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Rol's Automated Trading Journal
Hi all, I have been working on a mechanical trading system for about 4 years now and 4 months ago went live with it starting with $30,000. Some reasons for starting this thread are to chronical my performance, force me to go 100% auto and not interfere with the system. Also feedback, questions are welcome. I could go into the specifics of the strategies I use, but it probably wouldn't produce profit anway if not fully automated. Frankly, I'm not even sure what method to call what I do. Swing trading seems to imply holding times of several days to weeks, while mean reversion is considered intraday (correct me if I'm wrong). Some intraday charts look more like trend following. My average hold time is 2 days. My strat does not look at support or resistance levels, or moving averages, or volume other than to screen out low volume stocks. The couple of indicators I use are not used in the typical ways. It seems to come down to an edge I have discovered that backtests well or even better on out of sample data on a portfolio of about 1400 stocks (no futures, currencies, options, etc.). My theory was that if it worked on around 68% of the stocks out there, why not minimize individual stock exposure by diversifying into multiple symbols. I knew after backtesting on a portfolio of stocks, that automation was the only way to achieve this. Fortunately, just in the past year or so software, programming language and trade server connectivity has finally made it possible to go 100% black box, which is my ultimated goal. I wanted to be able to take the human element out of it completely,even including stock selection and the maximum number of stocks to hold. The results I have included are all the trades me or my system have made. I would say it is about 90-95% system. The discretionary trading dips on the equity curve are when I messed with the system. Starting today I plan to include weekly updates on the system performance and will begin a new equity curve with trading equity of $52000.
Attachment Removed at Request of Original Poster- Admin Joe
Re: Rol's Automated Trading Journal
Quote from Rol:
Mostly accumulating today. Several buy orders got help up at the open because a tick caused the strat to attempt placing a stop at the open which the trade manager tried to place pre-market. Guess I'll change that part of the code back to waiting a few seconds after market opens before firing. Reminds me why I don't place market orders at the open (avoid those nasty fills). 
Anyway 2 sells today, overall market negative.
Realized P/L (2/2/11) $90.63
Faded the gap on 3 stocks near the open and then had protective stops filled to preserve profits. I don't mind passing up potential upside profit if the stock starts reversing back. There are hundreds more stocks on the radar. Rode another 5 to the close.
Unfortunately, got in CCME, China MediaExpress, after the news from Muddy Water's allegations of falsly inflated earnings. It just reaffirms the importance of risking a small percent of net worth per position. I will just consider this a negative outlier in my overall % profit distribution. It is surprising that a long term profit can still be achieved even with occasional hits to your equity by using position sizing. I guess we'll find out for sure if I'm still around in a few months. 
My goal is to have no more than 3 losing days a month, an occasional losing week, and no losing months.
8 sells
Realized P/L (2-3-11) $333.36
Rol,
I'm a bit surprised that I'm the first one to be commenting on your journal, to be honest. First off, thank you for deciding to post. I have found the few posts thus far to be interesting and containing useful information and I'm hoping that continues.
As someone also interested in strategy automation, I have a number of questions for you, but I'll try not to ask them all at once.
Quote from Rol:
Hi all, I have been working on a mechanical trading system for about 4 years now and 4 months ago went live with it starting with $30,000.
Quote from Rol:
...while mean reversion is considered intraday (correct me if I'm wrong). Some intraday charts look more like trend following.
Quote from Rol:
It seems to come down to an edge I have discovered that backtests well or even better on out of sample data on a portfolio of about 1400 stocks (no futures, currencies, options, etc.). My theory was that if it worked on around 68% of the stocks out there, why not minimize individual stock exposure by diversifying into multiple symbols.
Quote from Rol:
The discretionary trading dips on the equity curve are when I messed with the system.
Quote from Rol:
Starting today I plan to include weekly updates on the system performance and will begin a new equity curve with trading equity of $52000.
Thanks Kohanz for the questions and interest
Thanks Kohanz for the questions and interest.
I'll try to hit all your questions, but I'm kind of new at this forum thing so it may seem disconnected. If you still have questions, keep asking them. I don't think I would be giving away the store by answering them. It is really just trying to pull everything together. The whole process has kind of directed itself with me discovering holes in the system and then trying to plug them.
I'm a retail trader with a full time job and dreams of retiring early to just trade. I dont' say trade full time because one reason for automating my trading is so I won't have to do this full time. It is more just a challenge for me to find the elusive "holy grail."
I use overnight buying power so it is 2X leverage. Occasionally the system will dip into daytrading buying power, and then I need to look at the trades closer to make sure I have enough that will exit before the end of the trading day.
I don't decide on which stocks to trade on a given day. The individual stocks, based on their price action, will determine whether they are potential candidates for trading. I scan the day before to narrow the list based on my criteria, and then during the trading day, if they hit my buy price, it triggers an order. It is on a first come first serve basis.
When I trade discretionary, I often get over exposed in a stock, usually trying to turn a loser into a net profitable trade. Many times I get decent gains as a result, but am usually left with that out of control feeling and don't want to hold overnight, and yes I usually get stopped out on the exit. With a small positon size, I feel much more relaxed about holding even currently underwater stocks, because there are usually some other stocks I'm holding that are profitable, so it helps smooth things out.
I don't use stops with the strategy other than to keep a profit from turning into a loss. I know that is heresy to many, but in backtesting it hurt my performance drastically to use stops. Actually, I am buying when others are being stopped out. 
I want to get my equity high enough relative to my position size so I can comfortably say my "uncle point" is when the stock goes to zero. 
When my exit conditions are met, that is when I exit, whether it will be a profitable trade or not, which is another thing that is hard to do if you have too large of a position size. I know others use profit targets and such, but to me that is like trying to predict where the stock will be heading. I admit I don't know where it will be heading and don't even really care. The more disconnected I can become from the trade, the better. I thought if I could step out of the fear and greed battle, it would be all the better.
My only concern is that I am connected to the markets.
Re: Thanks Kohanz for the questions and interest
Quote from Rol:
I'm a retail trader with a full time job and dreams of retiring early to just trade. I dont' say trade full time because one reason for automating my trading is so I won't have to do this full time. It is more just a challenge for me to find the elusive "holy grail."
Quote from Rol:
I don't decide on which stocks to trade on a given day. The individual stocks, based on their price action, will determine whether they are potential candidates for trading. I scan the day before to narrow the list based on my criteria, and then during the trading day, if they hit my buy price, it triggers an order. It is on a first come first serve basis.
Quote from Rol:
With a small positon size, I feel much more relaxed about holding even currently underwater stocks, because there are usually some other stocks I'm holding that are profitable, so it helps smooth things out.
Quote from Rol:
I don't use stops with the strategy other than to keep a profit from turning into a loss. I know that is heresy to many, but in backtesting it hurt my performance drastically to use stops. Actually, I am buying when others are being stopped out.
Quote from Rol:
When my exit conditions are met, that is when I exit, whether it will be a profitable trade or not, which is another thing that is hard to do if you have too large of a position size. I know others use profit targets and such, but to me that is like trying to predict where the stock will be heading. I admit I don't know where it will be heading and don't even really care. The more disconnected I can become from the trade, the better. I thought if I could step out of the fear and greed battle, it would be all the better.
Hi, I just wanted to post an image of a trade from today to practice inserting images along with a message. I'll post more later of results for the week and answer questions.
1/31/11 - 2/4/11 Results
Here are the results for the week:
Total Net Profit $1,217.15
(Per Share) $0.39
Gross Profit $1,356.01
Gross Loss ($138.86)
Profit Factor 9.77
Total Number of Trades 33
Percent Profitable 69.70%
Winning Trades 23
Losing Trades 10
Avg. Trade Net Profit $36.88
Avg. Winning Trade $58.96
Avg. Losing Trade ($13.89)
Largest Winning Trade $158.08
Largest Losing Trade ($47.12)
Max. Consecutive Winning Trades 9
Max. Consecutive Losing Trades 4
Total Shares/Contracts Held 3094
Total Commission $76.36
Return on Initial Capital 2.43%
Annual Rate of Return 205.73%
Buy & Hold Return 0.87%
Trading Period 4 Dys, 6 Hrs, 28 Mins
Percent of Time in the Market 81.26%
Mark-To-Market Period Analysis:
Period Net Profit % Gain Profit Factor # Trades % Profitable
2/4/2011 $379.36 0.75% 100 8 100.00%
2/3/2011 $443.78 0.88% 4.79 16 75.00%
2/2/2011 ($264.47) -0.52% 0.14 13 30.77%
2/1/2011 $505.32 1.01% 9.51 10 70.00%
1/31/2011 $153.17 0.31% 6.28 13 61.54%
Mark-To-Market Rolling Period Analysis:
Period Net Profit % Gain Profit Factor # Trades % Profitable
2/4/2011 - 2/4/2011 $379.36 0.71% 100 8 100.00%
2/3/2011 - 2/4/2011 $823.13 1.56% 30.71 17 82.35%
2/2/2011 - 2/4/2011 $558.66 1.07% 4.13 20 65.00%
2/1/2011 - 2/4/2011 $1,063.99 2.08% 8.25 27 74.07%
1/31/2011 - 2/4/2011 $1,217.15 2.43% 9.77 33 69.70%
Kohanz, thanks for the interest. It helps keep me thinking about things and not get lazy. I am a Medical Technologist at a major medical center hospital. Working around automated analyzers in the laboratory helps me appreciate the role computers can play in strat automation. The instruments follow programming instructions to perform functions tirelessly. A lot of success in trading I believe is just about being at the right place at the right time, and a human just can't keep up. I mean what person would just sit there for weeks to months at a time with their finger on the buy button, hoping it doesn't turn out to be a "Fat" finger. 
I use the TradeStation platform and the limit is 1000 symbols in what is termed their RadarScreen. I don't trade off of charts, otherwise I would need a separate chart for each symbol. The RadarScreen is similar in function, it appears, to what others are doing with Excel.
Let me just say that if you trade futures or forex, don't use TradeStation. If you go to their forums, you will hear many complaints about bad tick data, bad fills, disconnects, and fees for futures data. I only trade stocks, and you don't pay for the platform if you trade at least 5000 shares per month. I have developed into my code the ability to handle disconnects and position mismatches, so that is no longer a big problem for me.
Depending on what the market is doing overall, the number of signals can vary from a few to hundreds. In my code it prints the symbol and time that a valid entry occured, and each night I compare the trades I took to how many I could have. This was an unexpected surprise during my strat development because it meant that the strat could adapt to changing market conditions without my interference. When markets are quiet I am more in cash, but when things start moving, I am slow to enter, but quick to get out.
My position size is an equal dollar amount per position. This is necessary for me to be able to calculate the maximum number of positions I can take. A lot of what I have been doing recently has to do with determining that sweet spot between position size and maximum number of positions to maximize net profit.
With regard to entries and exits, I always use limit orders for entry and market orders for exit. I use market orders for exits because when the strat says to go flat, I am willing to give up a few points to do so. There is a bit of slippage in backtesting because it assumes I buy at the bid and sell at the ask, when the opposite is usually true. I am not scalping so it really is not a big issue. If one is developing a daytrading strat with tight margins, I would suggest they assume they have to buy at the ask and sell at the bid to get a realistic perfomance report (unless they are a quant trader working next door to Wall Street). 
Quote from Rol:
Kohanz, thanks for the interest. It helps keep me thinking about things and not get lazy. I am a Medical Technologist at a major medical center hospital. Working around automated analyzers in the laboratory helps me appreciate the role computers can play in strat automation. The instruments follow programming instructions to perform functions tirelessly. A lot of success in trading I believe is just about being at the right place at the right time, and a human just can't keep up. I mean what person would just sit there for weeks to months at a time with their finger on the buy button, hoping it doesn't turn out to be a "Fat" finger.
Quote from Rol:
I use the TradeStation platform and the limit is 1000 symbols in what is termed their RadarScreen. I don't trade off of charts, otherwise I would need a separate chart for each symbol. The RadarScreen is similar in function, it appears, to what others are doing with Excel.
Quote from Rol:
I have developed into my code the ability to handle disconnects and position mismatches, so that is no longer a big problem for me.
Quote from Rol:
When markets are quiet I am more in cash, but when things start moving, I am slow to enter, but quick to get out.
Quote from Rol:
My position size is an equal dollar amount per position. This is necessary for me to be able to calculate the maximum number of positions I can take. A lot of what I have been doing recently has to do with determining that sweet spot between position size and maximum number of positions to maximize net profit.
Quote from Rol:
With regard to entries and exits, I always use limit orders for entry and market orders for exit. I use market orders for exits because when the strat says to go flat, I am willing to give up a few points to do so. There is a bit of slippage in backtesting because it assumes I buy at the bid and sell at the ask, when the opposite is usually true. I am not scalping so it really is not a big issue. If one is developing a daytrading strat with tight margins, I would suggest they assume they have to buy at the ask and sell at the bid to get a realistic perfomance report (unless they are a quant trader working next door to Wall Street).
Quote from Kohanz:
.
Well exited my position in CCME around the open for a $320 loss. At one point I was down $1900 so I consider this a gift.
Reversed a losing position in LPHI but this was not part of the strat. I saw support breaking down on it midday and when I pulled up the news, I saw that too may law firms were hounding it. I know I said I would go 100 percent strat, but things can get boring when you auto trade. These stocks had already broken the rules of a typical entry, so I felt the need to micromanage them. I avoided the temptation to backup the truck with them, which is definately a step forward.
Another nice thing about using a strat on a large number of positions at once is that when orders are firing off, you realize you shouldn't interfere with the system because it is screaming at you "Don't mess with me."
Even with a net loss on the day, my networth closed at new highs since starting this journal. Go figure.
Real-time Realized P/L (Today) ($600.90)
Entries: 6
Exits: 15
Placed a buy to cover on LPHI at the open. Not part of strat, but did help with damage control.
I don't plan to give play by plays of all the trades I make in this journal. There is already plenty of that here.. Besides, there are just too many trades. I don't give any one trade more importance than the other. The stocks in my portfolio are all equals to me, so no favorites. I am their Master.
I will, however, be providing equity curves regularly to see how my equity progresses. Also, today I was thinking it would be instructive to me as well as others if I showed side by side charts of my equity curve verses the E minis at the end of each month. What I want to see is how my system performs during the various market conditions that occurred during the month. This is something I have not payed attention to greatly. The backtesting seems to be good in downtrends, sideways trends, as well as uptrends. We shall see.
Entries: 7
Exits: 9
BuytoCover: 1
Real-time Realized P/L (2/8/11) $440.65
Re: Rol's Automated Trading Journal
Quote from Rol:
Hi all, I have been working on a mechanical trading system for about 4 years now and 4 months ago went live with it starting with $30,000. Some reasons for starting this thread are to chronical my performance, force me to go 100% auto and not interfere with the system. Also feedback, questions are welcome. I could go into the specifics of the strategies I use, but it probably wouldn't produce profit anway if not fully automated. Frankly, I'm not even sure what method to call what I do. Swing trading seems to imply holding times of several days to weeks, while mean reversion is considered intraday (correct me if I'm wrong). Some intraday charts look more like trend following. My average hold time is 2 days. My strat does not look at support or resistance levels, or moving averages, or volume other than to screen out low volume stocks. The couple of indicators I use are not used in the typical ways. It seems to come down to an edge I have discovered that backtests well or even better on out of sample data on a portfolio of about 1400 stocks (no futures, currencies, options, etc.). My theory was that if it worked on around 68% of the stocks out there, why not minimize individual stock exposure by diversifying into multiple symbols. I knew after backtesting on a portfolio of stocks, that automation was the only way to achieve this. Fortunately, just in the past year or so software, programming language and trade server connectivity has finally made it possible to go 100% black box, which is my ultimated goal. I wanted to be able to take the human element out of it completely,even including stock selection and the maximum number of stocks to hold. The results I have included are all the trades me or my system have made. I would say it is about 90-95% system. The discretionary trading dips on the equity curve are when I messed with the system. Starting today I plan to include weekly updates on the system performance and will begin a new equity curve with trading equity of $52000.
Re: Re: Rol's Automated Trading Journal
Quote from endsongs:
So, how did you backtest on a portfolio? Did you purchase an add-on?
Saw some nice action day today, with the system working beautifully. I was able to recover my losses from two days ago and then some. It is a process of taking 2 steps forward and 1 step back, which is what you would expect with 66% profitability.
This is how I will guage whether my system is comparing well to backtesting:
Quote from Rol:
This is how I will guage whether my system is comparing well to backtesting:
- 66% or greater profitable
- Profit factor > 2
- Average $ Profit of Winners > Average $ Profit of Losers
- Maximum system drawdown of 8%
If the sytem begins missing these numbers, then I need to reevaluate it.
Quote from Kohanz:
Good plan. I assume that as you move forward, older live results will become part of the "backtesting" you compare newer live results to?
Re: Re: Re: Rol's Automated Trading Journal
Quote from Rol:
Click here to find the answer
Re: Re: Re: Re: Rol's Automated Trading Journal
Quote from endsongs:
I'm referring to the Tradestation equity curve you posted. That only works for a single symbol unless you buy an add on, right?
Re: Re: Re: Re: Re: Rol's Automated Trading Journal
Quote from Rol:
That is not a backtested TradeStation equity curve, that is an actual realworld equity curve from trades in my brokerage account. This is why you don't see an instrument (i.e. Eminis) at the top. It is not an add-on feature of TradeStation, it is included as part of the TradeManager Analysis feature for actual trades.
First part of the week the strat experienced a sizable drawdown due to a couple of stocks, but made up for the losses and then some by friday. I know my strat will not work on every stock. In fact, I attempted to quantify the performance by performing a "pseudo back test" within TS. What I did was run a back test on stocks one by one, and then copied the results into Excel. What I found to occur repeatedly when looking at random samples of around 1000 symbols was a consistent PF averaging around 1.8 and that about 17% of the stocks had actually lost money over a 10 year period. Some came close to break even, but others actually lost a considerable amount.
One recent discovery happened while reviewing my performance over the past 4 months from within my tax accounting software. What I noticed was that on average, I experienced 3 down days (realized loss) a month; and if you divide 3 by 20 trading days a month, you get a 15% net $ loss. I'm not sure if it can be directly correlated, but makes sense if around 17% of the stocks you own are going to turn out to be net $ losers. This is a slightly different stat than looking at percent profitable because one is dollar based, and the other percent based. Maybe someone more knowledgeable with stats can comment.
Seeing all of this only serves to reinforce the notion that loading up on one stock is a bad idea. You never know where you might be hopping on a particular stocks equity curve. Individual equity curves are generally quite jagged looking, while a portfolio equity curve is much smoother, as has been noted by others in this thread.
The stats I intend to post each week will be cumulative since starting to collect stats on 1/31/11. Here they are so far 2 weeks running:
Total Net Profit $2,050.17
(Per Share) $0.22
Gross Profit $3,589.82
Gross Loss ($1,539.65)
Profit Factor 2.33
Total Number of Trades 92
Percent Profitable 73.91%
Winning Trades 68
Losing Trades 24
Avg. Trade Net Profit $22.28
Avg. Winning Trade $52.79
Avg. Losing Trade ($64.15)
Largest Winning Trade $169.54
Largest Losing Trade ($369.89)
Max. Consecutive Winning Trades 15
Max. Consecutive Losing Trades 4
Total Shares/Contracts Held 9409
Total Commission $224.77
Return on Initial Capital 4.10%
Annual Rate of Return 130.23%
Buy & Hold Return 0.16%
Trading Period 11 Dys, 6 Hrs, 28 Mins
Percent of Time in the Market 78.60%
It is sort of ironic, but to make your trading system more "hands off", you have to buy more stocks. Because if you have a large position size relative to net worth, you are always fearful of a massive drawdown, and will feel the need to monitor it closely and meddle with it. The drawdowns will eventually happen. It is like getting hit by an earthquake, tornado, or volcanic eruption. You know they will happen, but when and where is unpredictable. All you can do is to have a contingency plan in place.
