Switching between systems using equity curve feedback

Let’s look at the following example. We have two different systems. The first one is a simple channel breakout. You can see the VirtualBuy and VirtualSell. These use the virtual backtester and will be used to turn the system on and off. The filtering is done at the tradeplan level. When MarketVar TurnOff is set that system is turned off so we exit any trades we are in. The real buy and sells are disabled at the tradeplan level.

' TradersStudio(r) copyright 2004-2011, All rights reserved
Sub Virtual1(SLen)
Dim MinMove
Dim S As String
MinMove=GetActiveMinMove()

VirtualBuy("ChanBuy",1,Highest(High,SLen,0)+MinMove ,Stop,Day)
VirtualSell("ChanSell",1,Lowest(Low,SLen,0)-MinMove,Stop,Day)

Buy("ChanBuy",1,Highest(High,SLen,0)+MinMove ,Stop,Day)
Sell("ChanSell",1,Lowest(Low,SLen,0)-MinMove,Stop,Day)

S = MarketVar("TurnOff")

If Len(S)>0 Then
ExitLong("","",1,0,Market,Day)
ExitShort("","",1,0,Market,Day)
End If
End Sub



Here is an opening range breakout system which is the second system in our example


' TradersStudio(r) copyright 2004-2011, All rights reserved
' System which communicates with
Sub Virtual2(Mult)
Dim AveTr
Dim Nxtopen
Dim S As String

If BarNumber<LastBar Then
Nxtopen=NextOpen(0)
Else
Nxtopen=0
End If

If Close>Open Then
Sell("SellBrk",1,Nxtopen-Mult*TrueRange,Stop,Day)
VirtualSell("SellBrk",1,Nxtopen-Mult*TrueRange,Stop,Day)
End If

If Close<Open Then
Buy("BuyBrk",1,Nxtopen+Mult*TrueRange,Stop,Day)
VirtualBuy("BuyBrk",1,Nxtopen+Mult*TrueRange,Stop,Day)
End If

S = MarketVar("TurnOff")
If Len(S)>0 Then
ExitLong("","",1,0,Market,Day)
ExitShort("","",1,0,Market,Day)
End If
End Sub



Below is the virtual tradeplan. At the session level within the tradeplan we check the equity curve for both of the systems above. We turn on the system which has a higher equity curve and turn off the one with a lower equity value. When the system is turned off we set entrynumunits to 0, -1 means that we take position sizing from the session level. If we set entrynumunits to 0, we will set MarketVar(“TurnOff”) to “Exit” and this flag will be used by the systems at the session level to exit any exiting positions.

' TradersStudio(r) copyright 2004-2011, All rights reserved
' This trade plan switchs between systems. It sets variables based on Virtual trading channel
' to trade the system which are performing best currently.
Sub VirtualTradePlan01()
Dim i As Integer
Dim S1 As TSProcessor.ISession
Dim S2 As TSProcessor.ISession
Dim n1 As Integer
Dim n2

If SessionCount <> 2 Then
MsgBox("This trade plan must have 2 sessions")
StopRun
End If

S1 = TradePlan.Session(0)
S2 = TradePlan.Session(1)

If S1.VirCurEquity > S2.VirCurEquity Then
n1 = -1
n2 = 0
Else
print "System 2 is the best"
n1 = 0
n2 = -1
End If

'Print S1.VirCurEquity & " / " & S2.VirCurEquity

For i = 0 To S1.MarketCount - 1
S1.Market(i).EntryNumUnits = n1
Next

For i = 0 To S2.MarketCount - 1
S2.Market(i).EntryNumUnits = n2
Next

For i = 0 To S1.MarketCount - 1
If n1=0 Then
S1.Market(i).MarketVar("TurnOff")="Exit"
Else
S1.Market(i).MarketVar("TurnOff")=""
End If
Next

For i = 0 To S2.MarketCount - 1
If n2=0 Then
S2.Market(i).MarketVar("TurnOff")="Exit"
Else
S2.Market(i).MarketVar("TurnOff")=""
End If
Next
End Sub

 

I once looked at a similar mechanical concept, and found the following issues (similar to those of a lagging indicator!):
1) The time lag between start of drawdown and the switching off of the underperforming system; you watch lots of equity destroyed before the underperforming system gets switched off. Conversely, you miss many wining trades before an off system switches back on.
2) “Switching Chop”; just after the underperformer is switched off, performance improves again. After a few successful trades, the off system is switched back on, and the next trades are all losers. In the end, you participate in all the losers and miss all the winners! It happened to me!
In my view, instead of the above it is best to pick systems with win rates and drawdowns you can live with. And then just take all the set-ups. In my experience, you come out ahead.

 

My experience is similar to abattia. I tested via spreadsheet rotating to the best performing strategy out of a group of 5 or so strategies. It underperformed simply holding all strategies and far underperformed picking the best strategies in sample and then holding them out of sample. I haven't given up trying to dynamically adjust my strategies or portfolio weightings at some point, but for the time being I simply diversify across my best strategies.

 

I am doing TradersStudio video's over the next few months , any interest in a equity curve feedback and trading system video

 

Yes Please Murray

 

This old threads discussing equity curve feedback is very important. If you want to see examples of using Equity curve feedback ,click here. This is an example of using equity curve feedback to improve a system. Our next example shows how to switch between systems using equity curve feedback in TradersStudio. TradersStudio Turbo is the best tool for developing systems using advance concepts like Equity Curve Feedback.

 

Here is my cornerstone page on Equity Curve Feedback

 

Very useful. Thanks!

 

You can see how easy it is to implement this in TradersStudio.

 

Yes, life must be easy. If I need to do everything in Python the game is lost. A trader must concentrate on trading and not on programming.