Why isn't everyone rich trading these systems?

[Roller_1]

There is a difference between 'fund manager' and 'trader'....it usually means a fund manager gets a salary and a trader gets a P/L....

Yeah i understand that, but these guys don't just become or stay fund managers. In saying that pro scalpers etc probably wouldn't accept losing years

 

[tech/a]

Pro traders can't have losing years. To be professional means that even losing months must be rare. Who or what is going to pay for living expenses?

A pro Trader "Should" be like any other business and factor in a survival plan for years which are lean or negative.
They would or should also be backed with either enough Capital OR an alternate source.

I think you have this view that 'REAL" Pro traders must be 100% profitable 80-90% of the time.
Frankly if they make $500K (being right 30% of the time ) and lose $100k over the other 70% of time----good business! (Figures are examples only).

Plus they are less of a trader if they supplement income.
A pro trader can make a small fortune teaching others who want to be him/her---so why not.

20Yrs ago I went to see Guppy.
Average presentation but 300 X $150 a head---$45,000
and he was booked 3 nights straight in ADELAIDE---we turn the lights out at 10!

Smart pro trader!!

 

[Gringotts Bank]

20Yrs ago I went to see Guppy.
Average presentation but 300 X $150 a head---$45,000
and he was booked 3 nights straight in ADELAIDE---we turn the lights out at 10!

Smart pro trader!!

Lot of work to get 300 people into one room, and paying. That's a very decent crowd.

 

[tech/a]

Lot of work to get 300 people into one room, and paying. That's a very decent crowd.

The lure of potential road maps to future riches will do it!

 

[skc]

Pro traders can't have losing years. To be professional means that even losing months must be rare. Who or what is going to pay for living expenses?

Depends on trade frequencies and trading style. I was listening to this interview with Peter Brandt who has 40+ years of professional trading experience... and he just went through a 15 month drawdown.

https://chatwithtraders.com/

You don't need a losing year to go backwards, as your expenses are pretty fixed year to year. Hopefully all professional traders (and anyone in any profession really) are wise enough to save up for the lean years. Having a second income in the household (selling seminars, working partner and other passive income etc) will also help.

Even if you buy a new BMW every month then at least you can still sell one for food... or drive UBER.

 

[Wysiwyg]

People like to make systems trading sound harder than it needs to be, mind you i am not a multi millionaire. A lot of the top systems traders talk about simple being best

Simple systems can be trend following systems but because price movement is not simple, the trend following system hits periods of long draw down and several losses in a row which is compensated for by (eventual) large wins. This may be palatable for those with deep pockets and time on their hands. Alternatively, trying to isolate a turning point to enter or exit the market requires more accuracy/timing hence analysis to make the strategy succeed. The nuances of each security are unique. Price movement isn't mechanical so how can it be defined by logic? Thoughts?

A system that works for someone does not necessarily transfer easily elsewhere.

By definition, a system is a set of rules to follow. If one does not follow the system then the same results that encouraged the system to be tried will not eventuate. Like you said, when the 10th loss in a row or large position loss comes along, most traders pull the pin. That is why I have a cynical view of anyone suggesting a system is exceptional. It is simply not so.

 

[Wysiwyg]

You can only do a certain amount from a book/s---with the knowledge you have.

Of course and as you have stated countless times it is the application that determines success or failure. We know it isn't as simple as taking a price breakout that makes a trend following system successful. Parameters in a rough range to tech trader or another trend following system would have done well during the great mining bull run. Not magic but a great eye opener to us that come after.

 

[tech/a]

Of course and as you have stated countless times it is the application that determines success or failure. We know it isn't as simple as taking a price breakout that makes a trend following system successful. Parameters in a rough range to tech trader or another trend following system would have done well during the great mining bull run. Not magic but a great eye opener to us that come after.

Luck

I had no idea at the time of trading live T/T that we were in front of a screaming bull run.
The system was designed for exactly those conditions. I agree with your statement.

But strangely many still lose in bull runs or under perform. Maybe it's not so strange.

Today I certainly agree with Howard Bandy's observations in that shorter time frame methods are likely to be
More successful.
But correct monitoring of any method should be a given in maximizing return and mst of all minimizing loss.

 

[Roller_1]

Simple systems can be trend following systems but because price movement is not simple, the trend following system hits periods of long draw down and several losses in a row which is compensated for by (eventual) large wins. This may be palatable for those with deep pockets and time on their hands. Alternatively, trying to isolate a turning point to enter or exit the market requires more accuracy/timing hence analysis to make the strategy succeed. The nuances of each security are unique. Price movement isn't mechanical so how can it be defined by logic? Thoughts?