Quote from Rol:
The stats I intend to post each week will be cumulative since starting to collect stats on 1/31/11. Here they are so far 2 weeks running:
Total Net Profit $2,050.17
(Per Share) $0.22
Gross Profit $3,589.82
Gross Loss ($1,539.65)
Profit Factor 2.33
Total Number of Trades 92
Percent Profitable 73.91%
Winning Trades 68
Losing Trades 24
Avg. Trade Net Profit $22.28
Avg. Winning Trade $52.79
Avg. Losing Trade ($64.15)
Largest Winning Trade $169.54
Largest Losing Trade ($369.89)
Max. Consecutive Winning Trades 15
Max. Consecutive Losing Trades 4
Total Shares/Contracts Held 9409
Total Commission $224.77
Return on Initial Capital 4.10%
Annual Rate of Return 130.23%
Buy & Hold Return 0.16%
Trading Period 11 Dys, 6 Hrs, 28 Mins
Percent of Time in the Market 78.60%
Quote from Rol:
It is sort of ironic, but to make your trading system more "hands off", you have to buy more stocks. Because if you have a large position size relative to net worth, you are always fearful of a massive drawdown, and will feel the need to monitor it closely and meddle with it. The drawdowns will eventually happen. It is like getting hit by an earthquake, tornado, or volcanic eruption. You know they will happen, but when and where is unpredictable. All you can do is to have a contingency plan in place.
Quote from DGunz:
Rol thanks for sharing, you have posted your 4 months equity curve but how about some stats regarding those 4 months other than equity, Perhaps you could post a recap like above, but started from 4 months ago.
Quote from DGunz:
I would say that in another few month you should probably take your equity to a prop firm to leverage it up so that you can maximize your trades. If I understand correctly, you have rules in place to adjust position size because of limited buying power?
Quote from DGunz:
Do you ever skip signals because of a buying power limitation? Since I started trading grey box equity strategies, I always traded the maximum signals the system could generate, with out worrying about margin calls.
Quote from DGunz:
I trade around 150 names a day and all with the same 100 share lot, sometimes a 200 share lot when the signal is strong. I would rather have 100 positions worth 1k each than 1, 100k position.
What is even more ironic is, the more positions I have on, the safer I feel. There are plenty of times I have one horrible position, but my net portfolio is all working like its supposed to and is enough for me to completely negate that poor performer. I love those days, it shows my system is working.
Quote from Rol:
Many thanks for saying that. Now I know I am not delusional for thinking of trading this way
What one must take into account is the cost of a round trip relative to position size. A $15-$20 round trip with a retail brokerage boutique isn't going to cut it. TS round trips are $2 on 100 shares, which has been manageable thus far.
I spent the weekend at the Interactive Brokers site and reading their pdf on using an Excel DDE to link with Trader Workstation (TWS). I plan to begin a new project of coding up my rules in Excel VB and using the IB's api to connect to the markets. I have dabbled in VB and macros off and on, but never tried learning it in an organized fashion. This will take a long time, but should go faster after having already learned to code using TS easylanguage. Also, IB offers portfolio margin, which TS does not, and the commissions should be better once equity is built up and things start ramping up.
Tradestation is ok, but the platform has gotten so big and does way more than I need. In the past, it always seemed to lock up at the worst possible times, like when market volatility and volume spiked. I really just use it for RadarScreen and Scanner. If I can get Excel to manage about 1400 symbols, I won’t even need to perform scans anymore. My strat will just monitor all the stocks in real-time. I also like the idea of a more general app like Excel as opposed to the proprietary one that TS offers. I suspect more and more brokerages will be including api’s to link to their accounts in the future.
Pretty average day trading today.
Real-time Realized P/L (2/14/11) $321.38
Entries: 7
Exits: 8
Excel 2007 Power Programming by Walkenback & Mr.Excel forums...all you ever need. The help you get there is amazing. Stuff I would pay for is literally free.
My universe is currently 1000 names, and all that is DDE links and VBA scripts, then sent direct to the platform. If you have a near top of the line computer like I do, it can handle that many with out a problem. I am not sure about 1400, as I havent tried. I have a AMD Phemon 6 core 1090 with 8 gigs. So I suppose if you have a better computer it should be able to handle your whole universe with out any problems.
Realized good steady gains for the week, but the strat took losses on about 4 stocks today (friday), which were underperforming. While it always hurts to take significant losses (-593.33 today), overall the numbers still look good. Profit Factor >2, and % profitable > 66%. Avg. Winning Trade < Avg. Losing Trade, but this is due to larger losses on a relatively smaller # of stocks. I hope to maintain an APR of > 100%, but I don't have a fixed #, because I expect that # to be variable. It is interesting that the Buy & Hold return is only 0.05%. This number represents the % return of holding all the stocks for the entire trading period as a comparison to the strategy return. It feels good parting with the losers anyway, because now I can reload for next week. My "edge" did not materialize with them and by holding them outside the strat rules, I would be putting myself in "no man's land".
I think I will narrow my list of stocks down to 1000 and increase my position size slightly to make up for the fewer signals I may get. I will put the 1000 symbols in the RadarScreen and let the strategy go to work. This way I won't need to perform nightly scans, and will just monitor the 1000 symbols in real-time. This will make everything even more hands off.
Total Net Profit $2,936.22
(Per Share) $0.19
Gross Profit $5,486.55
Gross Loss ($2,550.32)
Profit Factor 2.15
Total Number of Trades 134
Percent Profitable 74.63%
Winning Trades 100
Losing Trades 34
Avg. Trade Net Profit $21.91
Avg. Winning Trade $54.87
Avg. Losing Trade ($75.01)
Largest Winning Trade $199.96
Largest Losing Trade ($369.89)
Max. Consecutive Winning Trades 15
Max. Consecutive Losing Trades 4
Total Shares/Contracts Held 15260
Total Commission $351.38
Return on Initial Capital 5.87%
Annual Rate of Return 114.08%
Buy & Hold Return 0.05%
Trading Period 18 Dys, 6 Hrs, 28 Mins
Percent of Time in the Market 78.78%
" My strat does not look at support or resistance levels, or moving averages, or volume other than to screen out low volume stocks. The couple of indicators I use are not used in the typical ways. It seems to come down to an edge I have discovered that backtests well or even better on out of sample data on a portfolio of about 1400 stocks (no futures, currencies, options, etc.). My theory was that if it worked on around 68% of the stocks out there, why not minimize individual stock exposure by diversifying into multiple symbols. "
I have been following your post with great interest. My compliments on a great equity curve.
Is symbol selection based on just price action?
Can you recommend a favorite book that you found most helpful in developing your trading expertise.
Thanks
Quote from Camdo:
" I have been following your post with great interest. My compliments on a great equity curve.
Is symbol selection based on just price action?
Can you recommend a favorite book that you found most helpful in developing your trading expertise?
Thanks
Most of what I have learned has been on my own, by observing price changes on daily charts. I didn’t even know what swing trading or rtm trading was in my early years of trading. I think “buying the dips” best describes what I do. I would suggest to someone in order to get a feel for this type of setup is to identify days when a stock price rose significantly and then look at what the price was doing the few days before that, and seeing if any patterns emerge. Do this for a stock over a 10 year period, and then do this for 9999 more stocks, and it will become ingrained in your subconscious as to what a good setup looks like. Come up with indicators, optimizing various parameters through back testing, which will alert you to these setups. And then automate the strategy.
Quote from Rol:
Let me just say that if you trade futures or forex, don't use TradeStation.
Quote from benwm:
Have you used any other platforms other than Tradestation? Specifically for futures autotrading, do you have any advice?
I like the journal, by the way. Thanks for sharing.
Is this a long-only strategy? Sorry I wasn't so clear on that from your posts. For example, if the market tanked 20% would you be getting net short along the way? Or would you just get less entries and expect to make less money than normal?
Out of interest, how did the strategy backtest during the May 2010 flash crash, or even during 2008-Spring 2009 bottom?
I agree with the others that this is a really high quality journal. I don't trade stocks but the thought process is really impressive.
Were you influenced by any of the other posters or threads on ET?
Quote from benwm:
Is this a long-only strategy? Sorry I wasn't so clear on that from your posts. For example, if the market tanked 20% would you be getting net short along the way? Or would you just get less entries and expect to make less money than normal?
Quote from benwm:
Out of interest, how did the strategy backtest during the May 2010 flash crash, or even during 2008-Spring 2009 bottom?
Quote from benwm:
Were you influenced by any of the other posters or threads on ET?
Here are the numbers for the same time period. Note the consistent approximately 68% profitable.
This is the month before and after the May 6,2010 flash crash.
This is the Profit Distribution of all trades from the May 08 highs, to the March 06, 2009 low. Note that the bread & butter of profits are in the 1-5% range, with +- outliers basically cancelling each other out.
very nice
props to you for putting in the work
now time to get rewarded
cheers,
Totantaz
How did the strategy do yesterday and today?
Quote from Rol:
I spent the weekend at the Interactive Brokers site and reading their pdf on using an Excel DDE to link with Trader Workstation (TWS). I plan to begin a new project of coding up my rules in Excel VB and using the IB's api to connect to the markets. I have dabbled in VB and macros off and on, but never tried learning it in an organized fashion. This will take a long time, but should go faster after having already learned to code using TS easylanguage. Also, IB offers portfolio margin, which TS does not, and the commissions should be better once equity is built up and things start ramping up.
Tradestation is ok, but the platform has gotten so big and does way more than I need. In the past, it always seemed to lock up at the worst possible times, like when market volatility and volume spiked. I really just use it for RadarScreen and Scanner. If I can get Excel to manage about 1400 symbols, I won’t even need to perform scans anymore. My strat will just monitor all the stocks in real-time. I also like the idea of a more general app like Excel as opposed to the proprietary one that TS offers. I suspect more and more brokerages will be including api’s to link to their accounts in the future.
Pretty average day trading today.
Real-time Realized P/L (2/14/11) $321.38
Entries: 7
Exits: 8
Very impressive Rol. This is certainly a strategy that all of us would want in our portfolio. I'm sure I'm not alone in hoping that you divulge more of your secrets...
Obviously you will get some heat in a bear market but it seems like you're managing to stay out of trouble even when the general indices are falling.
Of course you always need to be aware that the past may be different from the future, but what you have done is buy yourself time to find some new strategies. I think the ideal setup for all of us is to have 3-5 different strategies, each with an edge and not too correlated with each other, so that even if performance if one of them tails off, you have others in the toolbox that will compensate.
I had a feeling that lescor's journal might be of interest to you, so I'm not surprised that you've read it. You beat me to it, I was going to mention it.
Looking back at the chart I see there is a 40% drawdown around fall of 2008. That is about the worst case scenario I would guess, as this was not even a typical bear market, it was brutal. Infact, a drawdown of this magnitude is quite common in trend following systems (I know yours is not trend following), and the key to long term success is managing risk and emotions.
Not to be a kiljoy but the last eighteen months have not been normal, in the sense that Bernanke's QE and global easing have created a one way ''steam train'' bull market. I think you are right not to worry about market direction on a day to day basis, otherwise it will be hard to follow the system, but that doesn't make it easy to withstand a 40% drawdown when it comes.
IF you do get a drawdown of a similar magnitude in the next year or so, do not throw this system away! Keep a cool head, and realize that very few systems work in every market environment.
It seems clear to me that there is a significant positive edge with this strategy. Don't get complacent, keep working hard to find edges with other strategies, and you may even stick around in this business...
Bottom line, well done.
Thanks for the input benwm. I think this journal will help me stick it out thru the difficulties. Today I experienced a 10% intraday drawdown. I knew I was pushing the envelope with the number of open positions I was allowing. I will scale that down a bit. The market action the past couple days has been a good stress test of my system. I know my equity will not just go up in a strait line. It will experience periods of doing great, good, not so good, and horrible. When my equity gets higher, I will likely deploy it into additional strategies.
I think a Holy Grail system is not one that is 100% correct all the time. Then it would become too obvious to the masses, and stop working. A Holy Grail system should have a definite statistical edge, but when looked at casually by an observer, should not appear able to work. Moreover, it is an even better system if the average person still cannot make it work in spite of knowing the rules.
Quote from Rol:
I think a Holy Grail system is not one that is 100% correct all the time. Then it would become too obvious to the masses, and stop working. A Holy Grail system should have a definite statistical edge, but when looked at casually by an observer, should not appear able to work. Moreover, it is an even better system if the average person still cannot make it work in spite of knowing the rules.
Quote from DGunz:
DDE links is old technology and it is slow. I have since updated to use XLQ, which is a third party excel add-in..
Quote from benwm:
DGunz
Please could you tell us more about your setup and XLQ? I had never heard of XLQ before.
How much faster is it compared to DDE and is it easy to use? Do you use any backtesting or autotrading software in conjunction with Excel?
Thank you in advance.
How did this long-only system do the last three days? Asking cause I'd like to compare it to my long and short system, which I've been running live almost 6 months now.
I managed to end the day with a realized profit of $428.23, while also reducing my open number of positions to a more comfortable level. February will be a shortened trading month, having fewer days and a couple trading holidays, but I am still shooting to complete the month with a net gain. My strat appears to do better when the market actually has a net gain/loss of 0. I think this is what is referred to as churning. This is why I like it for the long term, because I don’t have to try and predict longer term trends. I should probably come up with a strat that performs well in trending markets as an uncorrelated strat. I have noticed that with my current strat that when it has performed poorly, it is usually preceded and followed by periods where it was doing well, and I expect that to continue.
Quote from endsongs:
How did this long-only system do the last three days? Asking cause I'd like to compare it to my long and short system, which I've been running live almost 6 months now.
Quote from Rol:
I should probably come up with a strat that performs well in trending markets as an uncorrelated strat
Quote from Rol:
The equity curve only reveals realized profit/losses.
Quote from Rol:
To be honest, it is doing poorly. If you were to mark-to-market the losses the strat experiences occasionally, one would probably not want to trade this system. But I believe that is where the “secret” lies to its success. The equity curve only reveals realized profit/losses. This goes along with the idea of not giving up, if you are confident in your edge. Days like the last three are the exception and not the rule to general overall market behavior. I accept this risk as a part of the overall strategy. As poorly as the strat may perform at times, I can be confident that I would be doing worse if I were trading discretionary, or a long-term buy and holder.
Quote from heech:
Woah, *really*? That's a very significant disclosure. You should make that clear any time you post your equity curve.
For what its worth, I disagree on this point, and would never use it for my own purposes. Your positions are worth what the market says they're worth, period.
I'm not exactly sure as to the purpose behind the thread, so I'm not one to make demands. But if your goal is to inform and elicit discussion, in the spirit of transparency, can you repost your hypothetical equity curve on a "marked to market" basis?
Quote from heech:
I'm not exactly sure as to the purpose behind the thread, so I'm not one to make demands. But if your goal is to inform and elicit discussion, in the spirit of transparency, can you repost your hypothetical equity curve on a "marked to market" basis?
Here is a decent trade for the day (marked-to-market).
Quote from Rol:
If you have read this journal, you would know that my "purpose" is to try to match the back testing results in real world trading. If you want to nit pick over individual trades then perhaps you are missing the purpose. I am as incredulous as anyone that the system can achieve the back testing results, which is why I chose to document this experiment. I have not yet been able to prove that it does not make money. Take it anyway you want.
Heech,
You bring out a good point, for the sake of having accurate stats and charts to evaluate a model, 3 days average hold time for not recording unrealized loss/profit wont materially change all stats that he has recorded of the past year.
I agree that m2m on the stats would be a better gauge, the longer the hold time for unrealized losses the more unrepresentative the equity curve. However if the average loss hold days was 1 day flat.... then I would say that the curve is still highly representive because the losses are shortly recorded.
Rol, if either presentation doesnt matter to you, then why not try and put out m2m results. It wont change your stats you recorded on a closed basis anyway and it may help you see something you didnt see before.
Quote from heech:
You have to understand if the equity curve is purely showing "realized results", I'm not at all incredulous as to its shape.
There's another very hot thread on this site right now, the martingale discussion. If you were to look at the equity curve (both hypothetical and real) for a martingale on a "realized" basis, it would be far more impressive than what you've generated. This is precisely why marked to market numbers are very important.
In any case... its your show, and as I said, I'm not making any demands. I subscribed to this thread because I thought the results were exciting. But they simply aren't exciting if they're not marked to market.
EDIT: Thread to Martingale discussion:
http://www.elitetrader.com/vb/showt...threadid=215965
Quote from DGunz:
I agree that m2m on the stats would be a better gauge, the longer the hold time for unrealized losses the more unrepresentative the equity curve. However if the average loss hold days was 1 day flat.... then I would say that the curve is still highly representive because the losses are shortly recorded.
a daily chart would make more sense to look at. for example, when did ~#800 trade drawdown occur? i have no idea, it does not relate to me in any way. if i knew that it happened in december, it would make more interesting for me to think about the market at that time, etc.
Rol,
Whats your average hold for a unrealized loss? As long as the amount of days isnt something like 4 months, it is probably likely that the shape of the curve is basically intact.
Is it easy for you to show m2m, if it is, perhaps you could just leave it that way. Personally I am partial to knowing the m2m rather than closed, but its your journal.
Quote from heech:
But if these prices are cherry-picked... winning stocks are priced at market prices when they're profitable, losing stocks aren't priced unless they're profitable... then what conclusions could we possibly draw from the fictional graph that results?
Total Net Profit $1,695.17
(Per Share) $0.06
Gross Profit $7,720.92
Gross Loss ($6,025.75)
Profit Factor 1.28
Total Number of Trades 219
Percent Profitable 64.38%
Winning Trades 141
Losing Trades 78
Avg. Trade Net Profit $7.74
Avg. Winning Trade $54.76
Avg. Losing Trade ($77.25)
Largest Winning Trade $232.51
Largest Losing Trade ($369.89)
Max. Consecutive Winning Trades 26
Max. Consecutive Losing Trades 15
Total Shares/Contracts Held 28502
Total Commission $533.40
Return on Initial Capital 3.26%
Annual Rate of Return 41.85%
Buy & Hold Return -0.61%
Trading Period 28 Dys
Percent of Time in the Market 60.66%
Well it was not an easy week, mostly spent just trying to get back to b/e. I view this as a consolidation period for my equity curve. Profits should take off again eventually. When I look at the curve, I can almost see areas of support and resistance, as if it were a stock trading. Naturally, the 10% intraday DD was pushing my comfort zone, so I have scaled back on the max number of open positions to keep it closer to my goal of 8% max DD. While even 8% may sound like a lot, I might never trade at all if I constantly worry about a black swan event. I just need to be able to hunker down in my foxhole, waiting for the dust to settle, and come out fighting another day. It would not be an account blow up, but rather just pulling back to a previous "support level" on my equity curve. Even so, it is better than buy and hold, IMHO.
The PF is less than my goal of 2 since starting 1-31-10, but I expect it to average back up longer term. PP is still close to my goal of 66%. Buy and Hold return for the period is negative, so even mark-to-market, my strat is beating buy and hold. I also think I will still meet my goal of not having a negative month.
Quote from DGunz:
Heech,
You bring out a good point, for the sake of having accurate stats and charts to evaluate a model, 3 days average hold time for not recording unrealized loss/profit wont materially change all stats that he has recorded of the past year.
I agree that m2m on the stats would be a better gauge, the longer the hold time for unrealized losses the more unrepresentative the equity curve. However if the average loss hold days was 1 day flat.... then I would say that the curve is still highly representive because the losses are shortly recorded.
Rol, if either presentation doesnt matter to you, then why not try and put out m2m results. It wont change your stats you recorded on a closed basis anyway and it may help you see something you didnt see before.
. It will show better the "sweat" one has to endure, but I think I have already been discussing that from the beginning. Now even more with this journal, you will see the good, the bad, and the ugly. Disclaimer - Read at your own risk
Quote from DGunz:
Rol,
Whats your average hold for a unrealized loss? As long as the amount of days isnt something like 4 months, it is probably likely that the shape of the curve is basically intact.
Is it easy for you to show m2m, if it is, perhaps you could just leave it that way. Personally I am partial to knowing the m2m rather than closed, but its your journal.
Here is a MTM period analysis (Daily) since starting this journal. Today was actually the biggest $ gain for the month. I think I am going to like this MTM thing.
