting early gives you the best chance of building a robust portfolio that can support you for decades.

Investing in dividend stocks for a passive income can be a powerful way to build and achieve financial independence. By investing in high-quality, dividend-paying companies, you can create a diversified portfolio that generates a steady stream of income, regardless of market conditions. This strategy offers several benefits, including preserving capital while living off the income produced, reducing concerns about short-term market volatility, and allowing you to adopt a long-term perspective, allowing you to live the life you've always wanted.

Skate.

 

[farmerge]

Achieving financial freedom
One of the ultimate goals of investing is to achieve financial freedom. As you age, you'll eventually need to stop working full-time, and your investments can serve as a reliable income stream. Starting early gives you the best chance of building a robust portfolio that can support you for decades.

Investing in dividend stocks for a passive income can be a powerful way to build and achieve financial independence. By investing in high-quality, dividend-paying companies, you can create a diversified portfolio that generates a steady stream of income, regardless of market conditions. This strategy offers several benefits, including preserving capital while living off the income produced, reducing concerns about short-term market volatility, and allowing you to adopt a long-term perspective, allowing you to live the life you've always wanted.

Skate.

Right on the money Prof Skate

 

[Skate]

This thread has morphed into something completely different.

Embarking on a New Adventure in Investing
Yes, this thread evolves, offering something for everyone. Taking a break from system trading has opened a new door for me - the exciting world of investing.

I'll be posting a weekly equity curve of my investment portfolio, so you can follow along and see how it's performing. This is a real account with accurate results. I'm looking forward to sharing my progress, and I hope this journey is informative and helpful.

Skate.

 

[Skate]

How much money is enough?
This question is as unique as the individual asking it. It depends on various factors - your age, lifestyle, whether you own your home, and more. We all aspire to provide for our families without compromising the lifestyle they’re accustomed to. The amount of money needed to achieve this financial freedom varies from person to person.

The Real Question
Instead of asking "How much is enough," we should be asking, "How much do we need each week to live the life we’ve always wanted without lifting a finger?"

Reframing the question helps us focus on the desired lifestyle and the amount of passive income needed to sustain it. For me, financial freedom isn’t just about having "enough" it’s about having the freedom to pursue my passions and interests without financial worry.

Skate.

 

[farmerge]

Embarking on a New Adventure in Investing
Yes, this thread evolves, offering something for everyone. Taking a break from system trading has opened a new door for me - the exciting world of investing.

I'll be posting a weekly equity curve of my investment portfolio, so you can follow along and see how it's performing. This is a real account with accurate results. I'm looking forward to sharing my progress, and I hope this journey is informative and helpful.

Skate.

I will be watching with interest Prof

 

[Skate]

It's a Fine Line between Luck and Skill
Investing is a delicate balance between luck and skill. While skill and patience are essential ingredients in successful long-term investing, luck can sometimes play a significant role, particularly in timing.

Investing offers a lower learning curve than system trading
Posting about investing can provide an alternative perspective to active trading. The key to successful investing (IMHO) is buying quality stocks at a reasonable price and holding them for the long term. Investing is a delicate balance between luck and skill.

As a meticulous record-keeper
Despite the investment portfolio performing well during the first three days of this week, the investment portfolio experienced a significant downturn yesterday, which serves as a reminder that market fluctuations, while unpredictable, can have a minimal impact on the overall objective of generating passive income.



Skate.

 

[divs4ever]

How much money is enough?
This question is as unique as the individual asking it. It depends on various factors - your age, lifestyle, whether you own your home, and more. We all aspire to provide for our families without compromising the lifestyle they’re accustomed to. The amount of money needed to achieve this financial freedom varies from person to person.

The Real Question
Instead of asking "How much is enough," we should be asking, "How much do we need each week to live the life we’ve always wanted without lifting a finger?"

Reframing the question helps us focus on the desired lifestyle and the amount of passive income needed to sustain it. For me, financial freedom isn’t just about having "enough" it’s about having the freedom to pursue my passions and interests without financial worry.

Skate.

i would throw in a curve-ball on that .... how long will you ( and your partner ) live ( in relatively good health )

i would say calculate a figure and at least double it , until the last 10 years an annual inflation rate of 5% was not unusual , so is that a realistic starting point

now the folks the farm was bought from was 91 and had owned the farm for over 30 years ( he retired early from electrical contracting )

and has now moved to a retirement villa ( and probably has another 5 good years left in him

good luck to you if you can plan your future 30 plus years out

 

[farmerge]

i would throw in a curve-ball on that .... how long will you ( and your partner ) live ( in relatively good health )

i would say calculate a figure and at least double it , until the last 10 years an annual inflation rate of 5% was not unusual , so is that a realistic starting point

now the folks the farm was bought from was 91 and had owned the farm for over 30 years ( he retired early from electrical contracting )

and has now moved to a retirement villa ( and probably has another 5 good years left in him

good luck to you if you can plan your future 30 plus years out

Geez I'm having trouble planning as far ahead as tomorrow. with the heat etc.

 

[Skate]

i would throw in a curve-ball on that .... how long will you ( and your partner ) live ( in relatively good health )

@divs4ever, I've written about this subject that can be found here: https://www.aussiestockforums.com/threads/dump-it-here.34425/post-1042904 - to summarise the three snippets from my post.

Think about how long are you going to live.
How would you invest if you knew you could live another 20 or 30 years after retiring?

Invest conservatively
Once you retire at 65 all the current advice is to invest conservatively but if you’re planning on living for another 20 or 30 years investing conservatively may not be the best advice. If you are in the retirement phase of your SMSF there are compulsory withdrawals every year with the additional burden of inflation biting into your funds balance so a little more aggressive investment plan may be the way to go.

In Conclusion
Trading is an emotional roller coaster and how you manage your psychology really matters even more than your investment vehicle selection. Everyone tends to find their own level of expertise & will be driven to make their decisions based on this.

Skate.

 

[Skate]

More here: https://www.aussiestockforums.com/threads/dump-it-here.34425/post-1042915

The Holy Grail of investing
The truth is that there is no Holy Grail when it comes to investing or trading & there is no easy and simple answer to being consistently profitable in the stock market. The best approach to the market is highly subjective. The best approach depends primarily on you and your particular strengths and weaknesses.

Profiting from the stock market
Profiting from the stock market is exceedingly difficult to do consistently over a long period of time because the market is irrational and emotional. It moves in a manner that has little appreciation for what we might think is reasonable. When the market goes down, it tends to sink further than seems possible. When it rallies, the moves often last longer than seems logical. If you try to apply common sense and logic to the market, you will end up quite frustrated.

Skate.