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Set up and trigger accuracy

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Interesting stuff !

I like freeballing in the summer with just shorts

Bob.
 
Snake Pliskin said:
Michael,

I have pondered your post and find the following curious:

What is near random in your interpretation?
Why does near random generally do better?
Is prediction the only part of the fallacy?
Click to expand...
When I started backtesting systems, the initial entry condition was quite complex. I found, however, that as I bolted on more and more entry conditions in an attempt to improve things, system performance in fact decreased (worse drawdown and expectancy).

Just for kicks one day, I replaced the complex entry condition with random entry (Entry Trigger = 1). System performance suddenly improved dramatically.

Even since then, my "gold standard" for comparison of any system is random entry. If a condition can improve results over random entry, it is worthwhile. So far, I have only found 3 conditions on entry improve performance over random; CLOSE>Long Term Moving Average, enter on a white candle, and a three candle continuation pattern. Basically - price going up both long term and short term = BUY.


Pondering on this brings me to the following conclusions;
1. Indicators are a waste of time because they are all merely abstractions of PRICE and thus provide no additional information above and beyond that inherent in PRICE.
2. PRICE is all that matters.
3. The exit makes the money by biasing the system towards overperformers.
4. A price which is going up is more likely to go up than one going down. That is the only prediction which has testable validity.
 

4. Momentum.
 

I disagree, A price going up in the current market conditions is not likely to keep going up past previous resistance,the SP will mildly pass it and fall midway to the next channel, 'guaranteed within the week'.

I pointed out my entry points on this thread yesterday. Yesterday I purchased ROC at a channel bottom and stuck with it today as it finished the day mid channel. BSG I didn't purchase yesterday as it was mid channel, Today it spiked early (its a strong breakout stock and the market was good). I posted my buy at mid present channel predicting it would end the day mid next channel. Shortly after some silly punter dumped his stock on short profit and swallowed me up at SP $2.16, the SP then turned bullish all the way to $2.45. I dumped at $ 2.42 a point which was the same as its previous POR. Bottom channel purchases today were SBM (very nice) & PNA. Holds till tommorow were KZL & ROC ( ROC channel was a welcome suprise and I dumped 70k into it on Wednesday).

If you stick to the crude basics, stick with the same stocks and enter only at the bottom POR on a bad market (not early) and exit at the top of the channel (don't get tempted to stay in). You end up trading the same stocks, multiple times for at least a 20% gain each month for minimal risk. The only problem is that you might be locked out if the market goes on a run. Tomorrow might be the day this happens, hopefully.
 
I agree with Michael.Price and volume are the key.Trends do work.
Here is an example of one of the long term (weekly charts) trend following mechanical systems that I trade.51% CAGR and 8% drawdown.
To answer Snakes original question, yeah I say that mechanical trading works, it does for me anyhow.

TradeSim random run over ten years of data to present -:

Trade Parameters
(System VolP Realtive Buy )

Trade Parameters
Initial Capital: $50,000.00
Portfolio Limit: 100.00%
Maximum number of open positions: 100
Position Size Model: Fixed Percent Risk
Percentage of capital risked per trade: 1.50%
Position size limit: 15.00%
Portfolio Heat: 100.00%
Pyramid profits: Yes
Transaction cost (Trade Entry): $0.00
Transaction cost (Trade Exit): $0.00
Margin Requirement: 100.00%


Detailed Report
(System VolP Realtive Buy )

Simulation Summary
Simulation Date: 8/18/2006
Simulation Time: 9:50:27 AM
Simulation Duration: 1.10 seconds

Trade Summary
Earliest Entry Date in the Trade Database: 1/10/1997
Latest Entry Date in the Trade Database: 7/7/2006
Earliest Exit Date in the Trade Database: 1/24/1997
Latest Exit Date in the Trade Database: 8/11/2006

Start Trade Entry Date: 1/10/1997
Stop Trade Entry Date: 7/7/2006
First Entry Date: 1/10/1997
Last Entry Date: 7/7/2006
First Exit Date: 1/24/1997
Last Exit Date: 8/11/2006