Here is a side by side comparison of MTM charts and Realized PL for the same time period. I realized I didn't have the box checked earlier "Consider open positions closed, as of the date/time the report was generated." The draw downs are a little more pronounced with MTM, which is what I knew anyway, but it is instructive to see them side by side.
I have decided to change the way in which I will be displaying my equity curves. Before, I was displaying an equity curve line for all closing trades made. Due to demand, I will now be displaying a composed equity curve at the close, which includes mtm for open trades. These charts are cleaner looking anyway, and provide a better picture of the run-ups and draw downs incurred. At the end of the day, all that really matters is where your equity is.
In addition, I will consider 1-1-11 as my starting point instead of 1-31-11, to be able to look at progress on an annual basis. Here is an equity curve starting 1-1-11:
And here is an equity curve starting 12-1-10:
And here is an equity curve starting 11-1-10:
Rol,
It was never my intention to brow-beat you into making the change... in any case, am glad you made the change, and I do think this is the right move. Using calendar dates and M2M makes this much more understandable.
Just 2 more cents, I'll always be more accustomed to seeing an "equity curve" in % terms, or VAMI (adjusted index with 1000 = starting equity).
Quote from heech:
Rol,
It was never my intention to brow-beat you into making the change... in any case, am glad you made the change, and I do think this is the right move. Using calendar dates and M2M makes this much more understandable.
Just 2 more cents, I'll always be more accustomed to seeing an "equity curve" in % terms, or VAMI (adjusted index with 1000 = starting equity).
. The opposite is lunacy. I don't think TS does VAMI charts. I think with an accurate starting equity, one can know how much they had to work with when looking at returns on initial capital, and annual rates of return.
How's it been the last couple of days Rol?
Quote from benwm:
How's it been the last couple of days Rol?
Rol,
Good to see things are still going well! You mentioned earlier in this thread your general method of coming up with this strat was to look through the historical data for when a stock had a large daily uptick, then look at the daily bars prior to that and see if you can observe a quantifiable pattern and then to automate that.
I'm curious if you took news into account in your strat development to exclude bumps that occurred due to news. I'd love to hear why or why not you included or excluded that data.
Thanks!
Quote from Kohanz:
Rol,
Good to see things are still going well! You mentioned earlier in this thread your general method of coming up with this strat was to look through the historical data for when a stock had a large daily uptick, then look at the daily bars prior to that and see if you can observe a quantifiable pattern and then to automate that.
I'm curious if you took news into account in your strat development to exclude bumps that occurred due to news. I'd love to hear why or why not you included or excluded that data.
Thanks!
I was stopped out on 4 losers around the open, that the strat exited about a week ago. It did not help with reducing losses much to keep holding them beyond the strat exit. I need to remind myself that tying up cash in losers means missed opportunities in higher probability setups. Currently, I have the largest cash position I have had in a long while, holding only 4 positions.
The profit factor is not good to me. When I was back testing single stocks and then averaging the profit factors, I noticed that it often started out around 1.5 or less until the collection of more data. Then it reverted more towards 1.75 after 100's of stocks were included, thus smoothing things out over time. I actually look at my strat as a conservative investment style that just happens to have an extremely high turnover rate. The profits are not something I could live off until I had a mil or so. The nice thing is that I anticipate my strat is scalable into the millions.
Year to date, I am beating the SP500. I am up 6.72% ytd M2M, while the SP is up 5.35%. It is not much, but it is better than underperforming.
Total Net Profit $3,362.11
(Per Share) $0.06
Gross Profit $14,757.76
Gross Loss ($11,395.65)
Profit Factor 1.3
Total Number of Trades 504
Percent Profitable 60.52%
Winning Trades 305
Losing Trades 199
Avg. Trade Net Profit $6.67
Avg. Winning Trade $48.39
Avg. Losing Trade ($57.26)
Largest Winning Trade $400.56
Largest Losing Trade ($478.54)
Max. Consecutive Winning Trades 15
Max. Consecutive Losing Trades 25
Total Shares/Contracts Held 52911
Total Commission $1,216.86
Return on Initial Capital 6.72%
Annual Rate of Return 39.44%
Buy & Hold Return -0.91%
Return Retracement Ratio 5.08
Trading Period 1 Mth, 29 Dys, 6 Hrs, 27 Mins
Percent of Time in the Market 58.46%
Max. Equity Run-up(Daily) $5,834.49
Date of Max. Equity Run-up 2/18/2011 15:00
Max. Drawdown(Daily)
Value ($5,037.32)
Date 2/23/2011 15:00
Max. Trade Drawdown ($1,448.32)
I picked up a nice indicator from the TS forums that displays earnings dates for stocks. I have it displaying the stocks I currently track. Ciena Corp is reporting before the markets open Monday. If it disappoints investors, I may look to short it, as it is currently overbought looking. STRI is reporting next Thursday. I sold the stock last Thursday. The chart illustrates what I meant when I said I used stops to prevent a winner from turning into a loser. However, if possible, I like to let my winners run to the close as buyers step in and shorts begin to cover.
I may try to create a short strategy by pulling the earnings release date into the code, and then saying something like if the open is less than the low of one bar ago then sell short…
I got into trouble at the open when a message box popped up on my TS platform that said “odd lots not allowed with this security.” Once I acknowledged the message, all the orders that had been queued executed. I then found myself with over twice the number of positions I was allowed to have and exceeding my overnight buying power! I have not figured out which security it was that caused this yet. Throughout the remainder of the day, I was able to exit enough positions for a net gain to get my overnight buying power to $494. I will remember to turn off order entry macros in the future before acknowledging message boxes. I am now (for better or for worse) positioned to the gills for an up day tomorrow.
Entries today: 37
Exits today: 11
Realized P/L (3/10/2011) $236.22
Able to see gains by buying the dips in oil related and metal stocks recently:
Total Net Profit $4,507.33
(Per Share) $0.07
Gross Profit $18,077.38
Gross Loss ($13,570.05)
Profit Factor 1.33
Total Number of Trades 587
Percent Profitable 60.65%
Winning Trades 356
Losing Trades 231
Avg. Trade Net Profit $7.68
Avg. Winning Trade $50.78
Avg. Losing Trade ($58.74)
Largest Winning Trade $412.37
Largest Losing Trade ($478.54)
Max. Consecutive Winning Trades 15
Max. Consecutive Losing Trades 25
Total Shares/Contracts Held 62714
Total Commission $1,432.87
Return on Initial Capital 9.01%
Annual Rate of Return 44.25%
Buy & Hold Return -1.05%
Return Retracement Ratio 3.53
Trading Period 2 Mths, 10 Dys, 5 Hrs, 50 Mins
Percent of Time in the Market 58.25%
Max. Equity Run-up(Daily) $5,551.25
Date of Max. Equity Run-up 2/18/2011 15:00
Max. Drawdown(Daily)
Value ($3,831.77)
Date 2/23/2011 15:00
Max. Trade Drawdown ($1,448.32)
Performance YTD 9.01%
SP500 4.06%
Experienced a nice day today, buying the open, and riding it higher. I am still about $1000 away from my 2/18 equity high, but the trend appears upward. Would like to see a higher PF and % profitable though. I had to move the start date to 12/30/2010, because of an open trade around the New Year that TS was miscalculating, causing me to realize a greater profit than I actually had.
I guess my system is working so far because I am not shaken out of my positions. Just when my trades seem most hopeless, is when they often turn around.
Here are the daily returns for the past 28 trading days. The days with zeros are weekends or holidays. You can see that big down days are generally followed by big up days, which is why it is important to stay with the trade, until an exit signal is given.
Stops can be useful at times:
It is good to have exit rules in place ahead of time:
Hi Rol,
Your system looks to me like some kind of mean reversal system and the result is simply great. However, I have two concerns,
First, you seems to use 2x overnight buying power, can you handle some kind of black swan event which may be much worse than 9-11 and the market simply gapped down 30%. Do you have enough time to adjust your position to meet the margin?
Second, Is your system scalable? Suppose you have one million equity, do you have enough signals which you can enter? You may have some liquidity issues at some point.
Quote from zouy2000:
Hi Rol,
Your system looks to me like some kind of mean reversal system and the result is simply great. However, I have two concerns,
First, you seem to use 2x overnight buying power, can you handle some kind of black swan event which may be much worse than 9-11 and the market simply gapped down 30%. Do you have enough time to adjust your position to meet the margin?
Hi zouy2000,
A black swan event is obviously a concern, if not the biggest concern of a RTM strategy. Warren Buffett has a famous quote that goes: “Buy when there is blood in the streets.” Baron Rothschild’s was also quoted, “Buy when there’s blood in the streets, even if the blood is your own.” They made a fortune having the guts to invest when others were afraid to. If you are looking for a contrarian opportunity, research shows that the most rewarding investments are made when the entire market is in the tank as it was right after the crash in 1987 and right after 9/11. The Who’s Who list of millionaire/billionaires that have brought home plenty of bacon thanks to their investing acumen when most investors were cowering include the familiar, such as Warren Buffett, Benjamin Graham, Peter Lynch, Sir John Templeton and Martin Zweig.
While my style is not "investing", I believe it is just a matter of time horizon. My period is days, while with an investor it may be years. Nonetheless, the market patterns are quite similar between the two. I have a spreadsheet in Excel to perform various "worse case" scenarios to see the effects on buying power during extreme market drawdowns. I place limits on the maximum number of positions I can hold, so I won't get margin calls. Ideally, you want to have maximum market exposure at the bottom.
A gap down is actually superior to a slow bleed down, where you may be trying to scale-in slowly. I would prefer that the markets tank 30%. Individual stocks are having flash crashes and black swan events all the time. You cannot predict when they will occur, but you can predict what you will do after they have occurred.
Second, Is your system scalable? Suppose you have one million equity, do you have enough signals which you can enter? You may have some liquidity issues at some point.
Here are the number of buy signals I received recently just following slightly fewer than 1000 names:
I played around with Excel charts this weekend and came up with this plot of my annual return compared to the SP500. I will post these on a monthly basis, to track my performance. It is M2M, being based on my real-time account net worth. 2/18 was the recent market top, and I took some heat for being a bit over-leveraged. However, it just pulled back to being a bit below break even on the SP. On the close 3/3 and open 3/4 my system had moved mostly to cash, enabling me to take advantage of the 3/10 and 3/11 lows, by buying dips in some oil related names, metals, and semis. This is why there is a divergence at the close on 3/11. I have currently positioned myself with moderate market exposure to take advantage regardless of which way it heads, meaning if it goes up I sell, and if it goes down I buy.
Just out of curiosity, I entered data into my chart going back to 11-15-2010. For the most part, it mirrors the SP, but showing more volatility. 2X leverage and being in individual equities likely accounts for this explosive nature.
I do not recall my system placing so many buys and sells concurrently, but that is what was happening today. A position would stop out for a small gain, opening a slot for a new entry in another position. The exits today netted me $181.68 on the day and my account net worth is at a new high for the year. However, given that the Dow futs are down 250 right now, I do not believe that will hold. I have decided to loosen my entry criteria for the time being within the strat since it seems the markets have changed since the mid February highes.
Sell 3/14/2011 14:59
Buy 3/14/2011 11:39
Sell 3/14/2011 10:36
Buy 3/14/2011 10:11
Buy 3/14/2011 10:10
Sell 3/14/2011 10:08
Buy 3/14/2011 9:58
Sell 3/14/2011 9:35
Buy 3/14/2011 9:34
Buy 3/14/2011 9:33
Buy 3/14/2011 9:32
Sell 3/14/2011 9:32
Sell 3/14/2011 9:18
Sell 3/14/2011 9:06
Sell 3/14/2011 8:43
Buy 3/14/2011 8:41
Buy 3/14/2011 8:34
Buy 3/14/2011 8:34
Buy 3/14/2011 8:32
Buy 3/14/2011 8:32
Sell 3/14/2011 8:32
Buy 3/14/2011 8:32
Buy 3/14/2011 8:32
Sell 3/14/2011 8:31
Buy 3/14/2011 8:31
Buy 3/14/2011 8:31
Buy 3/14/2011 8:31
Buy 3/14/2011 8:31
Quote from heech:
You have to understand if the equity curve is purely showing "realized results", I'm not at all incredulous as to its shape.
There's another very hot thread on this site right now, the martingale discussion. If you were to look at the equity curve (both hypothetical and real) for a martingale on a "realized" basis, it would be far more impressive than what you've generated. This is precisely why marked to market numbers are very important.
In any case... its your show, and as I said, I'm not making any demands. I subscribed to this thread because I thought the results were exciting. But they simply aren't exciting if they're not marked to market.
EDIT: Thread to Martingale discussion:
http://www.elitetrader.com/vb/showt...threadid=215965
Quote from Rol:
[/B]
How has your pure paper trading compared to your live? In your live account you have to adjust to match your bp as well as ignore some signals because you can’t take them all. But the paper trading doesn’t have to do this.
Hi DGunz,
Many thanks for the thought provoking questions you provide! I haven’t compared the back testing for a couple weeks now. I will do that when I get home from work tonight. Amibroker actually does ignore signals when it has reached its BP limit. You can code margin BP limits into the portfolio strategy. That is actually a big advantage that Amibroker has, to make it more realistic. That being said, I will never be able to match it exactly because my real life code in TS does not match the Amibroker code exactly. When my TS strategy gets stopped out to prevent a decent gain from turning into a loss, Amibroker does not do this. One reason for this is that Amibroker is not looking at intraday data, and another is that I haven’t figured out how to code it. It has been more of an observation I have made over historical data that it should help in preventing bigger draw downs, although it may hurt my overall longer term performance. I would prefer a smoother equity curve, even at the sacrifice of some hypothetical long term profits. As I have said before, there is no shortage of signals, so it may actually improve long term results.
I have given up on trying to match Amibroker results exactly. I am content that if I am doing well when it is doing well, and doing poorly when it is doing poorly, then that is enough for me. It actually takes more risk than I am comfortable with right now, because I have it maxing out margin buying power.
My strat is not the product of curve fitting over a short time frame. I have tested in 100’s of time frames and it has always held up relatively well. The strat is based on genuine behavior I witness over and over again in the markets.
Also your return is using 2x, so would it be more accurate if you doubled your spx returns for an accurate comparison? Hence YTD you have marginally outperformed spx.
I don’t use margin all the time. In fact I would say I spend less time using margin than I do using it. Maybe a 1.5X or less comparison might be fair. I mainly want to see if my strat is able to avoid big drawdowns which would cause me to underperform the spx . I view margin usage as my “trump card” during trading. You only pull it out when you need it.
But your paper trade results from may to may last year is impressive. You should track your live vs paper, and see where and why it diverges. Because it doesn’t seem there is huge alpha considering the 2x overnight.
I need to study up tonight on what alpha, beta, theta, etc. means I have seen these terms used a lot in these forums. I am happy to say that my Account Net Worth is only down $173 from yesterday’s high for the year, even after today’s nearly 300 pt drop in the Dow, if that is what low alpha means.
Quote from Rol:
I am happy to say that my Account Net Worth is only down $173 from yesterday’s high for the year, even after today’s nearly 300 pt drop in the Dow, if that is what low alpha means.
Quote from DGunz:
You are saying that your long only strat basically didnt flinch at all m2m from yesterday to today? $173 is nothing the market is down about 1% and your strat only lost $173 m2m? That is incredible, if I think I know what you are saying.
.
Here is an open long position showing a stop placed at around 11:15am by the strat that nearly got hit today.
This is my crude attempt to compare the paper trading to real time portfolio results. The peaks and troughs line up roughly, but I seem to have bigger drawdowns. In addition, paper trading made about $1000 more. I know some of this is due to slippage, and not completely following my exits. I still have this sneaking suspicion that Amibroker is cherry picking stocks somehow. The only way to trade the exact same symbols would be to reduce the number of stocks I follow to a number that never exceeded my allowable number of positions. Then, to get enough market exposure, I would have to increase my position size perhaps 5 to 10 fold. I am afraid, however, that this could work really well or really bad. This has been an ongoing dilemma for me for several years when trying to match the back testing results. As I have said, it uses 2X buying power to go all in, which I do not. This just seems too risky to me. I'm not sure if Amibroker is programmed to know if it were to get a margin call… I doubt it. I think it is just a fact that for whatever the reasons, paper trading and back testing results always are better than real life trading.
I ended the day at new m2m equity highs for the year, although today my net realized P/L was (-$30). I had banked some coin earlier in the week on the gaps down, and today closed out some losers along with several winners to basically b/e. This is often the way it plays out. I will realize gains regularly, all the while hanging on to losers. I will think, if I can just get the losers to b/e, I’ll be doing pretty good. On a day like today, about the only purpose the winners played was to cancel the draw downs of the losers (2 steps forward, 1 step back).
The confidence in my system has gone up seeing how in spite of the downturn in the markets, my strat has continued to perform well. I think this is partly due to the fact that during strat development, I would look at all the time frames when it was most underperforming and then trying to optimize performance over those time frames. I consider focusing on minimizing the damage of the losers to be most important. The winners will take care of themselves.
I have heard that it is difficult to have a strategy for all market conditions, but that is what I have set out to accomplish. It just seems that trying to determine the market environment you are in or will be in tomorrow, and then using selected automated strategies, has a great discretionary element to it.
I was able to remain calm during the big down days recently. I was actually excited, because I saw these as buying opportunities. I am less comfortable trading when the markets are on extended runs of several months, because I know the big profit taking selloff is coming. My strat is able to execute with ice cold emotionless precision, which is something I could never do. There is no, “If I had done this, then I would have made this much.” Or ”Now I know what to do next time this happens.” Next time, things may be different. As far as my strat is concerned, everyday is the first day trading.
Total Net Profit $5,136.67
(Per Share) $0.07
Gross Profit $20,040.44
Gross Loss ($14,903.76)
Profit Factor 1.34
Total Number of Trades 671
Percent Profitable 60.66%
Winning Trades 407
Losing Trades 263
Avg. Trade Net Profit $7.66
Avg. Winning Trade $49.24
Avg. Losing Trade ($56.67)
Largest Winning Trade $412.37
Largest Losing Trade ($478.54)
Max. Consecutive Winning Trades 15
Max. Consecutive Losing Trades 25
Total Shares/Contracts Held 72267
Total Commission $1,625.66
Return on Initial Capital 10.73%
Annual Rate of Return 47.60%
Buy & Hold Return -1.59%
Return Retracement Ratio 3.66
Trading Period 2 Mths, 17 Dys, 5 Hrs, 50 Mins
Percent of Time in the Market 61.02%
Max. Equity Run-up(Daily) $5,978.62
Date of Max. Equity Run-up 3/17/2011 15:00
Max. Drawdown(Daily)
Value ($3,831.77)
Date 2/23/2011 15:00
Max. Trade Drawdown ($1,448.32)
Well, I have to say I am pleased with my auto trading system so far. Ytd return is 10.73%. I adjusted the starting balance of 12/30/2010 to $47,853 to reflect my actual brokerage statement. I had been using $50,000 as an estimate. I know the net profit so far of $5,136 is probably peanuts to many readers, but I project that if I had $500,000 of working capital, then the net profit would have been $50,000, and so on.
I am developing the skills now with smaller amounts, so when I begin dealing with larger amounts, I will already have the skill sets in place for managing the money. I am taking a business like attitude with my money. I take several small positions to help avoid a massive system draw down. I view the higher commissions I pay with several small positions as an insurance premium and business expense.
The current annual rate of return is acceptable to me, but I consider the profit factor of 1.34 and percent profitable of 60.66% to be minimum acceptable numbers, given the paper trading numbers.
Good Job.
You need to switch brokers ASAP. Keep TradeStation as your signal source and route orders to IB.
23% of your profit so far has gone to commissions... TS charges 0.01, right?
So you paid 1600 in commission and you could have saved 800 by trading at IB at 0.005.
Even if you don't know how to program, TradeLink (among other providers) offers a trade re-router from TS to IB. Pay a software guy the 800 to program a re-router for you.
High commissions is a business expense you have total control over. It makes no sense for you to be "paying-up" at this point.
Quote from Mike805:
Good Job.
You need to switch brokers ASAP. Keep TradeStation as your signal source and route orders to IB.