I trade a mean reversion system that is very simple it has minimal inputs, no optimized parameters, it works on different markets so its pretty robust so i don't think that short term systems have to be complex either. Like you said though accuracy is more important with smaller price swings but just a limit order help with this instead of buying on the open. It doesn't need to work perfectly on every security you just need to know if you have an edge over the long term just keep exploiting it.

Today I certainly agree with Howard Bandy's observations in that shorter time frame methods are likely to be
More successful.

I wonder if eeryone will get back on the trend following train when the next bull market kicks off

 

[tech/a]

I wonder if eeryone will get back on the trend following train when the next bull market kicks off

Just be sure to let me know when that is so I can hop on.

There is more
"Right time, Right place"
in many matters than you think.

Being long before a good take over.
Staying long in an early boom
(SMB as an example)

Getting out before a bust 2008
Going to that New years Eve party and finding my now wife.

Fooled by Randomness or putting your self in it (Anticipation) and getting HIT!

 

[Wysiwyg]

Going to that New years Eve party and finding my now wife.

Simply irresistible.

 

[Roller_1]

Just be sure to let me know when that is so I can hop on.

There is more
"Right time, Right place"
in many matters than you think.

Being long before a good take over.
Staying long in an early boom
(SMB as an example)

Getting out before a bust 2008
Going to that New years Eve party and finding my now wife.

Fooled by Randomness or putting your self in it (Anticipation) and getting HIT!

As you say if you system is designed to capture a trending market you have to be in waiting for it, ie sticking around after 2008 to cash in on 09

 

[tech/a]

Simply irresistible.

View attachment 67107

Yep---she's cute

 

[Quant]

As you say if you system is designed to capture a trending market you have to be in waiting for it, ie sticking around after 2008 to cash in on 09

It is possible to build a system that trades almost any market conditions , it just needs to be dynamic , like the market . Volatility filter is a MUST , using static stop losses will screw you , you need to adjust to underlying volatility . Volatility is the most under utilized tool that traders have at their disposal , not many understand it at all . Patterns exist that are totally exploitable

People like simple systems but trading is complicated , Ive used a top down approach , building my system involved listing what i required from a system first . Then i worked on that list 1 point at a time , not a long list but no easy answers initially . #1 on the list is getting the list . What is your acheivable end goal from a system ... expectancy , what can you do to improve BOTH sides of expectancy . What matters and is measurable ? What are the parameters of these measurements that are meaningful ? It isnt simple , that much is obvious

 

[Roller_1]

It is possible to build a system that trades almost any market conditions , it just needs to be dynamic , like the market . Volatility filter is a MUST , using static stop losses will screw you , you need to adjust to underlying volatility . Volatility is the most under utilized tool that traders have at their disposal , not many understand it at all . Patterns exist that are totally exploitable

When you say volatility filter, what are you using the filter for? positionsizing, market timing, entry/exit levels? or all

 

[Quant]

When you say volatility filter, what are you using the filter for? positionsizing, market timing, entry/exit levels? or all

All of that . Dynamic position size , dynamic stop loss , Filter for entry itself . Has uses in multiple time frames , volatility is different in varying market phases and gives a headsup (probability wise ) on where price goes after parameters met . Its a very versatile tool

FWIW I am primarily daytrader with a 4-6 week hold my version of investing

 

[Wysiwyg]

This Mean Reversion system is simple and the results shown are quite good but I can't get a positive result for Ausralian stocks. I realise the test is done on American stocks but really, the rules are so basic it should be at least up on other stock markets. No stop loss so I used percentage 10. Fills are better assumed to happen at Open or Close price rather than a nominal limit order at 0.5 * ATR() so I left that out.

http://alvarezquanttrading.com/2014...-a-mean-reversion-strategy-with-good-results/

Any thoughts on what was done to rate this 3 bars lower strategy so high?

PositionSize = -100/10; 
PositionScore = mtRandom();

SetTradeDelays(1,1,1,1); 

Turnover = MA(C * V, 10) > 5000000;

BuyRule1 = C > MA(C, 100);
BuyRule2 = C < MA(C, 5);
BuyRule3 = Sum(L < Ref(L, -1), 3) == 3;

SellRule = C > Ref(C, -1);

Buy = BuyRule1 & BuyRule2 & BuyRule3 & Turnover;
Sell = SellRule;

ApplyStop(0, 1, 10, 2);

 

[rnr]

This Mean Reversion system is simple and the results shown are quite good but I can't get a positive result for Ausralian stocks. I realise the test is done on American stocks but really, the rules are so basic it should be at least up on other stock markets. No stop loss so I used percentage 10. Fills are better assumed to happen at Open or Close price rather than a nominal limit order at 0.5 * ATR() so I left that out.

http://alvarezquanttrading.com/2014...-a-mean-reversion-strategy-with-good-results/

Any thoughts on what was done to rate this 3 bars lower strategy so high?

