Dump it Here

[captain black]

Most new traders probably also suffer from a dose of over-optimism

Even us old traders still suffer from over-optimism far too often for our own good

 

[Skate]

You can listen to too many
Reading various trading threads here at ASF sounds good in theory, but the problem is that getting so many different trading opinions & trading styles becomes confusing & in the end you won't know who to believe thus putting a handbrake on your trading.

Read below..

The quality of advice & traders vary
The "Aussie Stock Forum" is chock full of knowledgeable successful traders & its pays to read all the threads of any members who reply to you. Read & learn, align yourself with a member whose trading styles makes the most sense to you.

I aligned myself with @captain black over the last 4 years I've been trading. Like others on the forum I've made some serious coin over the last 4 years by listening & learning from his advice.

Great post @Skate and a couple of nice trades there in your Hybrid system

The Hybrid Strategy
Yes, nice trades are easy to handle. I have better performing trades at the moment so its a good time to show 4 of my best trades & 4 of my worst trades of the Hybrid Strategy. The Hybrid strategy is my main trading strategy that I trade with a combination of other strategies. The CAM strategy is the latest in the series & other than that one all have been consistent performers. The CAM strategy went live on the 11th June so its early days & I'm comfortable adding it to my stable of strategies.

My best 4 Hybrid performers
PET +152.24%
JIN +93.49%
Z1P +89.19%
PME +85.23%











My 4 absolute worst Hybrid performers
HFR -11%
JMS -4.4%
MNY -4.32
NGI - 4.29











Systematic trend trading
This style of trading is not for everyone & not all systems & assumptions that make up a strategy work for all traders @Gringotts Bank has made some worthwhile posts in the 'Dump it here' thread & he recently reinforced the fact - that's it's you who makes the strategy work.

The Bottom Line
Planning how to code a profitable strategy is not an easy task. There are many variables to consider but with a little extra time and effort, you can figure it out. Having the Captain in my corner didn't do me any harm. I'm forever in the Captains debt & I feel privileged to call him a friend & mentor.

Congrats on your AQG and SLR trades Skate, and thanks for sharing detail on how you hopped on board both of these according to your systematic rules.

I think you've mentioned before valuable trading podcasts, and here in Australia we've been fortunate to have Aaron Fifield (Chat with Traders) and Andrew Swanscott (Better System Trader) putting out a lot of fantastic material. The most recent Better System Trader podcast is a nice one for established traders and newbies alike. Steve Ward talks about the inevitable "J curve" to profitability most traders endure and ways of reducing the depth and time in drawdown before (hopefully) establishing sustainable profitability. Most new traders probably also suffer from a dose of over-optimism and Dunning-Kruger effect.....

Some other great material in this episode too:
Better System Trader Episode 164

@Newt your input is very much welcomed along with others who make a contribution in keeping the 'Dump it here' thread active - it's the very essence why this thread was started, thank you.

Skate.

 

[captain black]

My 4 absolute worst Hybrid performers
HFR -11%
JMS -4.4%
MNY -4.32
NGI - 4.29

Great job keeping your losses so low Skate, perhaps I need to take some lessons from you in building trend following systems

 

[barney]

Great job keeping your losses so low Skate, perhaps I need to take some lessons from you in building trend following systems

I was thinking the same thing Captain. Well done @Skate …. Your top 4 winners V Losers represents about a 17:1 profit ratio percentage wise …… that's pretty amazing

 

[willoneau]

Hi Skate , how do you determine your universe of stocks to select from?

 

[Skate]

Hi Skate , how do you determine your universe of stocks to select from?

Hi @willoneau thank you for your question & it's a really good question - a question that gives me the opportunity to expand on the logic in making that decision.

Commitment
I'll answer you question first & follow with a few words that may help others to understand the commitment required to have a fighting chance of not losing their money in this game.

The All Ordinaries
I determined the universe of stock to trade from my personal risk management assessment & the All Ordinaries was the winner.

Universe of stock
Deciding what universe of stock to trade was one of the very first questions I had to answer before risking one dollar trading. It took me a little over three years of study (14 hour days) to understand the culture of the share market & how to trade successfully before I made my first trade.

The decision
4 years ago I decided to invest locally. Trading is a risky business, so I set about evaluating the level of risk I was willing to absorb. Volatility was the determining factor to which universe of stock was suitable for me to trade - for a better word it was "my" risk factor that decided it for me.