23% of your profit so far has gone to commissions... TS charges 0.01, right?
So you paid 1600 in commission and you could have saved 800 by trading at IB at 0.005.
Even if you don't know how to program, TradeLink (among other providers) offers a trade re-router from TS to IB. Pay a software guy the 800 to program a re-router for you.
High commissions is a business expense you have total control over. It makes no sense for you to be "paying-up" at this point.
I crunched some numbers today regarding the commissions I am paying ytd:
Real-time Account Net Worth $59,657.92
Beginning Day Account Net Worth $57,523.62
Real-time Overnight Buying Power $113,398.02
Real-time Account Balance $53,760.67
Real-time Cost of Positions $5,991.32
Real-time Unrealized P/L ($94.07)
Real-time Realized P/L (Today) $1,963.47
About 2/3 of the profits today came from a discretionary entry at the close last Friday in TTMI with about 2300 sh. Here are a few reasons I liked the entry. I watched the stock rise quickly on high volume late morning Friday and then pull back to support at Thursday’s highs. I reasoned that if interest had picked up in the stock, then down side risk may be reduced. Fortunately for me the overall market gapped up this morning (Monday), and so did TTMI. I still wish to avoid doing these trades on a regular basis though and continue with running my auto strategy solely. I mostly went flat at the close today.
I will start posting account net worth along with realized and unrealized P/L from the TS platform. Occasionally, I make small contributions to the account, but I keep a running total of contributions and subtract them when calculating ytd returns on the account and charting.
I have had to rethink buying equal dollars amounts in each of my positions. Looking back it appears I average about 100 shares, but I am paying $2 in commissions instead of $1 for 100 shares. I am going to switch to buying 100 share lots, to reduce costs. I recently ran scans on stocks in the $15 to $50 range with decent volume, and I am still able to come up with about 1000 symbols. Averaging these symbols, I get an average stock price of around $30. I will use this number in my calculations when looking at buying power and margin usage. My rationale is that with a full portfolio of randomly bought stocks on trade signals, the average price should come out to around $30. We will see if this thinking holds up.
Today I reached a milestone by doubling my account size since going live 6 months ago with my auto trading. Granted about 40% of the gains came from contributions, $16,000 in profits is still an achievement for me. As the account net worth increases, contributions will have less and less of an impact.
Real-time Account Net Worth $60,149.88
Beginning Day Account Net Worth $59,280.45
Real-time Overnight Buying Power $111,499.77
Real-time Account Balance $51,410.88
Real-time Cost of Positions $8,671.79
Real-time Unrealized P/L $67.21
Real-time Realized P/L (Today) $336.18
I have returned to scanning for entry signals nightly rather than just monitoring 1000 symbols in TS Radarscreen. In back testing, annual returns dropped off significantly when trading 1000 names as opposed to 1400, which is likely due to the reduced market exposure. A nice thing about buying in 100sh lots is that when you buy lower priced stocks you are also risking less capital.
I made some adjustments to my Amibroker paper trading code. I added .01 to the strategy entry fills, and subtracted .01 from exit fills, to simulate buying at the ask, and selling at the bid. Also, I don’t know how I have been overlooking this, but I was not including commissions in the portfolio paper trading. Now I have included $0.01 per share. At the end of the quarter I will post a side by side comparison of live trading verses paper trading with the updated code.
I wanted to thank Mike805 for encouraging me to reanalyze the commissions I have been paying, and DGunz for persuading me to reexamine paper trading to live trading more closely, and to all the others who have provided insight and support to me so far.
Total Net Profit $8,028.44
(Per Share) $0.11
Gross Profit $22,654.11
Gross Loss ($14,625.67)
Profit Factor 1.55
Total Number of Trades 680
Percent Profitable 63.82%
Winning Trades 434
Losing Trades 246
Avg. Trade Net Profit $11.81
Avg. Winning Trade $52.20
Avg. Losing Trade ($59.45)
Largest Winning Trade $412.37
Largest Losing Trade ($478.54)
Max. Consecutive Winning Trades 29
Max. Consecutive Losing Trades 25
Total Shares/Contracts Held 73267
Total Commission $1,681.27
Return on Initial Capital 16.78%
Annual Rate of Return 66.46%
Buy & Hold Return -1.47%
Return Retracement Ratio 3.92
Trading Period 2 Mths, 24 Dys, 5 Hrs, 50 Mins
Percent of Time in the Market 64.22%
Max. Equity Run-up(Daily) $8,892.08
Date of Max. Equity Run-up 3/25/2011 15:00
Max. Drawdown(Daily)
Value ($3,831.77)
Date 2/23/2011 15:00
Max. Trade Drawdown ($1,448.32)
The drawdowns for my long only system have been minimal the past week, as the overall market has been trending back up. I am currently holding only 2 positions as my system waits for any sell offs in stocks. There is weakness in regional banks, which I may be able to take advantage of next week. I booked some profits in the real estate operations sector today.
I am now tracking 1571 names in an attempt to get more trading signals. I will continue buying in 100sh lots to reduce commission costs, by not buying fewer than 100 shares per entry.
Capturing the trend:
4 entries triggered on the opening drop today from my scan performed the night before that had resulted in about 130 names on the watch list. 2 exited at the close and I’m still holding the other 2. I was tempted to move my stops up, but refrained because they had already moved well in my favor. Anyway, most of the time when I move my stops up, they are filled around midday and then the stock proceeds higher into the close. This happens almost as clockwork where the stock advances early, consolidates around midday, and then after a small dip, advances further to end the day. Not only is it easier for me to deal with losers without getting stopped out when using a manageable position size, but it is also easier to let my profits run without wanting to take profits.
I am often tempted to take a larger position size to increase profits, but I am not comfortable with the individual stock drawdown that would entail. I could handle a 20% system DD better than a 20% DD in a large individual position. I feel this is an area automation excels in regarding position management. Actually, I am becoming more comfortable being in cash. As the saying goes, being in cash is still a position. In the past, when I had a large cash balance, I would want to put it to work as soon as possible. This would often result in me getting into trades too early, when a setup had not occurred. The important thing about dip buying is to wait for the trade to come to you, rather than going to it, which is an additional item automation handles efficiently.
Here are the two trades that turned out to be day trades today. What I wish to show is the volatility one should wait for before an entry, and not take profits too early in the day even if a nice unrealized profit exists. The same dip occurred in the Spoozs today when it nearly hit 1300. It may have caught some shorts on the wrong side, trying to predict the day's outcome.
Real-time Account Net Worth $60,771.55
Beginning Day Account Net Worth $60,453.07
Real-time Overnight Buying Power $110,632.10
Real-time Account Balance $49,965.55
Real-time Cost of Positions $10,714.00
Real-time Unrealized P/L $92.00
Real-time Realized P/L (Today) $231.48
Didn't take a hit on this one. Some trades just work out well...
With the limited market exposure the past few days, the few trades the system made are still mostly profitable. The Hitachi trade worked out well. It just goes to show that you don’t have to predict the news that will move a stock. The reason does not really matter. You can fill in the news: “_____ moved stock X today.”
I am tempted to put on a monster short position the next couple of days, perhaps in a company with disappointing earnings. I will continue to hide out in the woods, waiting to ambush the market as it marches by.
Real-time Account Net Worth $61,137.10
Beginning Day Account Net Worth $60,765.46
Real-time Overnight Buying Power $115,884.20
Real-time Cost of Positions $6,420.00
Real-time Unrealized P/L ($30.00)
Real-time Realized P/L (Today) $487.64
Total Net Profit $8,814.10
(Per Share) $0.12
Gross Profit $23,500.77
Gross Loss ($14,686.67)
Profit Factor 1.6
Total Number of Trades 687
Percent Profitable 64.19%
Winning Trades 441
Losing Trades 246
Avg. Trade Net Profit $12.83
Avg. Winning Trade $53.29
Avg. Losing Trade ($59.70)
Ratio Avg. Win:Avg. Loss 0.89
Expectancy 0.21
Largest Winning Trade $429.64
Largest Losing Trade ($478.54)
Max. Consecutive Winning Trades 29
Max. Consecutive Losing Trades 25
Total Shares/Contracts Held 74089
Total Commission $1,696.27
Return on Initial Capital 18.42%
Annual Rate of Return 67.68%
Buy & Hold Return -1.42%
Return Retracement Ratio 3.93
Trading Period 2 Mths, 30 Dys, 5 Hrs, 50 Mins
Percent of Time in the Market 65.77%
Max. Equity Run-up(Daily) $9,750.74
Date of Max. Equity Run-up 3/31/2011 15:00
Max. Drawdown(Daily)
Value ($5,177.94)
Date 2/23/2011 15:00
as % of Initial Capital 10.82%
Max. Trade Drawdown ($1,448.32)
Since it is the end of the first quarter, I decided to post ytd results a day early. The strat did not really do much for the first 2 months, and then decided to kick but, in March. I know this is a feature of my strategy. Over time, it tends to outperform the market when the market is rising, and perform less poorly than the market when the market is falling. It is a kind of one two punch. The thing is, I don't know when it will start doing well or stop doing well, so I am reluctant to second guess it.
The percent profitable is creeping back to 66%. I would also like to see the Avg. Winning Trade > Avg. Losing Trade. I have started to include an Expectancy calculation in my numbers, based on the following formula:
[(WIN: LOSS ratio + 1) x Percent Profitable] - 1
Anything over zero and you are making money. The Maximum Consecutive Losing Trades of 25 was from a bad discretionary series of trades the end of January that ultimately persuaded me to start this journal.
I know a lot of this automated trading is probably meaningless to a pure discretionary trader, or a solely breakout trader. I would not recommend RTM trading on a discretionary basis. I feel to avoid a massive drawdown, you must diversify, and let that 66% profitable edge work for you. I am realizing that there are fewer auto traders than I thought. Or else they are on sailboats heading for the Caribbean, while their auto strategy is working at home.
Here is a comparison with the SP500. The next couple of days I will post a daily realized P/L chart for the quarter from my tax accounting software.
This is how portfolio paper trading looks ytd. It is surprising similar to how I actually did. Adding a penny slippage both ways, and $2 round trip commissions really made it more realistic. The 6% maximum drawdown is on a closing bar basis, but I recall being down 10% at one time intraday in February. It is showing a negative return for February; however, my tax accounting software is showing a positive return. I am not sure why that is. It may have taken some bad trades that I managed to miss, since there were many more signals in February than I was able to take positions.
I have not posted an equity curve area yet since going live with my auto strategy system. This is about six months worth. I started with $30,000, but contributed along the way. This has juiced the results a bit, but I will take any advantage I can get . I think removing profits from the system is a mistake; just like early withdrawals from your retirement is not advisable. I view the power of compounding as an edge.
Sounds ambitions. Good luck to you!
Quote from jlancaster:
Sounds ambitions. Good luck to you!
Daily realized profit/loss for the quarter. There were 12 down days out of approx. 60 trading days or 20% down days. This is in line with historical performance.
Rol, these charts are very informative. It's been a long time since I've seen a thread this candid and interesting on ET.
I do find it interesting that your losing days, although they occur less, are typically larger in magnitude than your winnings days. It seems like lots of small winners vs few large losers (although there are also a few large winning days).
Is there some aspect of your strat that causes this behaviour? And how does it affect you psychologically?
Quote from Kohanz:
Rol, these charts are very informative. It's been a long time since I've seen a thread this candid and interesting on ET.
I do find it interesting that your losing days, although they occur less, are typically larger in magnitude than your winnings days. It seems like lots of small winners vs few large losers (although there are also a few large winning days).
Is there some aspect of your strat that causes this behaviour? And how does it affect you psychologically?
Quote from Rol:
[B]Hi Kohanz and thanks for the continued interest in this journal! I have not been getting a whole lot of questions so I was wondering if it was interesting.
Quote from Rol:
I am big on data and charts because I can see better what is going on with the strat, like how you noticed the fewer but larger down days. There is not a whole lot of emotional attachment when I let the strategy perform without intervention. Sometime I kid myself by saying that is just a savings account with a highly variable interest rate!
Quote from Kohanz:
Rest assured I read every new post as it's written (I am subscribed), but my day job has been quite busy lately which has relegated me to being an observer more than a participant.
Quote from Kohanz:
Out of curiosity, your strategy is long-only - have you ever tested a short-only strategy with similar logic? For example, it seems like you buy gap downs, or something like that - have you tried short gap ups in backtesting?
I saw a little buying action around the open, with EW and RBN turning out to be nice day trades. I am appreciating how crucial it is to be well capitalized. Being under funded forces you to take on size and leverage right from the start, so you better hope you are right about direction.
Well, I looked at reversing my strategy buy/sell rules to short/cover and I was surprised with the results. A few years ago, when I tried it the results did not look good. I would get stuck in some trends going against me too often. Since then, I have refined by rtm long only strategy. Now the short side results are looking much more promising. In 2008 it had a 250% return, when the market was tanking. It only makes sense to incorporate both long and short strategies to the markets if possible. I just need to come up with one that back tests well to build my confidence in it. I will start out small to be sure the strat is functioning as it should. I think by using proper position sizing, it will help with psychology. As with many things, there is a right way and wrong way of doing something. So I think there can be a right and wrong way to swing trade. Hopefully, I can get it going by next week.
I will put up some equity curves in the next couple of days of long only, short only, and long/short equity curves over the past 4 yrs paper trading for comparison. The past 4 years will be good for testing because they have seen some extremes both ways, as well as sideways movement. What I want to see is a smoothing of the equity curve and less overall system draw down
Real-time Account Net Worth $62,772.43
Beginning Day Account Net Worth $62,327.88
Real-time Buying Power $111,686.02
Real-time Cost of Positions $13,743.00
Real-time Unrealized P/L $49.42
Real-time Realized P/L (4/4/11) $295.13
Entries: 10
Exits: 5
Hi Rol. Thanks for the journal. What you said about decreasing risk by diversifying across a lot of small positions has inspired some recent work on my ATS.
Also, I'm intrigued by the idea of not using stops or profit targets. My system currently uses both and the results, as you probably know, are both good and bad (less bad when, I think, when you have an equal number of long and short positions, but I have been having a hard time coming up with a short strategy that works in this market). I haven't quite figured out how a strategy without stops would work. What kind of exit rules does your system follow?
Hi Rol,
Interesting thread, though I only read the first few pages.
Seems your trading has a few similarities to my own in that you are automated, trade equities, use Amibroker and you trade intraday. Seems you are much more frequent than me though.
I starting trading automated through Amibroker and IB around 6 months ago. Have only done about 130 trades. My exposure tends to be very low as my system is quite opportunistic (haven't made a trade for 2 weeks) but trades frequently enough to at least make money.
My results are on my blog.
thetrendfollower.blogspot.com
Keep up the good work brother I will be following this thread with interest.
__________________
thetrendfollower.blogspot.com
Quote from In2Deep:
Hi Rol. Thanks for the journal. What you said about decreasing risk by diversifying across a lot of small positions has inspired some recent work on my ATS.
Quote from In2Deep:
Also, I'm intrigued by the idea of not using stops or profit targets. My system currently uses both and the results, as you probably know, are both good and bad (less bad when, I think, when you have an equal number of long and short positions, but I have been having a hard time coming up with a short strategy that works in this market). I haven't quite figured out how a strategy without stops would work. What kind of exit rules does your system follow?
Quote from GekkoToBe:
Hi Rol,
Interesting thread, though I only read the first few pages.
Seems your trading has a few similarities to my own in that you are automated, trade equities, use Amibroker and you trade intraday. Seems you are much more frequent than me though.
I starting trading automated through Amibroker and IB around 6 months ago. Have only done about 130 trades. My exposure tends to be very low as my system is quite opportunistic (haven't made a trade for 2 weeks) but trades frequently enough to at least make money.
My results are on my blog.
thetrendfollower.blogspot.com
Keep up the good work brother I will be following this thread with interest.
Quote from Rol:
It seemed to me while reading your journal that you were trading news related stocks discretionary and not with an ATS. I am poor at discretionary trading long term. Sure I have had my windfall trades, but the false confidence generally caused me to give it all back. I made $50,000 overnight in early 2008 on a small biotech (Encysive Pharmaceuticals) buyout by Pfizer. I suspected it was going to be bought out because the CEO was saying that he was in talks with an investment bank in order to “Increase shareholder value”. I then proceeded to give it all back later that year by counter trending the down market through ETFs discretionary. What is unreal is that my auto strategy would have come out ahead had I had my code in place at that time. Now, I have no desire to trade discretionary because I know in myself that I cannot control the risk. Besides as my balance grows, it will become necessary to automate to be able to put on the number of trades required to diversify.
Quote from Rol:
I have read how others have had a hard time shorting, like during the recent earthquake crisis. What the market was doing was gapping down overnight and then trending up during the trading day. That was when I was using heavy margin to buy the dips at the open and it saved me. That is another reason I don’t like day trading because you totally miss out on the overnight gaps in your favor, while trying to scalp 2 or 3 ES points. I am looking for the bigger moves that work even after slippage is accounted for.
Quote from Rol:
Naturally I can’t go into details of my entry and exit rules, otherwise everybody would be trying to get in and out at the same time.
Quote from Rol:
I may be proven wrong over time with my strat, but it survived a recent major earthquake, and nuclear accident, so perhaps I am onto something. There is nothing wrong with learning to paper trade a portfolio until the required $25,000 in funds are available, even if it takes years of saving.
Quote from In2Deep:
Don't you worry about having too much long exposure? The market could have easily continued downward on those days… I think you're definitely on to something although the amount of long exposure would worry me. Not that I know any better but maybe if you can figure out a way to hedge that risk then I think you're in perfect shape. On that note, do you gradually increase your exposure over time or do you go all-in when your signals start going off?
I will just have to wait until the next bear market so see if it works for real.
Hi Rol
Does Amibroker execute your trades?
I haven't found Amibroker/IB to be unstable, though I've only been trading automated with this combination for 6 months.
Also, I only use Ami to send orders through to IB at the open. And that's where Ami/IB combination stops. All my buying is at the open, and then when a buy order is filled, my exit order becomes active.
So I guess I don't really need Ami/IB to be that reliable as I'm not constantly sending orders through.
In back testing I noticed when I became too choosy about my entries, it resulted in limited market exposure.
There's nothing wrong with limiting market exposure. Its one of the ways to limit risk/drawdown.
Although, if I go with my short strat in addition to long strat, I may find myself in the market all the time!
My strategy also works on the short side but its just not good enough. So I eliminated it. So I trade long-only at the moment.
__________________
thetrendfollower.blogspot.com
Total Net Profit $10,745.26
(Per Share) $0.15
Gross Profit $23,582.04
Gross Loss ($12,836.78)
Profit Factor 1.84
Total Number of Trades 648
Percent Profitable 66.36%
Winning Trades 430
Losing Trades 218
Avg. Trade Net Profit $16.58
Avg. Winning Trade $54.84
Avg. Losing Trade ($58.88)
Ratio Avg. Win:Avg. Loss 0.93
Expectancy 0.28
Largest Winning Trade $429.64
Largest Losing Trade ($478.54)
Max. Consecutive Winning Trades 15
Max. Consecutive Losing Trades 9
Total Shares/Contracts Held 69974
Total Commission $1,626.01
Return on Initial Capital 22.45%
Annual Rate of Return 74.55%
Buy & Hold Return -1.48%
Return Retracement Ratio 3.57
Trading Period 3 Mths, 7 Dys, 5 Hrs, 50 Mins
Max. Equity Run-up(Daily) $11,099.90
Date of Max. Equity Run-up 4/8/2011 15:00
Max. Drawdown(Daily)
Value ($3,831.77)
Date 2/23/2011 15:00
as % of Initial Capital 8.01%
Max. Trade Drawdown ($475.02)
I had to make some adjustments to result reporting. When considering open positions as closed for generating the equity curve, Tradestation miscalculates when a company changes its ticker. I sold WGOV back in January but the ticker recently changed to WWD so now TS calculates a nearly 100% loss on the position. I don't know how to correct it, other than to not consider open positions as closed. Maybe others TS users have noticed this problem. I recall this problem in the past, which is a reason I changed the view. I will still show dates as opposed to number of positions along the x-axis. My average hold on losers is 4 days, so after about a week passes the curve will reflect losses. What I will do is simply state my net open position P/L when posting equity curves. Currently it sits at (-$553).
