Dump it Here

[Skate]

Shopping
The problem is that we tend to think about buying stocks in much the same way we buy ordinary products. Usually when we go shopping for things, we want to pay less for that item than what someone else paid. If you buy “cheaper” than everyone else, you can take comfort in finding the ultimate bargain.

Value changes over time
However, it is a mistake to apply that same logic to the stock market. Stocks aren’t like a new pair of pants or a Tee shirt. Their real worth changes dramatically over time.

Skate.

 

[Skate]

Whipsaw, Risk & Stoploss
After placing a trade you will notice the share price may jump around, going higher than lower, it whipsaws from one price to another. If you have set a low stoploss it means you have a low tolerance to risk. Having a low risk appetite the quicker you will be stopped out of a trade whilst on the other hand accepting a high degree of risk there is a possibility to lose a lot more of your money if the price moves against you. (you can never win)

Skate.

 

[Skate]

Risk
Risk is a fine balancing act of been stopped out early only to see the price recover and/or watching the price keep falling and stopping you out at a much larger loss. This is the very reason an exit strategy has to be agreed upon before the initial stock purchase. Knowing when to sell also involves profit taking and not just accepting losses.

Skate.

 

[Skate]

Buying & selling
Traders buy and sell for all reasons and just because you are in profit or holding a loss doesn’t mean it’s the same for everyone. Trading is a judgement call, you place a buy with the expectation that the price will rise and you accept a loss and sell when your judgement has been proven to be wrong.

Skate.

 

[Skate]

Winners are grinners
Placing a buy order and watching the price rise is exhilarating and I’ve never seen a bad winner. On the other hand loosing is hard to swallow and that’s the reason why traders will hold onto losing trades hoping for a miracle. My advice is to be the best loser you can possible be and accept that losing is part of trading.

Skate.

 

[Skate]

Be very cautious
As humans all our decisions are based on 2 facts:

(1) To gain pleasure or
(2) To avoid pain.

The latter is the best principle to apply when it comes to making trading decisions.

Skate.

 

[Skate]

Points to ponder
Trading is selecting companies that you believe will increase in price over time, you may even select companies that pay a regular dividend. No matter what your selection criteria was, or what has motivated you to place a ‘buy’ order, you have to realise everything is out of your control from that point on till you elect to sell that security so just hang on for the ride.

Skate.

 

[sptrawler]

Id like to comment on fear of failure.

This was something as a youngster I often faced.
I learnt why. (I had fear).

Financially it was because I was risking a very large % of net wealth.
Having chosen to work for myself and create my own future it was always with me.

Failure meant a definite change in my plan for life.
I made my own wage for many years and at 40 found the power of leverage and compounding in property.
Suddenly I had a buffer—-equity in properties so expanded infrastructure in business including premises.

Always with my safety net.

Funny thing is I never used it
Never had to
That sense of safety in shackled me!

So now I have safety plans from insuring all projects over $100k and we do many in the 7 figure relm.To stops in trading and management plans for everything.

I’ve not felt that fear for many many years.

I can really appreciate what you are saying duck, I had children young and always worked for wages, as you say the feeling of security.
Now later in life I look at my son in law in his early 30's, he worked for a recruitment company that went belly up. So he started his own recruitment company, 7 years later he is better off than me.

 

[Skate]

Exuberance
After you place a buy order you will either be exuberant when the share price increases or feel despondent experiencing a white knuckle ride to the bottom. Trading is an emotional roller coaster and how you manage your psychology really matters even more than your stock selection & the only thing left for you to do is manage your sell orders as everything is in the lap of the trading gods.

I have a 50% record
Half of my picks are DUDS, I just wish I knew which half, knowing this would make me a much better trader.

Skate.

 

[Skate]

Technicals & Trend Trading
Today I've been selflessly talking about the markets from my perspective, explaining that I'm a system trader, trading mechanically with no emotional input. I trust my system that gives me confidence to keep pulling the trigger & that's what trading is all about.

If you are doing it the other way around
If you are learning about how to evaluate companies that’s a different matter and more study is needed. Fundamental analysis is the study of each company, their balance sheet and their financials & this type of trading is leaning towards value investing which is suited to the Medium to Long term. Everyone will find their own style of trading, or investing. I personally choose to trade and invest!

Skate.

 

[Skate]

# Apologies
This post is for those who have Amibroker. I wanted to display the parameter settings of my Hybrid strategy. The parameter are adjustable setting so you don't have to keep writing or changing code. The actual parameters have been removed but the list is complete. The list of parameter are (IMHO) the important ones to have control over.

Posted for demonstration purposes only.

Skate.



Post exclusively for:
@qldfrog
@Newt
@Lone Wolf
@Wyatt
@willy1111
@Habakkuk
@jjbinks

 

[satanoperca]

No figures, just fields.

When are you going to come out and just tell us what you are trying to sell?

 

[satanoperca]

DUMP @Skate
forum.
A forum is a place, situation, or group in which people exchange ideas and discuss issues, especially important public issues.

 

[satanoperca]

Soapbox
Used with reference to a situation in which someone expresses strong opinions about a particular subject without wishing to engage or listen to anyone else

 

[Skate]

No figures, just fields.

When are you going to come out and just tell us what you are trying to sell?

I am not selling anything, the thread is for the education of members who want to learn.

What a great quote
“Education is something that is done to you. Learning is something you do for yourself."

Skate.

 

[satanoperca]

Forum and Soapbox - learn something for yourself

 

[Newt]

Anyone that's written and backtested trend following systems would have a very good idea what the parameters Skate lists are for. For those lost or puzzled reading through the parameters post above, could be worth getting into some Nick Radge (Unholy Grails) or Howard Bandy (Blue Owl Press books).