Low risk & low volatility
The companies in ASX 20 are considered to be Bluechip investments with low volatility. A stock with lower volatility usually suggests the stock price will be much more stable than riskier investments. To make money in the stock market you need volatility to shift the share price in conjunction with company performance and capital growth. Rock solid companies being less volatile are suitable for those who have a low tolerance to risk. Investors not traders will find comfort trading these companies because the emotional roller coaster is a lot less scary than other indexes. Low volatility thus low risk was not for me. I was leaning towards trading stock that carried higher risk - a risk that I could manage. Being a multi business owner & Bookmaker has influenced my risk tolerance for sure, but who really knows.

The right mix of risk
The All Ordinaries has a mix of safe, stable and aggressive companies that enjoys more volatility than all the indexes listed above the XAO. The All Ordinaries for me has the right risk/reward combination for a growth portfolio – it’s a bit of a roller coaster but the rewards are larger with the corresponding disadvantage of higher risk. Indexes below the All Ordinaries have nail biting volatility and it’s akin to hanging on to a cliffs edge just by your fingertips, meaning trading an Index below the All Ordinaries you’ll require nerves of steel or at the very least you need to be a very hardened punter.

98% of Traders Lose
One of the first major shocks you will learn is that 98% of Traders lose their money and some traders lose their entire capital, blowing up their account.

Education is the key
I’ve read umpteen books & trading articles, I’ve listened to more podcasts than I care to remember, keeping my eyes and ears open, hoping to learn from successful traders, finding out what sets them apart from the average trader, trying to learn the secrets of their success whilst trying not to repeat their failures. @Newt recently posted an episode from Better System Trader Episode 164 it's a great listen, highly recommended. The 'Dump it here' thread is a condensed version of some of the important things I've learnt along the way.

Technology
Technology now makes it possible for anyone who is willing to put forth the effort to be an trader. In the past, most had to rely on financial advisers or the media for advice about the trading process. That is no longer the case as the 'Aussie Stock Forum' is full of members only too happy to help out when the need arises.

Tools
I'm a mechanical system trader & some members are unsure what that really means, some simply don’t know that trading tools exist let alone how to use those tools effectively. Many software applications, websites, forums & other sources of information are designed to help, but they are so overwhelming complex & inconsistent that people often feel even more confused & uncertain about how to proceed. This is one of the reasons that new members land here on the ASF site seeking help.

I was thinking the same thing Captain. Well done @Skate …. Your top 4 winners V Losers represents about a 17:1 profit ratio percentage wise …… that's pretty amazing

Kind words
Thanks @captain black & @barney for your kind words but the accolades need to be directed to the Hybrid Strategy. The Hybrid Strategy has my best interest at heart by selecting only the stock that meets my strict criteria - the strategy even goes as far to rank the signals in buy order just for me. The strategy knows I don't like slow, non-performing stock so it goes out of its way to keep me happy by trashing those annoying buggers quick smart.

The winners I'm prepared to keep - because that's just the type of person I am.

Skate.

 

[willoneau]

Thanx for the reply Skate , i also use XAO as my universe. Have you also looked at price range as part of your criteria?

 

[Skate]

Thanx for the reply Skate , i also use XAO as my universe. Have you also looked at price range as part of your criteria?

Hi @willoneau as you have taken an interest I'll explain the parameters used in my Hybrid system. I have most bases cover with my selection of parameters, price range being one of them. For AmiBoker users I'm posting my parameter list for the Hybrid Strategy below. Others might find some interest in looking at it.

N.B.
The individual parameters settings used in the Hybrid system are not displayed - they are sensitive.

The Hybrid Strategy
The Hybrid strategy has been previously discussed in the 'Dump it here' thread at length but as a recap I'll condense it again. The Hybrid Strategy is a combination of my 3 best performing strategies being (1) BlueWren, (2) Bollinger Bands & (3) Darvas. The 3 strategies are named with their parameters segregated into work groups. Each strategy works independently of each other but all 3 totally work in conjunction with each other. Reading the last sentence back sounds double dutch - I know.

No need to re-invent the wheel
Each strategy in their own right are good performers, by putting them all together turns a good system into a better system (IMHO). The 3 strategies compete to get me into the breakout "as early" as possible whereas my exit strategies look after it from here saving my butt on a few occasions. Having a good exit strategy can be the difference if you make money or not. Having a good idea is not enough, getting into a good trade is not enough. How you manage your exits is the key to profitability.

As traders
To start trading all we want to know is (a) what to buy & (b) when to sell - can't be that hard I thought. After years of experience I now think differently.

AmiBroker Parameter setting
Having a great idea to catch a trend is one thing but having the correct parameters to enter those trends is critical to its overall performance. The parameter list below shows there is so much more that goes into systematic trading than one thinks. The 3 trading ideas that make up the Hybrid System requires many lines of code to make the operation seamless. The Hybrid Strategy takes an additional 1,260 lines of code to simply tell me three things:

(1) What code to Buy
(2) How many shares to buy &
(3) What price to offer in the pre-auction.