I also removed the few discretionary trades I have made ytd from reporting, to make the results more reflective of the true automated strategy performance.
Here is my favorite trade for the day:
I am going to be posting comparisons of my long, short, and long/short rtm strategies by year starting in 2005. I will also include the SP500 during each year. For the most part, the long strategy is what I am currently using for this journal. The short strategy is simply reversing the strategy rules of the long only rtm strategy to attempt to capture the opposite extremes of a move in stock price.
Although I have experimented with a short rtm strategy in the past, this is my first in depth look and comparison with a long rtm strategy. This will be a learning experience for me, and I hope for others as well. While I realize there are probably many different mean reverting strategies with varying results, I am only making observations on the results of my strategies.
I did not back test more than a year at a time because Amibroker does not increase maximum number of positions held as equity increases, but rather just increases each position size. Therefore, at some point liquidity becomes an issue and results become unrealistic. However, I would be increasing maximum number of positions held as equity increases.
What I am observing is that the long only strategy is much more consistent than the short only strategy, regardless of overall market direction. The short only strategy depends much more on a down market to perform well, for example in March and April 2005. Then from May to July, the short only strategy did poorly. The long only strategy does not show this dependence on longer-term market direction, which is why I feel it is a survivable strategy, unlike my short only strategy. The long/short equity curve appears relatively smooth, but when compared to the long only strategy, one can see that it takes away profits.
The conclusion I draw from these comparisons is that my rtm short strategy does not do as well as my rtm long strategy over the long term. I believe this is the case because the long only strategy is identifying a market dynamic that exists on the long side, but less so on the short side.
Here is a look at 2006. All three strategies had a maximum drawdown of about 12%. However, the short only strategy DD was more concentrated towards the beginning and the end of the year. It performed well between May to September, when the market turned down and went below its 200 dma. The annual return is well below the long only strategy return. The long strategy was more consistent and from May to September, rather than turning down, went sideways; then rose with the market for the remainder of the year, while the short strategy gave back gains. This is what I have observed with the long only strategy. It performs well in sideways and up markets, and avoids portfolio breaking drawdowns in declining markets.
For 2007, the long strategy continued its steady climb. The short strategy non-performed, except in mid July and October, when the market sold off. The long strategy had a 10% DD but was able to recover within a couple months. This is what I have noticed with it. Whenever it suffers a sizable DD, it recovers losses within a reasonable amount of time. This makes it a survivable strategy, in my opinion. The long only strategy appears unaffected by the market decline from October thru the end of 2007. This is likely because the average hold on a position is 2-3 days, thus the longer-term market trends become less relevant.
In 2008, the long strategy had a 30% DD in mid-October, during the strong market decline. I would consider this a "tail" for my strategy. It showed high volatily from September thru November, but managed to make back losses, and then finish the year strong. Even though the trend was down for the year, the short strategy did not capitalize until the strong decline occurred from September thru the end of the year. Again, the long/short strategy underperformed the long only strategy.
The long strategy had a sizable 23% DD into the March 2009 market lows. It then rallied off that and finished the year strong. The short strategy started out strong for the year, but then displayed little edge in a rising market.
For the final year, 2010, the long only strategy performed as expected. In the market downturn from May thru June, it trended sideways. The short strategy did well during this time and poorly the rest of the year. Until I come up with a better short strategy, I think I will remain using my long only strategy. Perhaps a trend following strategy, incorporating macroeconomics, would be a better short strategy than mean reversion.
Interesting results. Thanks for posting. So I guess you could employ your short strategy when the market is trending down to sideways. And sideline it when Uncle Bernanke is juicing the market.
I got burned today by CYH, Community Health Systems. I saw it heading rapidly lower from my entry but I saw no news out on it yet. Well, eventually the news came out that they were being sued by Tenet Healthcare over Medicare billing fraud, but by then it was down big. I am currently down 1K on 100 sh.
I will be adjusting my entry rules filter slightly so that today’s entry would have been avoided in the first place. Also, I am going to try using a 10% stop loss on all of my system trades. The majority of my trades do not exceed 10% DD, and the ones that do, often seem to blow right through 10%. What I would like to achieve is a reduction in draw downs on news related stock moves, while at the same time, not interfering with the day to day gyrations in my overall portfolio.
In your backtesting, did you use EOD data?
If yes, what is your ratio of trades taken vs. total number of possible trades?
This issue can be more serious than you think, I found that out not so long ago.
Quote from d08:
In your backtesting, did you use EOD data?
If yes, what is your ratio of trades taken vs. total number of possible trades?
This issue can be more serious than you think, I found that out not so long ago.
I face the same problem and I used to have the same approach. I always thought since the entries are randomized across the day that there's no issue with this - I was wrong.
I found that out by rewriting the code to work on intraday charts, the results gave me quite a scare. During the more serious downturns such as in 2002 and 2008, the results were dramatically different; in the more smaller drops, the results were worse but not as significantly.
When these black swan events occur, all components drop with high correlation and randomizing the entries would give you better entries than you would realistically get. I can guarantee that your results would be different for the second part of 2008, for the other periods - it depends on the trades taken in simulator/total possible trades ratio. You should also include the now defunct companies that had a lot of liquidity but took a nosedive that year, survivorship bias is a very relevant factor for these types of strategies.
Quote from d08:
I face the same problem and I used to have the same approach. I always thought since the entries are randomized across the day that there's no issue with this - I was wrong.
I found that out by rewriting the code to work on intraday charts, the results gave me quite a scare. During the more serious downturns such as in 2002 and 2008, the results were dramatically different; in the more smaller drops, the results were worse but not as significantly.
When these black swan events occur, all components drop with high correlation and randomizing the entries would give you better entries than you would realistically get. I can guarantee that your results would be different for the second part of 2008, for the other periods - it depends on the trades taken in simulator/total possible trades ratio. You should also include the now defunct companies that had a lot of liquidity but took a nosedive that year, survivorship bias is a very relevant factor for these types of strategies.
DGunz, that would certainly help. He could run a monte carlo simulation on the trades, 5% of the worst results would imitate real life performance roughly. The one problem I see is that during a 2008 type panic, Rol's system would buy some positions in simulation in such a way that they would get exited next day with profit and the system would initiate new positions, in reality he would be left with losers (because the positions were initiated in the first phase of panic) and maximum exposure, unable to pick up new positions.
It's much easier to pick up intraday data from some vendor and do the "true" backtest. In a bull market such as this, results will match simulation but the same won't happen in a volatile bear market.
Should he do that, I believe the results will still show high profitability but the equity curve won't be as perfect as it is now.
Quote from d08:
The one problem I see is that during a 2008 type panic, Rol's system would buy some positions in simulation in such a way that they would get exited next day with profit and the system would initiate new positions, in reality he would be left with losers (because the positions were initiated in the first phase of panic) and maximum exposure, unable to pick up new positions.
Not exactly. When there is high correlation selling, the positions would be initiated during the first phase, for example, between 9:30 and 11:00. The second phase, from 14:00 to 16:00 would also trigger signals. Randomizing entries loses time priority. So if you could take 20 trades, you would already have full exposure before the second phase could start, you are essentially betting that the trades from the first sell-off outperform those from the second sell-off in the following days - but in my experience, this often is not the case.
Monte carlo is better than nothing but the only bulletproof way to know is with intraday data.
Quote from d08:
Not exactly. When there is high correlation selling, the positions would be initiated during the first phase, for example, between 9:30 and 11:00. The second phase, from 14:00 to 16:00 would also trigger signals. Randomizing entries loses time priority.
Quote from d08:
Not exactly. When there is high correlation selling, the positions would be initiated during the first phase, for example, between 9:30 and 11:00. The second phase, from 14:00 to 16:00 would also trigger signals. Randomizing entries loses time priority. So if you could take 20 trades, you would already have full exposure before the second phase could start, you are essentially betting that the trades from the first sell-off outperform those from the second sell-off in the following days - but in my experience, this often is not the case.
Monte carlo is better than nothing but the only bulletproof way to know is with intraday data.
I don't think it will kill profitability for your strategy either but I do think the equity curve won't be as smooth for the more difficult market settings (for long RTM).
I used to average down before and it also increased profit factor for me, I didn't really care what the rest said about that approach.
Your "follow-up position" approach is interesting, gave me a couple of ideas to try out as well.
I still suggest you test it all on intraday data, you will get a better overview of performance under different conditions. Plus you get peace of mind or "knowing where the bottom is".
Total Net Profit $11,106.67
(Per Share) $0.15
Gross Profit $25,294.54
Gross Loss ($14,187.86)
Profit Factor 1.78
Total Number of Trades 683
Percent Profitable 66.33%
Winning Trades 453
Losing Trades 230
Avg. Trade Net Profit $16.26
Avg. Winning Trade $55.84
Avg. Losing Trade ($61.69)
Ratio Avg. Win:Avg. Loss 0.91
Expectancy 0.27
Largest Winning Trade $429.64
Largest Losing Trade ($796.50)
Max. Consecutive Winning Trades 15
Max. Consecutive Losing Trades 9
Total Shares/Contracts Held 73815
Total Commission $1,716.01
Return on Initial Capital 23.21%
Annual Rate of Return 71.75%
Buy & Hold Return -1.34%
Return Retracement Ratio 3.47
Trading Period 3 Mths, 14 Dys, 5 Hrs, 50 Mins
Max. Equity Run-up(Daily) $11,987.32
Date of Max. Equity Run-up 4/15/2011 15:00
Max. Drawdown(Daily)
Value ($3,831.77)
Date 2/23/2011 15:00
as % of Initial Capital 8.01%
Max. Trade Drawdown ($1,511.50)
The CYH loss this week was the largest losing trade for the year. With the 10% max DD I now have in place, it would have been $300 instead of $800. Small position size is a form of stop loss, because it can also keep your losses small relative to account size. It is a reality that with rtm trading, there are going to be occasional "big" losses. It helps to have an action plan in place ahead of time. With auto trading it really is an "if, then" process. If the stock price does this, then my strategy will do that, letting the chips fall where they may. I think the problem some have is that they over leverage and scale in too quickly. In addition to that, I have not found it to work well on the short side, but that has just been my experience. Another edge I believe auto trading has is that markets can wear you down with long periods of relative calm, followed with sudden price moves. A computer algorithm has no loss of attention space.
I have heard that a reversion strategy is easier to code than a trend following strategy. I am not even sure how to approach a trend following strategy other than open > high of one bar ago, with increase volume. I am fairly certain there would be a lot of false signals.
Putting on enough different trades in a basket of stocks ensures that your equity still works for you. By scaling gradually into stocks over the past week, I had the BP to take a few profitable overnight and day trades today as the overall market reversed higher.
The profit factor so far for the year is comparable to paper trading, and the percent profitable is eerily at 66%. I would be pleased to maintain an annual rate of return over 70%. It would be hard to dispute that the strategy has no edge in its stock selection when the buy and hold return for the same period is
-1.34%.
My unrealized loss currently is ($398.85). Subtracting this from $11,106.67 gives a current net profit of $10,707.82 for the year.
Just a couple of cherry picked trades today.
Looks great.
One question - when you hold overnight, do you reduce your position size compared to intraday trading?
Quote from elitetradesman:
Looks great.
One question - when you hold overnight, do you reduce your position size compared to intraday trading?
Quote from Rol:
All positions currently start out at 100 shares, with the option to add 200 shares later. There is no distinction between intraday and overnight holdings. It has been my experience that holding overnight works more to one's advantage than against (in stocks that is), provided they are trading with an advantage. Stocks often begin their reversals the day after an exhaustion of sellers in the prior session, such as displayed with the recent gap up HOGS trade I posted. I view the game time from entry to exit as a continuum, with "time outs" between sessions.
Quote from d08:
What is your average exposure as percentage of equity?
I thought I would give an update on what I have been doing lately. I made some changes to the auto strategy entries. I made it more scaling in nature than it had been and more automated. At the end of the day the strat looks at how many open positions there are. Then for the next trading day, allows 5 addition positions to be taken. So for example if I had 10 position, I could take on a max of 15 total positions the next trading session. I anticipate this would prevent me from maxing out on available positions in the first signs of a broad market downturn, which is a shortfall of my current strategy. Today for example, I had 5 new entries, but there were 6 exits at the close with a realized P/L of $261.63. Unrealized P/L is ($806.45). There is a constant rotation of stocks in my portfolio. Tomorrow I can add 5 more positions if entry signals are given.
This should work well on typical daily market moves, and also allow me to ratchet up margin BP in a controlled manner during extreme market sell offs. I expect this would make more use of 4X daily buying power, during a black-swan type event, so I will have to monitor it closely, possibly even selling some stocks to meet margin. I don’t know what other’s experience has been with their brokers but I have noticed that TS does not hassle me about using 4X overnight BP once or twice a year if I am diversified, and I bring it back under 2X by the end of the next trading day.
I took an 183 share entry in Wells Fargo Monday in an IRA account. It came close to triggering an entry from my strategy, but did not. It had been down 8 days in a row, which on a decent company like Wells Fargo, to me qualifies as crazy oversold. My entry was at the second arrow, where I felt a double bottom was forming, creating a support level. I also knew earning would be released before market tomorrow, so I felt the selling was simply manipulation to get the stock ready for an earnings bounce. Banks somehow manage to spin their earnings in an upbeat way, and the market often reacts positively. We will see how it does tomorrow.
Total Net Profit $11,852.06
(Per Share) $0.16
Gross Profit $26,537.04
Gross Loss ($14,684.98)
Profit Factor 1.81
Total Number of Trades 703
Percent Profitable 66.15%
Winning Trades 465
Losing Trades 238
Avg. Trade Net Profit $16.86
Avg. Winning Trade $57.07
Avg. Losing Trade ($61.70)
Ratio Avg. Win:Avg. Loss 0.92
Expectancy 0.27
Largest Winning Trade $429.64
Largest Losing Trade ($796.50)
Max. Consecutive Winning Trades 15
Max. Consecutive Losing Trades 9
Total Shares/Contracts Held 76215
Total Commission $1,764.01
Return on Initial Capital 24.77%
Annual Rate of Return 72.65%
Buy & Hold Return -1.36%
Return Retracement Ratio 3.52
Trading Period 3 Mths, 19 Dys, 5 Hrs, 50 Mins
Max. Equity Run-up(Daily) $12,732.71
Date of Max. Equity Run-up 4/20/2011 15:00
Max. Drawdown(Daily)
Value ($3,831.77)
Date 2/23/2011 15:00
as % of Initial Capital 8.01%
Max. Trade Drawdown ($1,511.50)
It was a surprisingly slow week for me, other than the gap up on Wednesday, where I then exited several positions for profit. I actually expected the market to head lower, so I was not using much margin BP at all this week, wanting to save it if needed in a bigger sell off. That is somewhat how my strategy behaves. It holds back because market direction is never certain, and so tries to capitalize whichever way the market turns. As a result, I will most likely be missing huge short-term gains, while missing monstrous losses as well. I am shooting for a "low risk" strategy that I can observe hands off.
At some point, I think I would like to trade remote through a prop firm to leverage up when I have more entry signals than I can currently take. However, I want to give my strategy time to operate live to be more certain it can survive a wide variety of market conditions. I am still looking into using Tradelink to bridge Tradestation to a prop firm.
Unrealized P/L ($186.90)
Quote from Rol:
... I anticipate this would prevent me from maxing out on available positions in the first signs of a broad market downturn, which is a shortfall of my current strategy. ...
Here are all the system buys for the day. However, I decided to override the system and exit all positions at the close today and am now flat. The big winner today was RNOW with about a 13% gain. I don’t know if I want to enter any more positions this month. I may wait to see if the “Sell in May and go away” self fulfilling prophecy plays out.
PZE Sell 04/28/11 02:59:22 PM
BTM Sell 04/28/11 02:59:19 PM
HSII Sell 04/28/11 02:59:15 PM
MNRO Sell 04/28/11 02:59:14 PM
ABFS Sell 04/28/11 02:59:06 PM
TNE Sell 04/28/11 02:59:06 PM
INSU Sell 04/28/11 02:59:06 PM
LII Sell 04/28/11 02:59:05 PM
X Sell 04/28/11 02:59:05 PM
CVI Sell 04/28/11 02:59:05 PM
DBD Sell 04/28/11 02:59:05 PM
SFSF Sell 04/28/11 02:59:04 PM
PBR Sell 04/28/11 02:59:03 PM
BRCM Sell 04/28/11 02:59:03 PM
STX Sell 04/28/11 02:59:03 PM
SNE Sell 04/28/11 02:59:03 PM
BRCM Buy 04/28/11 12:53:19 PM
RNOW Sell 04/28/11 12:51:54 PM
X Buy 04/28/11 12:30:36 PM
STX Buy 04/28/11 11:01:52 AM
FTO Sell 04/28/11 10:46:56 AM
SFSF Buy 04/28/11 10:32:29 AM
HSII Buy 04/28/11 10:13:41 AM
PBR Buy 04/28/11 09:34:17 AM
DBD Buy 04/28/11 09:11:52 AM
RNOW Buy 04/28/11 08:38:45 AM
BTM Buy 04/28/11 08:31:02 AM
SNE Buy 04/28/11 08:31:02 AM
I now am just buying 100 share lots and no longer am “setting aside” an additional 200 share lot to add to a position. If an addition buy signal is given on a currently owned stock, the buy signal will have to compete for a 100 share entry slot just like any other buy signal would. This is more like how paper trading is done in Amibroker. Given my net equity, I feel that 300 shares is too much exposure in one stock. The additional available BP will allow me to take more positions and thus spread the risk around.
I also made the max number of daily positions that can be bought auto adjust based on current open positions and net equity. This will prevent the system from entering too many positions at once on a steep market decline or gap down.
Real-time Cost of Positions $0.00
Real-time Unrealized P/L $0.00
Real-time Realized P/L (Today) $950.62
Total Net Profit $13,807.20
(Per Share) $0.15
Gross Profit $30,262.18
Gross Loss ($16,454.97)
Profit Factor 1.84
Total Number of Trades 796
Percent Profitable 66.21%
Winning Trades 527
Losing Trades 269
Avg. Trade Net Profit $17.35
Avg. Winning Trade $57.42
Avg. Losing Trade ($61.17)
Ratio Avg. Win:Avg. Loss 0.94
Expectancy 0.28
Largest Winning Trade $429.64
Largest Losing Trade ($796.50)
Max. Consecutive Winning Trades 29
Max. Consecutive Losing Trades 9
Total Shares/Contracts Held 89225
Total Commission $2,005.87
Return on Initial Capital 28.85%
Annual Rate of Return 77.00%
Buy & Hold Return -1.14%
Return Retracement Ratio 3.56
Trading Period 3 Mths, 28 Dys, 5 Hrs, 50 Mins
Max. Equity Run-up(Daily) $14,994.68
Date of Max. Equity Run-up 4/28/2011 15:00
Max. Drawdown(Daily)
Value ($3,831.77)
Date 2/23/2011 15:00
as % of Initial Capital 8.01%
Max. Trade Drawdown ($1,511.50)
Well I should have taken the day off as I said I would because I spent the afternoon fooling around discretionary trading BC (Brunswick Corp). I was initially long, and then reversed my position short just at a bottom. I covered for a $300 loss at a short-term top and then it proceeded lower without me. Trading out of boredom always seems to kill me. However, the month ended well for the auto strategy.
I rolled the discretionary trades back into the equity curve to make it more realistic as few are able to completely auto trade. In addition, it will discourage me from discretionary trading in the future, knowing it will distort the equity curve.
I got Tradelink to work in sending my orders to IB's demo version. If you happen to be running Vista 64bit version, be sure to put Tradelink's Tradelibfast.dll in your SysWOW64 windows folder and not system32 to make Tradelink work. I eventually plan to migrate over to IB to use their portfolio margin. I would probably maintain a "token account" at Tradestation that trades 5000 shares/month to avoid the platform fees.