Total Trading duration: 3500 days

Profit Summary
Profit Status: PROFITABLE
Starting Capital: $50,000.00
Finishing Capital: $2,625,632.19
Maximum Equity/(Date): $2,625,688.69 (7/28/2006)
Minimum Equity/(Date): ($3,416.19) (5/9/1997)
Gross Trade Profit: $3,131,230.97 (6262.46%)
Gross Trade Loss: ($555,598.78) (-1111.20%)
Total Net Profit: $2,575,632.19 (5151.26%)
Average Profit per Trade: $13,484.99
Profit Factor: 5.6358
Profit Index: 82.26%
Total Transaction Cost: $0.00
Total Slippage: $0.00
Daily Compound Interest Rate: 0.1132%
Annualized Compound Interest Rate: 51.1468%

Trade Statistics
Trades Processed: 736
Trades Taken: 191
Partial Trades Taken: 0
Trades Rejected: 545
Winning Trades: 92 (48.17%)
Losing Trades: 99 (51.83%)
Breakeven Trades: 0 (0.00%)

Normal Exit Trades: 191 (100.00%)
Delayed Normal Exit Trades: 0 (0.00%)
Open Trades: 0 (0.00%)
Protective Stop Exit Trades: 0 (0.00%)
Time Stop Exit Trades: 0 (0.00%)
Profit Stop Exit Trades: 0 (0.00%)

Largest Winning Trade/(Date): $236,869.34 (11/12/2004)
Largest Losing Trade/(Date): ($43,882.75) (12/10/2004)
Average Winning Trade: $34,035.12
Average Losing Trade: ($5,612.11)
Average Win/Average Loss: 6.0646

Trade Duration Statistics
(All Trades)
Maximum Trade Duration: 1246 (days)
Minimum Trade Duration: 7 (days)
Average Trade Duration: 155 (days)
(Winning Trades)
Maximum Trade Duration: 1246 (days)
Minimum Trade Duration: 56 (days)
Average Trade Duration: 247 (days)
(Losing Trades)
Maximum Trade Duration: 336 (days)
Minimum Trade Duration: 7 (days)
Average Trade Duration: 68 (days)

Consecutive Trade Statistics
Maximum consecutive winning trades: 6
Maximum consecutive losing trades: 9
Average consecutive winning trades: 2.14
Average consecutive losing trades: 2.25

Trade Expectation Statistics
Normalized Expectation per dollar risked: $4.9000
Maximum Reward/Risk ratio: 303.36
Minimum Reward/Risk ratio: -2.97
Average Positive Reward/Risk ratio: 10.88
Average Negative Reward/Risk ratio: -0.75

Relative Drawdown
Maximum Dollar Drawdown/(Date): $79,367.92 (5/26/2006)
Maximum Percentage Drawdown/(Date): 8.1650% (5/7/1999)

Absolute (Peak-to-Valley) Dollar Drawdown
Maximum Dollar Drawdown: $79,367.92 (3.5610%)
Capital Peak/(Date): $2,229,071.51 (5/26/2006)
Capital Valley/(Date): $2,149,703.59 (5/26/2006)

Absolute (Peak-to-Valley) Percent Drawdown
Maximum Percentage Drawdown: 8.1650% ($4,904.72)
Capital Peak/(Date): $60,068.65 (6/26/1998)
Capital Valley/(Date): $55,163.93 (5/7/1999)
 
Freeballinginawetsuit said:
I disagree, A price going up in the current market conditions is not likely to keep going up past previous resistance,the SP will mildly pass it and fall midway to the next channel, 'guaranteed within the week'.
Click to expand...
My current real portfolio begs to differ with this assertion. 9 out of 19 have made highs well beyond their May 2006 peaks within the last week or two. The other 10 are range trading. There are still sustained trends in the market, just less of them than there were a few months ago.

NB: There is NOTHING in the above post that should be construed as criticism of your trading methodology.
 
Which stocks are range trading?. A more important questions is what stocks are at highs, what daily volume do they trade (I wouldnt hold greater than 5% of daily turnover), their market cap and are they a speccie. Finally, are they in the materials sector, thats the only sector I trade.

Cheers,
Mark
 
My universe is the ASX300, so volumes are generally orders of magnitude above my position sizes and none are speccies.

The Licensed Property Trusts in my portfolio are pulling well above their weight at present whereas Consumer Discretionary are ranging. The two oilers in there are looking good as is one Materials stock.