PositionSize = -100/10; 
PositionScore = mtRandom();

SetTradeDelays(1,1,1,1); 

Turnover = MA(C * V, 10) > 5000000;

BuyRule1 = C > MA(C, 100);
BuyRule2 = C < MA(C, 5);
BuyRule3 = Sum(L < Ref(L, -1), 3) == 3;

SellRule = C > Ref(C, -1);

Buy = BuyRule1 & BuyRule2 & BuyRule3 & Turnover;
Sell = SellRule;

ApplyStop(0, 1, 10, 2);

Why not test it on the ASX100 as per the initial rules (Entry <= Min(O,Ref(C-ATR(10)*0.5,-1)) & No stop-loss) and see how it stacks up.

 

[Wysiwyg]

Why not test it on the ASX100 as per the initial rules (Entry <= Min(O,Ref(C-ATR(10)*0.5,-1)) & No stop-loss) and see how it stacks up.

Tried that and buying the low of the day doesn't produce a positive result.

 

[howardbandy]

A mean reversion system tested on Norgate Premium Data's 496 stock list of ASX. Date range 1/1/1999 through 6/15/2016. 17.5 years (which is way too long to expect the same system to work without adjustment)
The code was recovered from a directory that was left untouched for two years.
Profitable on 407, not profitable on 89, traded individually.
Allowing all trades on all stocks, there are 141675 trades -- a little more than one trade per stock per month.
83% are profitable.
Average gain per trade is 0.40%.
Average holding period is 3 days.




The AmiBroker code

// BuyAfterAnNDaySequenceMultiPosition.afl
//
// This is a modificatiion of Listing 3.2
// BuyAfterAnNDaySequenceMultiPosition.afl
// contained in the book
// "Mean Reversion Trading Systems"
// which is copyright © 2013 Blue Owl Press, Inc
//
// The author of the book and programmer
// of the code is Dr. Howard B. Bandy.
//
// Please read and understand the disclaimer
// associated with all materials related to the book.
//
// To obtain a copy of the book,
// visit the book's website:
// www.MeanReversionTradingSystems.com
//
// This code is provided for the convenience of
// readers of the book.
// Please respect the copyright.
// Do not post this listing without
// the express written consent of Dr. Bandy
//
SetOption( "ExtraColumnsLocation", 1 );
SetOption ( "CommissionMode", 2 ); // $ per trade
SetOption( "CommissionAmount", 0 );
SetOption( "InitialEquity", 1000000 );
SetPositionSize( 10000, spsValue );
MaxPos = 500;
SetOption( "MaxOpenPositions", MaxPos );
//SetBacktestMode( backtestRegularRawMulti );
SetBacktestMode( backtestRegular );
SetTradeDelays( 0, 0, 0, 0 );
BuyPrice = Close;
SellPrice = Close;
// ObFn == K-ratio, CAR/MDD, expectancy

// Define a day as rising based on the closing price
Rising = C > Ref( C, -1 );
Falling = C < Ref( C, -1 );

// The number of days in the sequence
N = Optimize( "N", 2, 1, 7, 1 );

// Direction. 1 == Rising, 0 == Falling
Direction = 0; // Optimize( "Direction", 0, 0, 1, 1 );

// Exit variables
// Maximum holding period
HoldDays = Optimize( "HoldDays", 7, 1, 7, 1 );
// Profit target
ProfitTarget = Optimize( "ProfitTarget", 1.0, 0.2, 4, 0.2 );

// Detect an N day sequence

if ( Direction == 1 )
{
NDaySequence = Sum( Rising, N ) >= N;
}
else
{
NDaySequence = Sum( Falling, N ) >= N;
}

Buy = NDaySequence;

Sell = 0;

ApplyStop( stopTypeProfit, stopModePercent, ProfitTarget );
ApplyStop( stopTypeNBar, stopModeBars, HoldDays );

// Plots
Plot( C, "C", colorBlack, styleCandle );
shapes = IIf( Buy, shapeUpArrow, shapeNone );
shapecolors = IIf( Buy, colorGreen, colorWhite );
PlotShapes( shapes, shapecolors );

/////////////// end /////////////////

Best,
Howard