Real-time Unrealized P/L ($62.39)
The strategy is entering positions in a controlled manner. Most entries today occurred in the first hour as usual. 3 day trades stopped out and 1 day trade lasted until the close. I started keeping track of my daily exposure and will eventually post chart updates compared to the SP500. I want to see how the market exposure varies on a daily basis.
Current exposure is 124%. It would be closer to 100%, but I took 3 100 share discretionary trades 2 days ago that are currently underwater. 200% exposure would represent using maximum overnight margin.
In spite of a considerable unrealized P/L from currently held stocks, the strategy realizes profits elsewhere. It helps with morale to be able to realize some profits daily in the face of unfavorable market conditions.
I wonder if it is still considered adding to losers if one keeps taking new positions in previously unowned stocks as the market trends against you. If you were buying an index or futures contract, it would be. However, what about individual stocks? I know many say don't fight the trend, because my strategy does not try to follow the trend. For that matter, by looking at any period such as intraday, daily, weekly, monthly, one could make the trend appear to be going in whatever direction they wanted.
My performance seems to respond to the Russell 2000 more than the SP500, probably because I hold more smaller cap stocks. The Russell 2000 is back where it was on March 30 over one month ago.
Real-time Unrealized P/L ($1,290.77)
Real-time Realized P/L (May 3) $277.03
Chip equipment maker Applied Materials Inc is snapping up rival Varian Semiconductor Equipment Associates Inc for $63 per share in cash to acquire new technology to meet increased demand for smartphones and solar equipment. Varian shares surged 51.6 percent to $61.48 in premarket trade…
Been reading your journal, sounds like we both have a similar trading strategy. I'm RTM equities trader.
I had a question, since your system is in EL I was wondering why you don't switch to Multicharts for the platform connected to IB? Probably save on commission w/ a platform that is improving constantly.
Quote from CA04:
I had a question, since your system is in EL I was wondering why you don't switch to Multicharts for the platform connected to IB? Probably save on commission w/ a platform that is improving constantly.
Several long commodity trades are working out from the past couple of days. I can't help but feel a little lucky buying the recent commodity dip.
Total Net Profit $16,661.65
(Per Share) $0.17
Gross Profit $37,058.05
Gross Loss ($20,396.40)
Profit Factor 1.82
Total Number of Trades 892
Percent Profitable 64.80%
Winning Trades 578
Losing Trades 314
Avg. Trade Net Profit $18.68
Avg. Winning Trade $64.11
Avg. Losing Trade ($64.96)
Ratio Avg. Win:Avg. Loss 0.99
Expectancy 0.29
Largest Winning Trade $1,936.09
Largest Losing Trade ($796.50)
Max. Consecutive Winning Trades 29
Max. Consecutive Losing Trades 9
Total Shares/Contracts Held 99478
Total Commission $2,207.92
Return on Initial Capital 34.82%
Annual Rate of Return 85.76%
Buy & Hold Return -1.19%
Return Retracement Ratio 3.12
Trading Period 4 Mths, 5 Dys, 5 Hrs, 50 Mins
Max. Equity Run-up(Daily) $17,542.29
Date of Max. Equity Run-up 5/6/2011 15:00
Max. Drawdown(Daily)
Value ($3,831.77)
Date 2/23/2011 15:00
as % of Initial Capital 8.01%
Max. Trade Drawdown ($1,511.50)
I had my largest winning trade of the year this week, but had it not been for that, I felt I underperformed. Partly because changing to not entering a position in predefined pieces did not work out well. I am rolling back my strategy to enter in 1/3, and then 2/3 for a full position. In the recent downturn beginning in May, I was being stopped out at 10% DD on a few stocks only to see the position head north without me. Then I would enter a new position, only to see it head south. Often in a broad market downturn, stocks will begin their decent at different times. Therefore, I believe it is better just to stick with the stocks you currently own and manage them, rather than trying to catch additional falling knives. In addition, I did not like the large number of positions I held, and would prefer just concentrating on fewer positions to avoid overtrading and commissions. Limiting my entries per day worked out well though, as it allowed me to scale into the market slowly. I am aiming for maximum exposure that would take about 4 days to achieve. This is typically how long I have observed broad market downturns last before any short-term reversal occurs. Today's morning reversal was short lived and so I found myself stopped out on several positions that gave up decent gains. I spent too much effort discretionary trading and over concentrating in a couple of positions, so some bad habits crept back in. I closed all my positions today, and will start fresh next week with a clean slate.
I am posting a chart I created of my profit distribution for trades since going live with my auto strategy nearly 8 months ago. I also included a zip file for download to those interested. All you need to do is enter your percentage profit for trades made in column A of the Excel spreadsheet and it updates the chart.
My profit distribution compares well to paper trading with over twice the trades in the 0 to 5% range as opposed to the 0 to minus 5%. There are also more trades in the 5 to 10% compared with -5% to -10%. However, I can see a few more negative outliers that are not balanced with positive outliers (I did not design the chart to include trades beyond -20% to 20% to keep it concise).
When I first started RTM trading before automation, I used to "swing for the fences" and eventually got into positions that became "buy and hope." Seeing the negative outliers reminds me that I cannot concentrate my equity in one position. I think the chart can be a great way to monitor performance.
Profit Distribution Zip file...
Hey Rol, I know you may have mentioned this somewhere before, but how do you select stocks? Strictly by average volume/liquidity?
Quote from In2Deep:
Hey Rol, I know you may have mentioned this somewhere before, but how do you select stocks? Strictly by average volume/liquidity?
Interesting reply. Thanks.
Curious - Why not limit your trading to the S&P 500? The work of diversifying across sectors, and removing bad apples is already done for you by the S&P analysts. I'm assuming you don't do this because it would result in less entry signals? Or, since one of your system's core strengths is diversifying across many stocks, is 500 stocks is not enough diversity?
Quote from In2Deep:
Interesting reply. Thanks.
Curious - Why not limit your trading to the S&P 500? The work of diversifying across sectors, and removing bad apples is already done for you by the S&P analysts. I'm assuming you don't do this because it would result in less entry signals? Or, since one of your system's core strengths is diversifying across many stocks, is 500 stocks is not enough diversity?
I enjoy reading this journal the most, possibly because Rol and I seem to have very similar views and have/are?/will? travel the same roads.
I would still caution you about the problem discussed earlier, at present you would need to deduct 0.3-0.4 points from your current backtested profit factor and multiply the all time maximum drawdown by 2 to achieve realistic results at your exposure levels.
I like the idea of small positions & no stoploss although it seems a bit exposed to broad-based downturns. What would you say is the average you pay in commissions relative to position size?
Quote from d08:
I enjoy reading this journal the most, possibly because Rol and I seem to have very similar views and have/are?/will? travel the same roads.
I would still caution you about the problem discussed earlier, at present you would need to deduct 0.3-0.4 points from your current backtested profit factor and multiply the all time maximum drawdown by 2 to achieve realistic results at your exposure levels.
With all respect the the thread, i think it is too early to say this automated strategy is safe and profitable.
I consider myself newbie but this is my opinion and i might be wrong..
However, Good Job and i am still following your interesting thread and learned a lot from it.
All best,
McGene
__________________
High Risk = High Gain
Quote from In2Deep:
I like the idea of small positions & no stoploss although it seems a bit exposed to broad-based downturns. What would you say is the average you pay in commissions relative to position size?
Not doing much tonight so I have time to post another chart. I like to look at these monthly profit bar charts because it gives me an idea of what I might be able to pull from the markets on average each month. The market selloff that occurred between 2/22 - 3/16 did not result in a negative month. My goal is to not have any losing months. As my equity grows, I expect growth in the monthly net profits to follow.
Here are the stocks I will be watching Monday. Being 100% in cash, I have set my strategy to take potentially 100 share positions in all of them. For this exercise, I will post the opening trades that occurred as well as the exits when they occur for all of the stocks in this watch list. I have noticed in the past that when country ETF's appear in my watch list, since they rarely do, high expectancy turnarounds are imminent.
then it would be a martingale "like" strategy which Rol pointed out his is NOT. Not sure which point you find confusing but for me it seemed clear that his exit rules are anything but waiting for losing positions to get back into neutral/positive territory or adjusting size as a function of a position's unrealized pnl.
I agree mark to market is always the best representation and he could improve on this re his reporting but I think you are a little off with your points made so far.
Quote from heech:
I'd definitely agree that marked to end of day prices, or even end of week prices would be representative/meaningful, if done over a long enough timeframe. The important thing is that these samples are consistent across the entire portfolio.
But if these prices are cherry-picked... winning stocks are priced at market prices when they're profitable, losing stocks aren't priced unless they're profitable... then what conclusions could we possibly draw from the fictional graph that results?
code:
Total Net Profit $4,229.55 (Per Share) $0.59 Gross Profit $5,219.73 Gross Loss ($990.19) Profit Factor 5.27 Total Number of Trades 48 Percent Profitable 45.83% Winning Trades 22 Losing Trades 26 Avg. Trade Net Profit $88.12 Avg. Winning Trade $237.26 Avg. Losing Trade ($38.08) Ratio Avg. Win:Avg. Loss 6.23 Expectancy 2.31 Largest Winning Trade $1,936.09 Largest Losing Trade ($169.85) Max. Consecutive Winning Trades 7 Max. Consecutive Losing Trades 9 Total Shares/Contracts Held 7200 Total Commission $132.80 Return on Initial Capital 7.84% Annual Rate of Return 245.98% Buy & Hold Return 1.35% Return Retracement Ratio 7.99 Trading Period 11 Dys, 5 Hrs, 1 Min Max. Equity Run-up(Daily) $4,229.55 Date of Max. Equity Run-up 5/6/2011 15:00 Max. Drawdown(Daily) Value ($948.54) Date 5/3/2011 15:00 as % of Initial Capital 1.76% Max. Trade Drawdown ($427.71)
hey Rol. nice thread; i have read only cursorily but its good to read somewhat real looking stuff on ET.
A few questions (not sure if you have already answered;pointer would be fine); as i just want to do compare against a few strategies i trade just for fun. btw i use AB too; havent automated yet. Ive looked into it a time or two but its a bit too daunting; the automation part.
questions for you -
1. Can you post your complete basket?
2. Rules as per how much do you risk per trade; is it fixed percent or fixed dollar amount. if so how much?
thanks!
-gariki
Quote from Rol:
Quote from kcgoogler:
hey Rol. nice thread; i have read only cursorily but its good to read somewhat real looking stuff on ET.
A few questions (not sure if you have already answered;pointer would be fine); as i just want to do compare against a few strategies i trade just for fun. btw i use AB too; havent automated yet. Ive looked into it a time or two but its a bit too daunting; the automation part.
questions for you -
1. Can you post your complete basket?
2. Rules as per how much do you risk per trade; is it fixed percent or fixed dollar amount. if so how much?
thanks!
-gariki
). I would not call myself an expert programmer, as that is not my educational background. I have just learned what I need to get by.
Quote from dejavu8:
looks your system is similar to this auto system:
http://www.smd-trading.de/smd_pivot...ce_details.html
300 shares on a 30k account sounds too aggressive; even with a 2x leverage say you have 60k buying power to carry overnight, with say roughly 30$ stock price you will need about 4500$ per stock; which means on average you will not be able to carry about more than 13-16instruments at any given time. Have you checked what your worst case max open positions is? I am guessing with any kind of mean reversion strategy in big dips you will be getting more and more signals to enter the market and if you will have to be limited to just 13-15 signals out of potentially say 300-600, it will be very hard to realize your backtest results going forward.
Not condemning; but just trying to understand your parameters; doesnt sound good to me. Ofcourse as you can see above ; lot of rough calculations but i bet if you compute real numbers you wont land too far off.
Good luck anyways!
-gariki
Quote from kcgoogler:
300 shares on a 30k account sounds too aggressive; even with a 2x leverage say you have 60k buying power to carry overnight, with say roughly 30$ stock price you will need about 4500$ per stock; which means on average you will not be able to carry about more than 13-16instruments at any given time. Have you checked what your worst case max open positions is? I am guessing with any kind of mean reversion strategy in big dips you will be getting more and more signals to enter the market and if you will have to be limited to just 13-15 signals out of potentially say 300-600, it will be very hard to realize your backtest results going forward.
Not condemning; but just trying to understand your parameters; doesnt sound good to me. Ofcourse as you can see above ; lot of rough calculations but i bet if you compute real numbers you wont land too far off.
Good luck anyways!
-gariki
thanks. that will not be necessary. if you know what you are doing, great. just thought would offer my 2cents as i thought the thread was genuine.
all the best!
Taking a diversion from my strat.
Currently long 800 shares EWP iShares MSCI Spain Index Fd
Average price 42.46.
Long 900 shares
you bet more than half of your whole capital on a single name? Wow, what a departure from your previous approach. Having worked in this industry for more than a decade it sounds like the turning point is approaching very quickly...
I hope not but I cant help this thought...
Quote from Rol:
Long 900 shares
Quote from asiaprop:
you bet more than half of your whole capital on a single name? Wow, what a departure from your previous approach. Having worked in this industry for more than a decade it sounds like the turning point is approaching very quickly...
I hope not but I cant help this thought...
EWP showing great promise. I will allow the strat to exit the position when the exit signal is given.
you are right, it does not matter the outcome of this one single trade. But sooner or later the inevitable must happen. If there is anything you should have learned from 2008 then that ANYTHING can happen at any time.
But I do like your thread so far, one of the better quality ones here and you seemed to take a very good risk mgt approach thats why I am surprised to see this trade in your book. Seriously, I can only strongly recommend you to never do it again, you will pay for it otherwise, and you will remember my words. Just my 2 cents, you pull all the strings in your account...
Quote from Rol:
Yes I know asiaprop, it is a risky venture. I need to get away from trying to out do my system. I was having a hunch that this country ETF was a sure thing. But even if it turns out a winner, it is a practice I must avoid.
Quote from Rol:
Long 900 shares
__________________
High Risk = High Gain
Quote from Rol:
Thanks d08, I am sure many of us are walking the same path. I want to give others hope and convince myself that there is a "conservative" and workable way to consistently trade the markets over the long term. In addition, the journal reminds me to be disciplined and treat this as a business. You would not take wild risks with your business capital and expect to thrive.
You mentioned the DD and it is funny because last night after reading Neke's journal, I started displaying on my monitor in real-time what a 30% DD of my equity looks like in big red numbers. This is to remind me constantly what can and probably will happen at some point. Therefore, when it happens, I cannot say I was surprised or it was not expected. I should determine ahead of time if I can live with the DD. What I plan to do is "Make hay while the sun is still shining." In addition, I am counting on the resilience power of my strategy to make it back in due time.
Quote from short&naked:
What about the 2% DD rule? Do you apply it?
Quote from asiaprop:
...you seemed to take a very good risk mgt approach that’s why I am surprised to see this trade in your book. Seriously, I can only strongly recommend you to never do it again, you will pay for it otherwise, and you will remember my words. Just my 2 cents, you pull all the strings in your account...
. I need to keep this an auto trading journal, though, as this is a basic thesis of this journal that a 100% auto system can be work. Even when I have attempt to load up on a stock, I can usually look back and say my system would have still done better, without the individual stock exposure during the same time frame.
The market stopped me out of my Spain index ETF EWP today. I decided at the open I would place my stop to give up half my gains, in order to try and let it run, and then walked away from the computer. While the setup was typical for my auto strategy, the size was not. I am relieved to be back in strategy mode now. I really want to begin collecting accurate data on the exposure my strategy takes each day relative to the market, and will eventually post a comparison chart.
I think ETFs can give a false sense of security. Most of the time, they are not volatile enough to bother with. The temptation is to increase size to compensate, often at the worst possible time. Sure they won’t go to zero, but the trend can still go brutally against you when they do eventually become volatile. I think you get more bang for the buck in individual stocks.
Continuing to buy dips in precious metals and oil related stocks. At this point, four positions are scheduled to exit at the close.
Holding Yahoo! long here. The selling seemed overdone. Volume spiking now…
Quote from Rol:
Holding Yahoo! long here. The selling seemed overdone. Volume spiking now…
Quote from Rol:
I use the TradeStation platform and the limit is 1000 symbols in what is termed their RadarScreen. I don't trade off of charts, otherwise I would need a separate chart for each symbol. The RadarScreen is similar in function, it appears, to what others are doing with Excel.
Hey Rol, Have you looked at long-only trend following strats?
I've spent a lot of time this week back testing different strats, and, although i don't know the specific details of your strat, trend following strats seem to yield significantly more over the long term (talking decades here) than "buy low sell high" type strats.
BTW I still haven't found a short strat that works on stocks over the long term. I keep remembering something you said earlier in this thread, something about stocks "wanting" to go higher. I think there's something to that.
Quote from short&naked:
I think multicharts allows up to 5000 and it is able to interpret easylanguage code. This would also solve your IB connection issue.
code:
Total Net Profit $1,708.03 (Per Share) $0.28 Gross Profit $2,484.85 Gross Loss ($776.82) Profit Factor 3.2 Total Number of Trades 51 Percent Profitable 70.59% Winning Trades 36 Losing Trades 15 Avg. Trade Net Profit $33.49 Avg. Winning Trade $69.02 Avg. Losing Trade ($51.79) Ratio Avg. Win:Avg. Loss 1.33 Expectancy 0.64 Largest Winning Trade $507.58 Largest Losing Trade ($154.00) Max. Consecutive Winning Trades 9 Max. Consecutive Losing Trades 3 Total Shares/Contracts Held 6146 Total Commission $120.40 Return on Initial Capital 3.17% Annual Rate of Return 263.14% Buy & Hold Return 0.63% Trading Period 4 Dys, 7 Hrs, 51 Mins Max. Equity Run-up(Daily) $1,725.03 Date of Max. Equity Run-up 5/13/2011 15:00 Max. Drawdown(Daily) Value ($414.43) Date 5/11/2011 15:00 as % of Initial Capital 0.77% Max. Trade Drawdown ($153.00)
.
Tradestation time based chart for the week.
Quote from In2Deep:
Hey Rol, Have you looked at long-only trend following strats?
I've spent a lot of time this week back testing different strats, and, although i don't know the specific details of your strat, trend following strats seem to yield significantly more over the long term (talking decades here) than "buy low sell high" type strats.
Quote from Rol:
[font=Maiandra GD][size=2]
Even with the choppy markets this week, the strategy navigated the shark-infested waters coolly. There was some interference on my part however. Last Friday, I was feeling somewhat anxious over the market volatility and pressed my "eject button" which exited all of my positions Friday afternoon to go flat. Not wanting to predict the markets, I still get the sense that the happy days of the past two years have ended. It would not surprise me to see us still around 1350 on the S&P come year's end. Three years in a row of 20+ percent gains would be uncharacteristic for the broad markets, I think. I don't intend to make changes to my strategy though.
Quote from short&naked:
Rol, you may want to check out Topaz NQ100, which has a good amount of alpha exposure to the Nasdaq. The approach taken seems very similar to that of your strategy in many regards, including holding stocks overnight, and only going long, etc. In fact, it's equity chart (specifically the nature of it's DDs) might point to an RTM strategy. Of course,The question is not always if you can beat the broad markets,
Btw, how about just restricting your exposure to Russell 2000 stocks (no Chinese pump and dumps).
Quote from short&naked:
Rol, you may want to check out Topaz NQ100, which has a good amount of alpha exposure to the Nasdaq. The approach taken seems very similar to that of your strategy in many regards, including holding stocks overnight, and only going long, etc. In fact, it's equity chart (specifically the nature of it's DDs) might point to an RTM strategy. Of course,The question is not always if you can beat the broad markets,
Btw, how about just restricting your exposure to Russell 2000 stocks (no Chinese pump and dumps).
http://collective2.com/cgi-perl/system25860974
Certainly very impressive how your system is chugging along.
Quote from Rol:
Hi short&naked, I just checked out some of the Topaz NQ100 trades. My system did take a few of the same trades listed. However, I looked at the biggest drawdown, and had to question the exit criteria. My system attempts to avoid being too greedy. The next day gap downs will often be the result.
That is an idea about the Russell 2000 index. I've looked at it before, but thought it had too many low volume stocks. I have filtered out most Chinese stocks from my symbol universe (hopefully).