However, I don't enter using top down analysis - what's in the portfolio at the moment is there simply because the stop loss has selected for them.
 

Hardmoney thats a really good effort !!

U should hold like seminars or something...

Everybody should post like that so we can really know whos the king of this forum and who really dominates the markets

The stats speak for themselves..

Starting Capital: $50,000.00
Finishing Capital: $2,625,632.19
Click to expand...

What is interesting is this...

Winning Trades: 92 (48.17%)
Losing Trades: 99 (51.83%)
Click to expand...

But the key is this...

Average Win/Average Loss: 6.0646
Click to expand...

If u dont mind me asking; what books have u read that u rate ?

Thanks
 
Hi Nizar,

Ive read dozens of trading books and my favourites would be -:

Reminiscences of a Stock operator
Darvas 2 million dollar book
both Market Wizards books
Stan Weinstien Secrects to Profits in Bull and Bear Markets
Tharps Trade you Way to Financial Freedom, cheezy title but a fabulous book

Keep in mind that the above posting was a sample run on TradeSim and it appears as though I forgot to include brokerage, however Monte Carlo analysis and real time results over the past few years shows that this is a fairly typical result.Trends work.

Rgds,

HM
 


Hi FBIAW,

Quite interested to know why you chose the sector and stocks that you trade? Your entry criteria seems similar to what i am putting together i am trying to keep it as simple as possible.

My biggest problem is my small cap base at the moment, i will only have 10k when i start trading so if i only use 5k position sizes 15% is not very good for me as tax and brokerage doesnt leave me with much in my pocket, kindly pointed out by fellow ASF members. Risk = Reward is not there!

So i am starting to look for a few stocks that i could trade consistently to get my equity moving asap. At the moment i scan the whole market looking for whatever indicators i feel like and am starting to think this is counter productive because i obviously find different ones every day and end up with these huge watchlists that are quite frankly unmanageable. So your comment about only using a certain sector peeked my interest as i havent considered restricting my searches to a certain area.

Regards Stink
 
 
Thanks for your reply mate,

Sounds like a valid strategy for someone with that type of money, obviously your results speak for themselves.

I dont take tips but i will have a look at the shares you mentioned.

Regards Stink
 
By Michael ID some time ago

""When I started backtesting systems, the initial entry condition was quite complex. I found, however, that as I bolted on more and more entry conditions in an attempt to improve things, system performance in fact decreased (worse drawdown and expectancy).

Just for kicks one day, I replaced the complex entry condition with random entry (Entry Trigger = 1). System performance suddenly improved dramatically.

Even since then, my "gold standard" for comparison of any system is random entry. If a condition can improve results over random entry, it is worthwhile. So far, I have only found 3 conditions on entry improve performance over random; CLOSE>Long Term Moving Average, enter on a white candle, and a three candle continuation pattern. Basically - price going up both long term and short term = BUY.


Pondering on this brings me to the following conclusions;
1. Indicators are a waste of time because they are all merely abstractions of PRICE and thus provide no additional information above and beyond that inherent in PRICE.
2. PRICE is all that matters.
3. The exit makes the money by biasing the system towards overperformers.
4. A price which is going up is more likely to go up than one going down. That is the only prediction which has testable validity.******""
*******
""

I am fascinated to find this just now in a search. I have been demo-ing on intraday futures indices for a few months now and have been looking for a high accuracy system to start my live trading with. What have I found? I have trialled several systems, some of my own creation, one I even paid $$ for some indicators......I test these with an even bracket methodology ie stop loss same dist from entry as profit target( in a range that is usually met within a minute or 3)....I have not yet found a system that will give me significantly above 50% over 50 consecutive trades. So I am now thinking I have been on the wrong track..just this morning I thought I should try simply entering (long or short, doesnt matter) 60 seconds following the close of the previous trade and see how it goes. The moral of the story for me, supported by Michaels views (above) too, is that I will now choose a simple entry system .....stop the search for high accuracy ......and focus almost entirely on trade management!
 
lindsayf said:
The moral of the story for me, supported by Michaels views (above) too, is that I will now choose a simple entry system .....stop the search for high accuracy ......and focus almost entirely on trade management!
Click to expand...

gidday Lindsay ---- nothing wrong with simple, but random entries simply wont work if u r trying to trade short time frames ---- u will get cut to bitz (unless u r using a scaling entry system to iron out the bumps) -----

MM is very important of course, but good MM will not save yr account if yr entries are bad -------- random might work for a while, but not in the long term ----
 
gday Cartman
I would be interested to hear if Michael ID has moved away from his opinion of a year or 2 back.......I am not proposing a random entry...but am stopping the search for a system that provides a super high W%..and moving my focus to trade/money management....