 

[Newt]

Skate, I'm fascinated that you've combined 3 types of go-Long signals into your Hybrid strategy. Did you ever consider running all 3 with separate accounts somehow? Wouldn't backtesting and tracking performance forward be easier in that case?

 

[Skate]

Skate, I'm fascinated that you've combined 3 types of go-Long signals into your Hybrid strategy. Did you ever consider running all 3 with separate accounts somehow? Wouldn't backtesting and tracking performance forward be easier in that case?

Newt, that a great question. (I'll post up some charts & reports to explain it in pictures)

# Apologies for the long winded explanation

Points to answer
1. "I'm fascinated that you've combined 3 types of go-Long signals into your Hybrid strategy"
It was the captains idea after explaining the problem of high correlation to him as it was becoming an issue for me.

2. "Did you ever consider running all 3 with separate accounts somehow?"
Yes, I traded the three strategies separately over a period of time & this is how I found the problem of correlation.

3. "Wouldn't backtesting and tracking performance forward be easier in that case?"
No, it's no easier or harder backtesting & tracking performance of an individual strategy or backtesting a combined strategy. I code up the idea given to me by the captain & backtested it. Backtesting a strategy with one buy condition & one sell condition is no different to backtesting a strategy with three buy conditions & two sell conditions. (there is no difference)

Optimisation is a different matter
Backtesting as I have explained, 'there is no difference' but when it comes to optimisation there is a huge difference. Each strategy need to go through its own optimisation procedure, combined & re-optimised to sharpen the overall strategy. One set of parameters work individually whereas another set of parameter are required when they have to work together after being combined.

Trading $150k positions
@captain black floated the idea of combining the strategies after explaining to him that the strategies I was actually trading were taking the same signals on the same week & sometimes only a week apart. At that stage I was buying $50k positions, meaning I could have $150k in one position which was crazy.

I emailed the captain
I fired off an email to the captain for clarification & guidance (I'm sure he won't mind me disclosing our personal email correspondence, I can't ask permission as he's out of range for two weeks & I don't want to wait that long to answer)

What did I do after receiving the captains advice ?
I quickly coded up my best three strategies into one system & called it the HYBRID strategy. I went to work backtesting the guts out of the new combined (HYBRID) strategy. I started off fresh with a new system strategy development in place & the rest is history.

When the captain speaks, I listen.

Skate.

EMAIL BELOW (from the captain)
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The captains email response
The only real issue with trend following is that most systems are correlated and tend to track the broader market movements. If you're happy to accept that then there's nothing wrong with trading multiple correlated systems.

You won’t have a smooth equity curve and if you're invested in the same companies across multiple systems you run higher risks if that company goes broke or has a big price drop.

One way to reduce that risk is to run monte carlo simulations to get an idea of the statistical variation of the system if you take trades in a random way rather than using positionscore. That way, if the monte carlo runs have a tight range you can ignore a signal in one system is you're already holding that company/share in another system.

Your systems will still move up and down in a similar fashion over the long term but you reduce the risk of a catastrophic event if a company you're holding across all systems goes broke.

If you decide to trade multiple correlated systems and you want to reduce the risk of a catastrophic event such as a company going broke then you may want to look at ignoring a signal in one system and taking the next signal if you already own that company in another system.
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More to follow..

 

[Skate]

Skate, I'm fascinated that you've combined 3 types of go-Long signals into your Hybrid strategy. Did you ever consider running all 3 with separate accounts somehow? Wouldn't backtesting and tracking performance forward be easier in that case?

Moreover...

A time consuming post
This graphic below shows clearly the problem of trading high correlation systems. (it was time consuming to write & I'm assuming it going to take a lot longer to read & unpack how I trade)

The analysis 'Buy' report below (The first report) shows 4 very important things:
1. What positions to buy (SAR & EVN) Signal generated on 11th Jan, Friday - Purchased on 14th Jan, Monday (VWAP = opening price)
2. The quantity to buy of (SAR - 8,200 shares) & (EVN - 6,472 shares)
3. What price to offer in the pre-action for (SAR - $3.05) & (EVN - $3.87) Settled at (SAR - $3.00) & (EVN - $3.81)
4. What strategy gave me the "Buy signal" (SAR got the signal from BBO & Darvas) whereas (EVN got the signal from Darvas only)

Signals
1. (SAR) got the buy signal from the BBO strategy & also got a signal from the DARVAS strategy. The BlueWren strategy didn't acknowledge the signal at all.
2. (EVN) received it signal from the DARVAS strategy only. The BlueWren strategy didn't pick up a signal at all, only Darvas.

The original correlation issue using $50k positions
1. I would be holding $100k position in (SAR) & liquidity & slippage would now be an issue for me but after the captains advice this issue is resolved.
2. (EVN) these is no correlation in this example so a $50k position would have been taken.

Two analysis reports that are exactly the same (The report I see & the other with scribble on it)
After looking at the Amibroker analysis report I shouldn't have written on it as it doesn't look like a clean report. I make another without the scribble.

1. Amibroker [Explore] analysis report (buy signal - actual position currently being held)



2. Amibroker [Explore] analysis report (with explanations)



Disclaimer (I'm currently in the move)
(SAR) I'm in this trade at the moment & this chart show the actual Bar I got the Buy Signal & the actual Buy purchase bar




Disclaimer (I'm currently in the move)
(EVN) I'm in this trade at the moment & this chart show the actual Buy Signal Bar & the actual Buy Bar.


The issue is now fixed
I trust this explains why you shouldn't trade high correlated strategies.

Skate.