I must say, I have been enjoying the silver trade lately.
Long Gulfport Energy (again). Would like to let it run this time.
Rol, quick question, have you ever done any testing on how Beta affects your stock selection? If you could isolate those stocks that are historically decorrelated from the S&P perhaps you could weather an upcoming bear market much more successfully.
Strategy is playing it unadventurously here with a current market exposure of 59% of equity. I hope the market continues to sell off so I may amass more shares on the cheap. I made zero discretionary intrusion today. I want to let the strategy play this market correction uninhibited. The drawdown henceforth is quite manageable.
Real-time Unrealized P/L ($216.00)
Real-time Realized P/L (5/16/11) $3.66
Quote from short&naked:
Rol, quick question, have you ever done any testing on how Beta affects your stock selection? If you could isolate those stocks that are historically decorrelated from the S&P perhaps you could weather an upcoming bear market much more successfully.
If the s&P drops below its 200 dma, then I may only focus on stocks that are able to remain above their 200 dma. I also think I may begin dabbling with some short ETFs, with small size using my current strategy. Since historically, my short strategy does much better in down markets, now may be the time to try it out live.
Hey Rol. I'm curious, how does your strat perform when the market is going down for extended periods of time (like when the 50 day gets under the 200 day SMA)?
If it performs poorly in a down trend why not put explicit rules in your program that check if the 50 is under the 200 and if so, not enter any new trades?
BTW, sorry I didn't get back to you about trend following but the closer I looked at the back testing results the more I realized how poorly a long-only approach to trend following performs in a bear market. While it did very well over the last 20 years overall, it did horribly during 2008-2009. So it's certainly something I would not be comfortable trading black-box style & would require a fair amount of discretion.
Quote from In2Deep:
Hey Rol. I'm curious, how does your strat perform when the market is going down for extended periods of time (like when the 50 day gets under the 200 day SMA)?
Quote from In2Deep:
If it performs poorly in a down trend why not put explicit rules in your program that check if the 50 is under the 200 and if so, not enter any new trades?
Quote from In2Deep:
BTW, sorry I didn't get back to you about trend following but the closer I looked at the back testing results the more I realized how poorly a long-only approach to trend following performs in a bear market. While it did very well over the last 20 years overall, it did horribly during 2008-2009. So it's certainly something I would not be comfortable trading black-box style & would require a fair amount of discretion.
So far, the strat is monitoring exposure successfully. Intraday dipped into margin BP, but 3 exits today brought it back below to a more comfortable level. It has been day 2 with no manual interference with the strat. Usually, I have no problem avoiding tampering with the system during market sell offs. I tend to go into “survival mode,” letting the strategy control risk for me. The Holy Grail may just be having some slight edge along with automation to execute faithfully.
Intraday exposure: 107%
End of day exposure: 88%
Real-time Unrealized P/L ($676.76)
Real-time Realized P/L (5/17/11) $249.00
Sniffing out buying opportunities during the market correction…
I could not resist taking profits on my Gulfport Energy trade.
It turned out to be a very solid day today with the broad markets reverting to the mean; Bailed out of many of my positions at the close. I am holding the bag on 3 stocks, one of them being HPQ. I will be watching HPQ closely the next few days. Shorts will want to cover at some point. It has been my observation that beaten down stocks often will recover on down days in the markets, perhaps as shorts rotate into other stocks to short.
Real-time Unrealized P/L ($435.50)
Real-time Realized P/L (5/18/11) $1,179.08
Exposure: 16%
I closed out a couple of losers today. I was stopped out for a 10% loss costing me about $160 on a stock that then reversed as usual and turned higher. I forgot to remove those instructions from my strategy code. After that mishap, I discretionary traded WFC with a bit of size only to be stopped out for a $70 loss.
It is difficult for me to sit on my hands when my system is not generating signals, but more often than not that is what I should be doing. I need to take advantage of these down times when it is slow and do other things. With RTM trading it is easy to get caught in the markets at the wrong time by trying to force the trades. It is ironic, but I actually want the markets to fall, otherwise I will not get any buying opportunities.
Seeing the markets continue to drift higher after exiting many of my positions yesterday is not easy. However, I do not regret missing out on further gains. The market could have just as easily gapped down, and instead of realized profits, I would be looking at unrealized losses.
Current exposure is a bit higher than it should be because I added to my HPQ position outside the strat.
Real-time Unrealized P/L ($124.03)
Real-time Realized P/L (Today) ($378.10)
Exposure: 20%
code:
Total Net Profit $1,010.61 (Per Share) $0.16 Gross Profit $1,907.62 Gross Loss ($897.01) Profit Factor 2.13 Total Number of Trades 38 Percent Profitable 55.26% Winning Trades 21 Losing Trades 16 Avg. Trade Net Profit $26.60 Avg. Winning Trade $90.84 Avg. Losing Trade ($56.06) Ratio Avg. Win:Avg. Loss 1.62 Expectancy 0.45 Largest Winning Trade $406.00 Largest Losing Trade ($160.00) Max. Consecutive Winning Trades 6 Max. Consecutive Losing Trades 5 Total Shares/Contracts Held 6300 Total Commission $118.80 Return on Initial Capital 1.64% Annual Rate of Return 82.64% Buy & Hold Return -0.16% Trading Period 7 Dys, 4 Hrs, 30 Mins Max. Equity Run-up(Daily) $1,469.95 Date of Max. Equity Run-up 5/20/2011 15:00 Max. Drawdown(Daily) Value ($459.34) Date 5/17/2011 15:00 as % of Initial Capital 0.75% Max. Trade Drawdown ($244.00)
Strat taking a loss on a failed trade...
Very nice performance.
What's your profit factor and annualized return % from 12/30 (when you started)?
Quote from d08:
Very nice performance. What's your profit factor and annualized return % from 12/30 (when you started)?
code:
Total Net Profit $19,380.29 (Per Share) $0.17 Gross Profit $41,450.51 Gross Loss ($22,070.22) Profit Factor 1.88 Total Number of Trades 981 Percent Profitable 64.73% Winning Trades 635 Losing Trades 345 Avg. Trade Net Profit $19.76 Avg. Winning Trade $65.28 Avg. Losing Trade ($63.97) Ratio Avg. Win:Avg. Loss 1.02 Expectancy 0.31 Largest Winning Trade $1,936.09 Largest Losing Trade ($796.50) Max. Consecutive Winning Trades 29 Max. Consecutive Losing Trades 9 Total Shares/Contracts Held 112191 Total Commission $2,447.12 Return on Initial Capital 39.75% Annual Rate of Return 86.55% Buy & Hold Return -1.12% Return Retracement Ratio 3.31 Trading Period 4 Mths, 19 Dys, 5 Hrs, 50 Mins Max. Equity Run-up(Daily) $20,260.94 Date of Max. Equity Run-up 5/20/2011 15:00 Max. Drawdown(Daily) Value ($3,831.77) Date 2/23/2011 15:00 as % of Initial Capital 7.86% Max. Trade Drawdown ($1,511.50)
I performed a walk forward optimization today and here are the results. Although this is not exactly identical to my live strategy, some interesting observations may still be made.
I chose one-year periods for in sample as well as out of sample data. I felt this would demonstrate better the responsiveness of the strategy to changing market conditions over a relatively short period instead of averaging out performance over several years.
I like how my strategy is "alive," adapting to differing market conditions, much as a living organism adapts to its changing environment. I particularly like the consistency of the average bars held. I can know within a few days if the trade is profitable, and can turn around and deploy the cash elsewhere rather than wishing I had exited when I had the chance.
The net profit and net percentage profit may be a bit unrealistic, because Amibroker is not looking at intraday data. This may result in "cherry picking" during broad market declines over a period of days. The discrepancy to live trading is yet to be seen. So far this year, I am very close to paper trading percentage wise at an 85% APR return. I have included a penny slippage on the limit entries and 5 cents slippage on the market exits, as well as $2 round trip comm. for the optimization.
The maximum system draw downs, typically around 10-15%, should be quite manageable going forward, with the worst being the '08-'09 period of around 35%. It is interesting that the years with the largest draw downs also had some of the greatest returns.
My current live profit factor and percentage winners are both just about on target to the historical averages.
My # of trades per year will likely be higher than paper trading, but if I can keep it to 1000-2000 per year, I feel I will not be overtrading. Around 40 trades per week would be around 2000 trades per year.
Some years the OOS results actually outperformed the IS results, most notably the '06-'07 period. My "realistic" expectation is to maintain a 72% APR. This would be a doubling of account size every 12 months when rolling profits back into the system.
code:
Total Net Profit ($693.87) (Per Share) ($0.07) Gross Profit $1,936.73 Gross Loss ($2,630.60) Profit Factor 0.74 Total Number of Trades 74 Percent Profitable 40.54% Winning Trades 30 Losing Trades 44 Avg. Trade Net Profit ($9.38) Avg. Winning Trade $64.56 Avg. Losing Trade ($59.79) Ratio Avg. Win:Avg. Loss 1.08 Expectancy -0.16 Largest Winning Trade $312.00 Largest Losing Trade ($155.00) Max. Consecutive Winning Trades 11 Max. Consecutive Losing Trades 38 Total Shares/Contracts Held 10600 Total Commission $186.00 Return on Initial Capital -1.13% Annual Rate of Return -56.32% Buy & Hold Return 0.69% Trading Period 7 Dys, 6 Hrs, 15 Mins Max. Equity Run-up(Daily) $1,798.73 Date of Max. Equity Run-up 5/27/2011 15:00 Max. Drawdown(Daily) Value ($2,492.60) Date 5/24/2011 15:00 as % of Initial Capital 4.04% Max. Trade Drawdown ($262.00)
Largest winning trade for the week. Rinse and repeat…
I returned to incorporating some UltraShort ETFs into my overall strategy yesterday and got off to a good start with the DOW retreating 279 on economic worries today. Worries? What a new revelation!
While back testing is still very inconclusive with my rtm strategy on the short side, I don't think the past 5 years have been fair to them. When the ultra short ETFs were introduced in '06, my strategy did very well with them up until the market bottomed in March '09 and went on a bull run.
I want to try to use them when I am not getting many signals on the long side with equities. In fact, when I am not getting long only signals, may very well be a leading indicator that it is a good time to short the market.
I am still working out entry parameters and position sizing with them, but as long as the market doesn't go on another year long plus bull run, today's results show potential.
Here are the ETFs I have chosen to integrate into my strategy:
code:
Total Net Profit $1,461.13 (Per Share) $0.37 Gross Profit $1,605.74 Gross Loss ($144.61) Profit Factor 11.1 Total Number of Trades 30 Percent Profitable 73.33% Winning Trades 22 Losing Trades 8 Avg. Trade Net Profit $48.70 Avg. Winning Trade $72.99 Avg. Losing Trade ($18.08) Ratio Avg. Win:Avg. Loss 4.04 Expectancy 2.70 Largest Winning Trade $246.14 Largest Losing Trade ($111.94) Max. Consecutive Winning Trades 15 Max. Consecutive Losing Trades 6 Total Shares/Contracts Held 4000 Total Commission $74.80 Return on Initial Capital 2.25% Annual Rate of Return 249.71% Buy & Hold Return 0.84% Trading Period 3 Dys, 5 Hrs, 59 Mins Max. Equity Run-up(Daily) $1,531.13 Date of Max. Equity Run-up 6/3/2011 15:00 Max. Drawdown(Daily) Value ($70.00) Date 5/31/2011 15:00 as % of Initial Capital 0.11% Max. Trade Drawdown ($209.27)
This is monthly net profit YTD. May ended with a surprisingly nice net profit in view of the errors committed by me. Using a 10% stop loss earlier in the month hurt strategy performance, as well as my discretionary trading activity. One aspect of my strategy I like is its ability so far to maintain a relatively smooth equity curve through market timing, position sizing, and risk distribution.
nice going, Rol!
may I suggest a larger font size for your posts? at least in my browsers the letters appear to be in ~2point font in your recent posts.
Thanks shortie! It's always nice to hear from long time ET members. I noticed how font size varies depending on the computer I log into. I will just leave the font size code out. Let me know if that improves things, please. I use different fonts for variety and coding practice (I like to code ). In addition, unpredictable fonts are a metaphor for the day-to-day unpredictability of the markets.
Edit:
This is font size = 4. Is that better for you?
Quote from Rol:
Thanks shortie!
A really nice result during this difficult week. I expected something a bit worse than this, wow!
Quote from d08:
A really nice result during this difficult week. I expected something a bit worse than this, wow!
On a roll here... So here is another chart I came up with. It is the number of signals generated on a daily basis for the past few months. It illustrates why being in the markets 100% of the time may be ill advised. You will not be able to take advantage of the dips with rtm trading if you are. It would appear that there are on average, one or two "black-swanoid" events a month to capitalize on. These are days where the strategy generated over 100 signals. In addition, I can see that a maximum position count of anywhere from 50-200 would still provide a nice balance between under and over exposure.
The days that registered 100+ signals are 3/10, 3/16, 4/12, 5/4, and 5/5. If one has the buying power and strategy with a historical win rate around 66%, I don’t know why you would not want to take every signal possible. It has been said, "Be fearful when others are greedy, and greedy when others are fearful".
Engaging multiple targets…
Hi Rol,
You have created a fabulous thread.
The days that registered 100+ signals are 3/10, 3/16, 4/12, 5/4, and 5/5.
Quote from Camdo:
Hi Rol,
Lots of signals also mean the market is going down hard, so it begs the question:
Do entries made on those days have better returns or win probability than normal?
I wanted to give an update for those following along, and to put in writing what I am thinking at this time of market correction. Presently, the stratagem is taking it in the assets. Draw down is hovering about 10%. It should be more like 9%, but I bought 200 shares of ZUMZ outside of the strat causing me to be down about $700 more than I should be. The SP500 has corrected over 5% from its recent highs, so my current DD is within reason at 2X BP. I programmed my trading platform to display in real time equity %DD and exposure for easy reference.
If I had no equity curve and back testing to refer to, I would really be questioning myself right now. This is about how it was during the Japan earthquake regarding DD, although the dollar amount is greater this time around. The strat recovered dramatically then, and I am confident it will recover eventually this time too. While a loss is a loss, it is harder to bear I think when you are below your initial investment as opposed to giving back some of what you have removed from the markets. I am currently down a month or two of profits, oh well.
I fixed the problem I had with not being able to include unrealized P/L in my equity curves. I plan to start a new equity curve at the beginning of each month, instead of a new one each week. I will also post YTD curves monthly. Since my goal is no losing months, it will be interesting to see if the curve of the month can pull out a gain. This month should be especially challenging. I think any time frame less than a month is too short to evaluate a strategy. Ultimately, I want to get to where I can just concern myself with monthly average gains, and not worry at all about daily fluctuations.
Quote from Rol:
The SP500 has corrected over 5% from its recent highs, so my current DD is within reason at 2X BP
__________________
thetrendfollower.blogspot.com
Quote from GekkoToBe:
Is your strategy correlated to the S&P500 ?
Quote from Rol:
Since my goal is no losing months, it will be interesting to see if the curve of the month can pull out a gain.
Quote from benwm:
Rol - I think you have developed a method which seems to have a genuine positive edge, however, I would caution that for a long only strategy such as yours, "no losing months" is an unrealistic goal. You have to accept the bad with the good, and boy, with the way the Fed has printed money the past couple of years stocks have certainly had it good.
I have strategies that I KNOW will have bad weeks and months...it is guaranteed...but they still generate decent profits overall. I view the bad runs as a way of shaking out others who might be testing similar strategies, in the hope that any potential competition will be misdirected from a good strategy. No free lunches, and all that jazz!
What you might want to do is attempt simplify the strategy somewhat so that for the same # of trades you are able to generate similar PnL numbers. That might free up your time to developing a short only strategy to run alongside this strategy.
If you can find a short strategy with a positive edge you will stop caring about the direction of the market. I like the way you've approached this project, but maybe you need to think outside the box, look for a completely different method to add some diversification.
Quote from Rol:
...Currently in a 7% DD, I am still up about 28% for the year.
Quote from In2Deep:
That's pretty excellent, certainly by hedge fund community standards.
Does that include leverage? For example if you did not use leverage would that number be less?
have you considered hedging overnight risk with OTM puts when you approach 2x leverage? the market has been known to dive 5% overnight. i suppose you are still OK even if it drops 10% because you have your profits to cushion the pain. Still, the risk is there.
code:
Total Net Profit ($4,401.82) (Per Share) ($0.40) Gross Profit $2,792.45 Gross Loss ($7,194.27) Profit Factor 0.39 Total Number of Trades 87 Percent Profitable 47.13% Winning Trades 41 Losing Trades 46 Avg. Trade Net Profit ($50.60) Avg. Winning Trade $68.11 Avg. Losing Trade ($156.40) Ratio Avg. Win:Avg. Loss 0.44 Expectancy -0.32 Largest Winning Trade $496.27 Largest Losing Trade ($596.00) Max. Consecutive Winning Trades 15 Max. Consecutive Losing Trades 15 Total Shares/Contracts Held 11000 Total Commission $185.80 Return on Initial Capital -6.83% Annual Rate of Return -241.39% Buy & Hold Return -1.35% Trading Period 10 Dys Max. Equity Run-up(Daily) $1,626.19 Date of Max. Equity Run-up 6/9/2011 15:00 Max. Drawdown(Daily) Value ($5,188.59) Date 6/8/2011 15:00 as % of Initial Capital 8.05% Max. Trade Drawdown ($662.00)
Hi Rol
I came accross this interesting free online book called "Trading Strategies" by Larry Sanders.
http://www.tradelabstrategies.com/
It explains in simple terms the theory of bootstrap (he calls monte carlo), and effects of varying paramenters. In essence a strategies return is a relationship of risk to a strategy's probability and win/loss ratio. Probability being the most influential of a strategy's characteristics and risk being a trade's position size. The book also points out that there is an optimal relationship between equity return drawdown and risk. Drawdown is in fact desirable. After reading this book, your next strategy drawdown will be an elevating experience that "you are optimized"!
Mean Reversion systems are doing terrible at the moment. I do fewer trades and hedge the risk and experienced a very moderate DD of 3%. However, I'm not participating on the upside that much.
I think given a history of simulated results on can roughly estimate the expected DD. On should bear in mind that in can get much worse than that. For example, in January 2008 a few banks got absolutely killed and the trend was even less volatile than in the following October. But in my opinion is still better to run an optimization that to adjust parameters by hand. Give a position size of x% the problem is to maximize the sharpe ratio and/or return/DD for all possible x. This is quadratic programming problem which one can solve by enumeration if the calculation is not to time-consuming. No need for complex algorithms. I usually do this making a ranking of sharpe ratio and total return. A small-position size can be to costly, which is why Kelly betting is optimal given the true (unknown) distribution. To cut off tail risk is makes sense to bet a fraction of Kelly (instead of chosen amount which is arbitrary). In my view it is quite important that one uses all the alpha one can get, i.e. use fixed fractions instead of lots and scale position size with strength of the signal if possible.
My experience with mean reversion is that I prefer a steady decline, rather than a volatile one. A volatile decline often is related to news and therefore the outcome is not as predictable. Most trades focus on changes of prices (the Dow is down by 1%, or worse, the Dow is down by 100 points). But the significance of the ROC is related to volatility. In some periods 1% is a lot and in others it is not. Unfortunately I have never had any success with volatility adjustment. To me it seems it just to noisy. Betas are notoriously unstable.
The beauty of the equity market is that there is always a small probabiliy that an inefficiency occurs in 1 out of 5000 stocks. It is easier to trade from a small capital base, because more stocks are available.
The real, hard problem with automated trading, if one wants to make a business out of it, is, that you really need a multi-system approach. You can't rely on one system, because markets change, and alpha always can dry up. So even while I make a living of mean-reversion, I am working very hard to diversify into other areas, which are not correlated. For instance trading volatility is such an area. Or trading announcements and news is another area. So not only does one need good models, one has to be able to continously come up with new ideas. My guideline is simple things work best. No need for higher mathematics, except for some basic statistical knowledge and some insight into optimization (what a convex function is and stability of parameter choices).