Simple is good
The code is complex but the generated signals are simple to understand & follow - systematic trading removes all the emotions, my end game.



I hope this goes some way to explain why it's so important to use the tools at your disposable giving yourself a fighting chance to survive let alone make money playing this game.

Skate.

 

[Skate]

Skate.

 

[Zaxon]

I like how you've set a concrete target, and measure yourself by it. Most of us like to "outperform the market", but if the market is a bear, that can still mean losing...but hopefully less. You haven't given yourself that option.

 

[willoneau]

When you backtested your hybrid system what was annual return%?

 

[Skate]

When you backtested your hybrid system what was annual return%?

@willoneau thank you for your follow up question . I wish to make a few statements before posting the backtest results you requested to put the results into perspective. I've posted a full & frank discussion about my HYBRID strategy as most were interested to understand it a little better. If you are interested it's still all there for you to read.

Backtesting means JACK
I've stated before, backtest results mean "Jack" - but the backtest results do give an indication between test results using different parameters for evaluation.

As you have asked
I've cut & pasted 4 backtest runs from 1/7/2015. The backtests are correlated from a single year (last year, than the last 2 years average than the last 3 year average & than the 4 year average)

Static Dollar position sizing
These backtest results use static dollar positing sizing whereas my Hybrid system uses a Bank feed to calculate dollar position sizing. (read back a few post as I've explained why it's done this way, I even talk about wars & soldiers - all the neat stuff to explain it) https://www.aussiestockforums.com/posts/1029737/

Backtest Results
Are the backtest an accurate reflection of my trading results - no not really, they mean Jack - my actual trading results are a little better.

Last year


The average of the last 2 years


The Average of the last 3 years


The average for the last 4 years

View attachment 95952

I like how you've set a concrete target, and measure yourself by it. Most of us like to "outperform the market", but if the market is a bear, that can still mean losing...but hopefully less. You haven't given yourself that option.

@Zaxon thank you for your positive comment, comments & questions are always welcomed - hitting the 'Like' button means someone is reading my posts & it encourages posters like myself to keep going when there is a definite interest in the subject matter being posted.

Targets
Targets need to be achievable for most to have the enthusiasm to keep striving for the best results that you can possible achieve.

Mission Statement (The CAM Strategy)
The mission statement came about from an off the cuff comment made to me a few weeks ago - “I could live on a $1,000 a week” so that’s the plan, I’m aiming for $1K a week for the next 52 weeks. Results will vary & maintaining an average set is a hard task most times.

When I first started trading
I set a target to achieve a 6% return - I've ticked that one off !!

Skate.

 

[Skate]

 

[investtrader]

Skate,

I've stated before, backtest results mean "Jack" - but the backtest results do give an indication between test results using different parameters for evaluation.

Interesting.. actually I don't agree with this at all, with all due respect. Which surprises me, as I agree with most other things you say. But I think you didn't really mean this.

Do backtest results guarantee the same going forward ... no.
Can backtest results give you false hope ... yes
Can backtest results lead you to a winning strategy ..yes

It really depends on the quality of the backtest. You can curve fit or torture the data to give any result basically. You need to start with an idea which is sound and move forward from there. But if your view of the markets are flawed, then good luck with that.

Most traders fail. It is pretty hard to forge ahead without some historical idea that what you are doing works.

 

[Skate]

Skate,

Interesting.. actually I don't agree with this at all, with all due respect. Which surprises me, as I agree with most other things you say. But I think you didn't really mean this.

Do backtest results guarantee the same going forward ... no.
Can backtest results give you false hope ... yes
Can backtest results lead you to a winning strategy ..yes

It really depends on the quality of the backtest. You can curve fit or torture the data to give any result basically. You need to start with an idea which is sound and move forward from there. But if your view of the markets are flawed, then good luck with that.

Most traders fail. It is pretty hard to forge ahead without some historical idea that what you are doing works.

Hi @investtrader, thank you for allowing me to clarify my statement about Backtesting.

Your statement (1)
"Interesting.. actually I don't agree with this at all, with all due respect. Which surprises me, as I agree with most other things you say. But I think you didn't really mean this"

I mean it
Let me put my statement into perspective to why backtesting means 'JACK' to me.

AmiBroker
I know you use AmiBroker & you actively trade so lets do a backtest to confirm what I mean.

Your homework
Pick a date that you have traded & compare your actual results to the backtest results for the same period. Those two results will not correlate. Post your results or send them via a "PM" if they are sensitive. For the benefit of others please post a followup comment with regards to the comparison results. Posting your results will be important to this discussion & hopefully to other readers.