Cartman..I suspect you have been down this road....most have I guess

You know it is amazing to see the claims out there...I have recieved a promo email from a mob in the US that claim an over 80% accuracy rate with their system... but wouldnt respond to my request for some data to support their claims...
 
The high % win rate appeals because we are brought up as being told right is better than wrong, a high grade at school is better than a low grade. Our culture dictates that those that who are right more often are the rewarded ones when we go to work. Do your homework, get high grades, you'll go to uni, get good marks, you'll get a great job, get a great career etc etc.

This is why the promo's advocate high % win rates - because they are trying to appeal to how we have been brought up.

Trading doesn't operate like that. You can have a 90% win rate and still be a losing trader. This is where so many people fall over. They spend days, weeks, months, years and lifetimes trying to find the perfect winning system and they simply don't understand WHY profits are made in the markets. They buy countless books, go to numerous seminars and eventually resort to ridiculously priced seminars thinking that the Holy Grail exists just around the corner. The WHY has nothing to do with the win rate. The WHY is the basic maths behind expectancy. The Holy Grail of trading is partly understanding that concept. The other parts of success relate to the JOURNEY of trading, protecting one's capital and a few other features.

People carry on about all soughts of things; 50% retracements, weekly pivot highs, monthly lows, out of sample, in sample, backtesting, forward testing, Elliott Waves, Fib levels, RSI, MAE, blah blah blah. But once you truly understand how profits are made and how they come about, the less you need to backtest, the less you need to read, the less you need to do a lot of things. You have turned the corner. You can get on with the job of creating a positive expectancy that suits YOU and in turn makes some profits.

I would say lindsayf that you have taken a very significant step in your trading career with this realization, and one that many don't ever get.
 
lindsayf said:
gday Cartman
I would be interested to hear if Michael ID has moved away from his opinion of a year or 2 back.......
Click to expand...

i suspect that Michael would have adapted his system to suit cause he is pretty switched on, but the parameters of his 'bull market' system would need to be modified with regard to time frames (holding period) in the current choppy market


lindsayf said:
Cartman..I suspect you have been down this road....most have I guess
Click to expand...

lol ----- i have been down 'trading roads' that u would not believe ----- and most were one way streets --- haha ----

lindsayf said:
You know it is amazing to see the claims out there...I have recieved a promo email from a mob in the US that claim an over 80% accuracy rate with their system... but wouldnt respond to my request for some data to support their claims...
Click to expand...

yeah --- these guys are a bit of a joke ---------- anyone can have a system giving 80% ---------- hell ive got one !!! ----- is it worth selling ??? ----- haha --- (maybe it is ) ---- 80% means bugger all unless it performs over a long period of time and is relative to the risk and capital required for the individual ------
 
Nick Radge said:
the less you need to backtest, the less you need to read, the less you need to do a lot of things. You have turned the corner. You can get on with the job of creating a positive expectancy that suits YOU and in turn makes some profits.
Click to expand...

lol, yes, took me about 2 years to truly understand this.

Everything works, yet everything doesn't.

I remember asking WayneL about some option strategies some time ago, and he explaining it in detail, in the end, basically explaining the advantage, but, with that, the guaranteed drawback.

If you run positions, you get a lower win %. If you take small profits, you never get large outliers. If you have a tight stop, you minimise risk, but get chopped out all the time. List goes on and on and on.

In the end, it's all down to practice practice practice and creating your own style and finding your own edge. This constantly has to be altered and adapted to market conditions, which again, this ability to be dynamic and continuously evolve, is just part of your edge.

Personally for me, I think the most important things are pattern recognition and having some idea of when to hold and when to fold. Along with having the mental ability to do what goes against a humans genetic makeup and that is NOT waiting for confirmation.
 
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