The CAM Strategy
I'm posting the actual trading portfolio of the CAM strategy with the corresponding backtest result over the last 36 days. The backtest results are displayed so you can compare the discrepancy of a one month trading period, imagine if the backtest was carried out over one to ten years. (it would be mind blowing)

Comparison Results
Actual Results = + $12,660
AmiBroker Backtest = + $10,126

Compare
Compare the "actual" results with the "backtest" results & this is only after 36 days

CAM actual returns (from 11th June 2019 to 17th July 2019)



CAM Amibroker - Backtest (from 11th June 2019 to 17th July 2019)

Your statement (2)
Do backtest results guarantee the same going forward ... no. (I agree)
Can backtest results give you false hope ... yes (I agree)
Can backtest results lead you to a winning strategy ..yes (I agree)

Your statement (3)
"It really depends on the quality of the backtest. You can curve fit or torture the data to give any result basically. You need to start with an idea which is sound and move forward from there. But if your view of the markets are flawed, then good luck with that. Most traders fail. It is pretty hard to forge ahead without some historical idea that what you are doing works"

Backtesting
For others - Backtesting is run on known data & yes I totally agree with you that any strategy can be curve fitted to give great backtest results.

OOS Data
For others - "Out of sample data", is data that your strategy has not seen before.

Paper Trading
Running your strategy using (OOS) data (paper trading) is the only results you should take notice of when "your cash" is on the line. Paper trading measures the true worth of any strategy. All other trading results not using OOS data mean 'JACK ****' to me & I really mean this.

Skate.

 

[Gringotts Bank]

Backtests give you confidence. They're important, and yet they mean jack ****. There are some deep paradoxes in trading - the outer reflects the inner. Here's the system I trade.

2004-2019

 

[investtrader]

Not a lot of time right now, but I will follow up more fully later. I don't think we are that far apart in our thinking.

Skate, maybe you need to know that I have 'traded' for 14 years. Never actually had a losing year and sat out some years for extraneous reasons. Because of this I don't even really think abut the difference between a backtest and real life - of course they are going to be different.

 

[investtrader]

Skate,

Your homework
Pick a date that you have traded & compare your actual results to the backtest results for the same period. Those two results will not correlate. Post your results or send them via a "PM" if they are sensitive. For the benefit of others please post a followup comment with regards to the comparison results. Posting your results will be important to this discussion & hopefully to other readers.

My main account returned about 27% last FY. Backtested system result was 15%. Now this is not usual as it normally is the other way around.
Why the difference? Well I sold some positions before they hit stops in the downturn which helped reduce DD. I also bought positions that had triggered earlier but I hadn't taken the original trade. I recognized how bullish the market had become after January and just piled on. I also look at the fundamentals and use Stockopedia for this. Great resource. I don't want a whole port of spec stuff as I trade longer term weekly trends. I have a lot experience with true quant tech/fundamental systems using Portfolio123 for US stocks and know a fundamental overlay can help. So I vary the strict Amibroker rules I trade around. I never vary the stop though - when it says get out I always do.
But in all of this my conviction begins with a backtest.
So I think what you really mean is backtesting is the most important thing I have done as it has lead me to develop a system/s that makes me money. But don't expect my perfect backtest to predict exactly what my returns will be in the future.

Cheers
Gary

 

[qldfrog]

A bit surprised by the discrepancy between your backtest and real;
Mine kind of match pretty well:
maybe you suffer from the same issue as I do:
Let me try to explain:
you buy based on last trading price: add a margin2 or 3pc, whatever
that higher price give you the amount of shares to buy on the next open ..but that share price at open will rarely be spot one, so you will buy less shares than required at open price to match your 5k/10k/20k or whatever per position;
the variation will actually be indicative of the short term movement: so a share falling on the next open will be less invested (in $ term) than one going up at open..which is good;
That flaw alone could explain your better than backtest results.
I do not mean to say backtest will be indicative of the future trades but backtest on AB are pretty spot on otherwise with a real system for the past actions unless you have stop lossess etc which may not be executed..definitively a risk too
Hope I am not confusing anyone

 

[investtrader]

A bit surprised by the discrepancy between your backtest and real;

Well I luckily bought a couple of big winners ..PET,PME ,ISXand PMV. I also bought JIN when the actual buy signal was back in August 18 and I bought in Feb19 as this is a high quality company and the market is really rewarding this currently with not much regard for valuation. I know that these long stable trends can persist so I just jumped on. Also, I loaded up on Gold stocks in the last six months. So these are kind of discretionary overlays. And as I said my DD was less as I aggressively sold some positions last Sept/Oct before actual stops were hit.