Quote from macrotrader:
The real, hard problem with automated trading, if one wants to make a business out of it, is, that you really need a multi-system approach. You can't rely on one system, because markets change, and alpha always can dry up. So even while I make a living of mean-reversion, I am working very hard to diversify into other areas, which are not correlated. For instance trading volatility is such an area. Or trading announcements and news is another area. So not only does one need good models, one has to be able to continously come up with new ideas. My guideline is simple things work best. No need for higher mathematics, except for some basic statistical knowledge and some insight into optimization (what a convex function is and stability of parameter choices).
Had I not discretionary traded the past month or so, my strategy would be punching thru new equity highs today. The dead cat bounce was what I needed to exit several positions to bring my market exposure down to 50%. I am still down $1200 dollars for the month, so the strategy still has some work to do in order to go green for the month ( if only I would get out of the way!)
code:
Real-time Account Net Worth $64,633.70 Real-time Unrealized P/L ($1,046.11) Real-time Realized P/L (Today) $1,320.53 Current Draw Down -1.62% YTD Return 33%
I am really surprised by how well you held up from your equity high until your last post. It seemed like you were down about 7% in a DD around the 9th but made it all back on the 14th?
Quite remarkable. Even if today turns out a bad day for you I am quite surprised by how well you fared after your initial 7% DD. Care to shed some light on some of the reasons why?
How was today?
Plenty of red numbers on my screen.
I will respond to DGunz and benw in a single post if I may. I was still down $1200 on the 14th, so I did not quite make it all back. A good chunk of the reversal came from JCP, which I was down $1000, but closed it out for a $700 gain. I had also bought several positions on the 12th and 13th on margin which closed green on the 14th. Many other positions just got back to break even on exit, so there has also been considerable churning of positions.
I was stopped out on a few positions today that should have exited yesterday, but this is a discretionary feature I built into the system awhile back. I must say, I was also surprised to see the system rebound on the 14th, but then again the market is also full of surprises. I ended the day today with the same market exposure as I started the day, albeit with a change of positions. I am looking forward to a further sell off to accumulate more shares, possibly for another bounce on Friday.
My strategy basically views all up days in the market as a dead cat bounce, which should be exited at the close. I think by taking this view, one will not be left holding the bag by being over weighted in stocks overnight, should the markets turn lower the following day, such as occurred today. The discipline required for this would be difficult on a discretionary basis; however, it is not a problem for automation.
code:
Real-time Account Net Worth $64,253.24 Beginning Day Account Net Worth $64,625.73 Real-time Unrealized P/L ($468.54) Real-time Realized P/L (Today) ($956.95) Current Market Exposure 49%
I find it strange that you at at the same exposure that you started the day with. Are you manually keeping your self from taking the signals that your system is generating? It just seems curious that you showed so much restraint in holding back from buying during todays dump...surely the system with out manual intervention is long alot more names than you currently have? In anycase, even if you are manually stoping the entries, I would say you did really well in doing that, it is keeping you in the black while the market is going red.
Quote from DGunz:
I find it strange that you are at the same exposure that you started the day with. Are you manually keeping yourself from taking the signals that your system is generating? It just seems curious that you showed so much restraint in holding back from buying during today’s dump...surely the system without manual intervention is long a lot more names than you currently have? In any case, even if you are manually stopping the entries, I would say you did really well in doing that, it is keeping you in the black while the market is going red.
code:
Total Net Profit ($2,118.22) (Per Share) ($0.13) Gross Profit $5,409.80 Gross Loss ($7,528.01) Profit Factor 0.72 Total Number of Trades 133 Percent Profitable 51.13% Winning Trades 68 Losing Trades 65 Avg. Trade Net Profit ($15.93) Avg. Winning Trade $79.56 Avg. Losing Trade ($115.82) Ratio Avg. Win:Avg. Loss 0.69 Expectancy -0.14 Largest Winning Trade $566.00 Largest Losing Trade ($576.25) Max. Consecutive Winning Trades 15 Max. Consecutive Losing Trades 7 Total Shares/Contracts Held 16300 Total Commission $294.00 Return on Initial Capital -3.26% Annual Rate of Return -68.86% Buy & Hold Return -0.52% Trading Period 17 Dys Max. Equity Run-up(Daily) $3,588.16 Date of Max. Equity Run-up 6/14/2011 15:00 Max. Drawdown(Daily) Value ($5,188.59) Date 6/8/2011 15:00 as % of Initial Capital 7.98% Max. Trade Drawdown ($662.00)
code:
Real-time Account Net Worth $63,797.52 Beginning Day Account Net Worth $63,451.27 Real-time Realized P/L (Today) $278.34 Current Draw Down -1.90%
what do you mean by DD? is it calculated relative to the account size at the beginning of the month? peak-to-through DD ~3.7K or 6% (from trade ~ #32 peak)
Quote from shortie:
what do you mean by DD? is it calculated relative to the account size at the beginning of the month? Peak-to-trough DD ~3.7K or 6% (from trade ~ #32 peak)
I am relieved to be breathing again for the month. I gotta say, the strategy really pulled a rabbit out of its arse to come back from an 8%,~$5000 DD. I am seriously considering taking the rest of the month off, as I bailed on all of my positions today. I made a $5,000 contribution, which is likely the last I will make this year, (I have to catch up my 403B).
code:
Real-time Account Net Worth $71,240.06 Beginning Day Account Net Worth $69,190.48 Real-time Cost of Positions $0.00 Real-time Unrealized P/L $0.00 Real-time Realized P/L (Today) $963.22
Getting long iShares FTSE China 25
The strategy exited my FXI trade at the close. I intended to make it a longer term position play, but it reverted nicely today. The nice feature of the strategy is that regardless of any manual entries I may make, it will still exit the position when exit conditions are met. Kind of “set it and forget it”. Several other auto trades remain open.
I felt very comfortable with the FXI entry, as I sensed the high probability signals it gave off (Daily and intraday charts, trading matrix action). If I can restrict manual trading to high probability ETF trades and not stocks, I believe it may be beneficial. I must, however, consider fundamentals and perhaps use hard stops to save me from myself when exploring these types of trades.
A few days ago I thought about sitting the rest of the month out, but that would not be being true to the strategy. Anyway, historically, it tends to outperform the days and often weeks following market selloffs. I still see the S&P bouncing around between 1250 and 1300 for some time, an environment that should suit my strategy just fine.
code:
Real-time Account Net Worth $72,022.83 Beginning Day Account Net Worth $71,217.62 Real-time Unrealized P/L $245.16 Real-time Realized P/L (6/23/11) $528.05
Cannot say it is the smoothest monthly equity curve experienced, but it does appear to have formed a classic Cup with Handle. So far the handle has not broken. In this market, I will take any positive return I can get. The S&P is up about 1% for the year. It is funny to me that the annual rate of return is >20%, which would still be a respectable return. I hope that 8% is my largest DD for some time going forward.
code:
Total Net Profit $939.17 (Per Share) $0.04 Gross Profit $8,281.75 Gross Loss ($7,342.58) Profit Factor 1.13 Total Number of Trades 177 Percent Profitable 59.32% Winning Trades 105 Losing Trades 72 Avg. Trade Net Profit $5.31 Avg. Winning Trade $78.87 Avg. Losing Trade ($101.98) Ratio Avg. Win:Avg. Loss 0.77 Expectancy 0.05 Largest Winning Trade $566.00 Largest Losing Trade ($576.25) Max. Consecutive Winning Trades 16 Max. Consecutive Losing Trades 7 Total Shares/Contracts Held 21500 Total Commission $396.20 Return on Initial Capital 1.44% Annual Rate of Return 21.82% Buy & Hold Return -0.23% Trading Period 24 Dys Max. Equity Run-up(Daily) $5,982.86 Date of Max. Equity Run-up 6/23/2011 15:00 Max. Drawdown(Daily) Value ($5,188.59) Date 6/8/2011 15:00 as % of Initial Capital 7.98% Max. Trade Drawdown ($662.00)
Rol, just wanted to say that I continue to read this thread and that it is an inspiration to me. Keep it up. There are a lot of lurkers like me who are rooting for you.
I have looked at the backtest results and followed the discussion on what I would call the 'averaging problem'. After a lot of work in this area I have concluded that end-of-day tests of this type can be biased and in some cases completely unreliable.
To keep matters simple say I have a MR strategy (SMR) which goes long if the last close is breached (low of the day < prior close). SMR can be tested by doing the following. For every day check whether high > prior close and low < prior close. This means that the price has crossed the target price at least once intraday. For most purposes this is precise enough. So the trade returns for each stock indivually can easily be tested.
Now the number of signals is directly proportional to the change of the market in %. If the market is down 2% usually 95% of all stocks generate a signal. If the market is up 2% usually 5% of the stocks generate a signal. If I backtest this strategy by averaging all signals this will generate outsized returns, because of a lookahead underlying the test. I don't know how many signals (N) occur before the day. If I knew I could allocate 1/N of my capital to each signal and generate the returns, which I get by average(all signals).
The correct way to do this test is to use intraday data and assign capital by occurrence of the signal, e.g. 10% to signal 1 ... 10% to signal 10. then all my capital is allocated, and no slot is free if new lows occur.
To show how biased end-of-day tests can be I have tested a simple strategy similar to SMR. Even if I put 100% of equity in one stock only it generates outsized returns with only a 30% drawdown. This is very unrealistic and most of the profit comes from the implicit lookahead.
It is true that the problem is bigger for a higher number of signals, however, based on my experience I would strongly suggest that you verify your results on intraday data. The best case is that intraday results match EoD results. The worst case scenario would be that the EoD backtest has little resemblence to a real-life performance especially in drawdown periods. As I understand your life results matches your backtest, so a complete lookahead is not in question. However the problem might be more pronounced in drawdowns.
DTN gives you 3 years worth of minute data for 50$/month for all NYSE stocks + the live feed. If you want I can give you python code and some data to get you started.
The test goes like this:
For every stock doTest:
For every minutebar:
checkEntrycondition
If hour == 9 and minute == 30:
do Beginng of Day calculations
If hour == 16 and minute == 0:
do End of Day calculations
For all stocks:
signals = doTest(stock)
makePortfolio( signals) # sort by arrival
My second recommendation would be that you use % position sizing. I can't imagine that the additional benefit of reduced costs due to lot trading outweighs the negative impact due to unlinear scaling. In effect trading 100 shares lots is like assigning a random position size. From my experience position size has a significant impact on returns and sharpe ratio.
Strategies that have something I call alpha factors can be very valuable, that is if the input factors are linear to the alpha of the trade. Say you have a input value (IV) of 1 to 10 and the alpha increases linearly with 1 to 10 from 10bps alpha to 100bps alpha. Then according to Kelly Sizing the position size should be much higher for higher values of IV.
Quote from macrotrader:
I have looked at the backtest results and followed the discussion on what I would call the 'averaging problem'. After a lot of work in this area I have concluded that end-of-day tests of this type can be biased and in some cases completely unreliable.
Regarding the two recent posts about my strategy, I am well aware that portfolio back testing skews the results by not looking at intraday data. I don't need go to the trouble and expense to do intraday testing to show me what I already know. The back testing only laid the groundwork for further strategy refinements, which came later when taken live. I wonder what will be said when I am able to take every signal I get.
At first, I was reluctant to display the back test results because I knew they were outrageous. I got feedback I needed to make live adjustments, so it was not in vain. Now I very rarely refer to the paper trading results. I do, however, still like to see the trades it takes each day.
I used to use % position sizing, but to reduce comm. and simplify orders I went per share. Sometimes a slightly larger position size has helped with profits, so I would expect randomness to cancel out any harmful consequences.
Going forward, I will no longer refer to "my strategy." It will be just "me trading" by the seat of my pants. I may even make some "live calls" taking all the credit for the entries myself. If anyone asks, I will just say, "I have an assistant." I was getting tired of typing "my strategy" anyway. Now I can just type "I." Others can talk freely about the shortcomings of my strategy if they desire, but I no longer feel any need to defend it.
I am thinking of creating a poll to vote on whether I will succeed, or I will blow up.
The bulk of today’s profits came from an opening fade in QUAD. I placed a stop to capture a minimum $300 profit which soon got hit, because I feared the volatility and volume spike. Around high noon I placed several trades in oil related names that I will hold overnight. I am up $250 on my 700 share EWI iShares MSCI Italy Index ETF, and would like to continue holding for more profit. I have my eye on SLV iShares Silver Trust. It is still too soon to try and dig myself out of a $90 hole on that one. I got killed with UFPI at the open. I need to pull up the news on that one tonight, probably a downgrade. I have a few financials, but don’t expect any miracles out of them as the sector is the poster child of bearishness right now. Current exposure is 82%, which is a nice zone I like to work in.
code:
Current Holdings: UFPI ($174.00) -6.82% 25.50 100 $2,550 Univl Forest Products SLV ($90.00) -2.68% 33.54 100 $3,354 iShares Silver Trust KBW ($66.00) -3.46% 19.07 100 $1,907 KBW Inc AIXG ($61.00) -0.62% 32.89 300 $9,868 Aixtron SE ADS GRMN ($24.70) -0.76% 32.36 100 $3,236 Garmin Ltd AU ($2.18) -0.05% 40.05 100 $4,005 Anglogold Ashanti Ltd DWA ($15.00) -0.74% 20.28 100 $2,028 DreamWorks Animation SKG Inc ATPG ($9.53) -0.65% 14.75 100 $1,475 ATP Oil & Gas BK ($5.00) -0.20% 24.70 100 $2,470 Bank Of New York BCS ($1.00) -0.06% 15.40 100 $1,540 Barclays Plc ADS GEOI $4.00 0.20% 20.06 100 $2,006 GeoResources Inc EXH $13.89 0.72% 19.38 100 $1,938 Exterran Hldgs Inc FST $31.00 1.26% 24.62 100 $2,462 Forest Oil Corporation STRI $34.00 2.45% 13.86 100 $1,386 STR Holdings Inc PETD $42.00 1.46% 28.71 100 $2,871 Petroleum Development CWEI $175.00 3.24% 53.98 100 $5,398 Clayton Williams Energy EWI $250.00 2.19% 16.30 700 $11,412 iShares MSCI Italy Index Fd Real-time Account Net Worth $72,479.75 Beginning Day Account Net Worth $71,848.77 Real-time Unrealized P/L $101.48 Real-time Realized P/L (Today) $346.09
At 14:44:12 New York time I panic sold all of my positions ( Ctrl+F12 for TS users). It was purely impulsive behavior as I observed my NW reach a nice round number of 73K. I knew Mr. Market was aware of how fond I am of nice round numbers, and refused to let Him steal my joy.
code:
Real-time Account Net Worth $73,077.99 Beginning Day Account Net Worth $72,468.78 Real-time Unrealized P/L $0.00 Real-time Realized P/L (6/28/11) $700.21
Hi Rol
Maybe you already addressed this question somewhere in the thread, but I noticed you also trade ETFs from time to time. What % of your trades occur in ETFs and how did you determine which ETFs were suitable for trading, in terms of liquidity, bid-ask spreads, etc? Do you have a short list of 50-100 ETFs, say, and does this include commodity ETFs or bond ETFs?
It would be interesting to seperate the results from regular stock trades and ETF trades. Of course, long regular stock is long the averages, but some ETFs are short the averages in the sense that they were created to gain from stock price declines.
If the results for ETFs and stocks were similar you might be able to reduce overall stock directional bias but including a higher proportion of ETFs that are directionally short?
I would suspect that many ETFs would behave differently to regular stocks...
Is that something you have considered?
Quote from benwm:
Hi Rol
Maybe you already addressed this question somewhere in the thread, but I noticed you also trade ETFs from time to time. What % of your trades occur in ETFs and how did you determine which ETFs were suitable for trading, in terms of liquidity, bid-ask spreads, etc? Do you have a short list of 50-100 ETFs, say, and does this include commodity ETFs or bond ETFs?
It would be interesting to seperate the results from regular stock trades and ETF trades. Of course, long regular stock is long the averages, but some ETFs are short the averages in the sense that they were created to gain from stock price declines.
If the results for ETFs and stocks were similar you might be able to reduce overall stock directional bias but including a higher proportion of ETFs that are directionally short?
I would suspect that many ETFs would behave differently to regular stocks...
Is that something you have considered?
I managed a healthy comeback for June, coming back from an 8% DD, and ending the month with a 3.56% return on initial capital of $65,035. I am now 100% in cash. It was a turbulent month to say the least, but I am stronger from it.
I plan to post results for the 2nd quarter and YTD this weekend.
code:
Total Net Profit $2,314.80 (Per Share) $0.09 Gross Profit $9,963.12 Gross Loss ($7,648.31) Profit Factor 1.3 Total Number of Trades 208 Percent Profitable 62.50% Winning Trades 130 Losing Trades 78 Avg. Trade Net Profit $11.13 Avg. Winning Trade $76.64 Avg. Losing Trade ($98.06) Ratio Avg. Win:Avg. Loss 0.78 Expectancy 0.11 Largest Winning Trade $566.00 Largest Losing Trade ($576.25) Max. Consecutive Winning Trades 18 Max. Consecutive Losing Trades 7 Total Shares/Contracts Held 24700 Total Commission $479.80 Return on Initial Capital 3.56% Annual Rate of Return 42.58% Buy & Hold Return -0.23% Trading Period 30 Dys Max. Equity Run-up(Daily) $7,098.33 Date of Max. Equity Run-up 6/29/2011 15:00 Max. Drawdown(Daily) Value ($5,101.59) Date 6/8/2011 15:00 as % of Initial Capital 7.84% Max. Trade Drawdown ($662.00)
Here is a summary of my trading YTD. I would say the numbers are minimally acceptable. I want to keep the APR over 72%, to double account size each year. If anything, this journal is making me understand I am in this for the long haul. With patience, I can be triumphant. I wish to commit to keeping this journal going until I reach 1 million. At my current rate that would occur sometime in 2015. I still plan to migrate over to IB to ramp up buying power in the 4X range, so that should help speed things along. I know there will be many naysayers along the way, which is to be expected. It never hurts to have a plan.
code:
Initial Capital $47,853 Total Net Profit $21,261.48 (Per Share) $0.14 Gross Profit $53,744.09 Gross Loss ($32,482.61) Profit Factor 1.65 Total Number of Trades 1269 Percent Profitable 62.96% Winning Trades 799 Losing Trades 469 Avg. Trade Net Profit $16.75 Avg. Winning Trade $67.26 Avg. Losing Trade ($69.26) Ratio Avg. Win:Avg. Loss 0.97 Expectancy 0.24 Largest Winning Trade $1,936.09 Largest Losing Trade ($796.50) Max. Consecutive Winning Trades 29 Max. Consecutive Losing Trades 38 Total Shares/Contracts Held 148539 Total Commission $3,121.34 Return on Initial Capital 44.43% Annual Rate of Return 73.38% Buy & Hold Return -1.69% Return Retracement Ratio 2.53 Trading Period 5 Mths, 29 Dys, 23 Hrs, 59 Mins Max. Equity Run-up(Daily) $21,628.32 Date of Max. Equity Run-up 6/29/2011 15:00 Max. Drawdown(Daily) Value ($5,498.87) Date 6/8/2011 15:00 as % of Initial Capital 11.49% Max. Trade Drawdown ($1,511.50)
The numbers look nice. How do they compare to the backtested results?
Quote from d08:
The numbers look nice. How do they compare to the backtested results?
The 2nd quarter continued in up trending fashion, with some spikes along the way. The spike up on 5/4 was the VSEA buyout and the spike down on 5/23 was chiefly due to WFC. I felt a warm fuzzy feeling about Wells Fargo because I recently refinanced with them, opened a checking/savings, and got a Visa card with 0% interest for 9 months. This clouded my judgment with the stock. I must never load up on a single stock again. 6/10 losses were from realizing various losses on underperformers.
code:
Initial Capital (7/1/2011) $73,028 Total Net Profit $35.80 (Per Share) $0.00 Gross Profit $1,317.57 Gross Loss ($1,281.77) Profit Factor 1.03 Total Number of Trades 58 Percent Profitable 48.28% Winning Trades 28 Losing Trades 30 Avg. Trade Net Profit $0.62 Avg. Winning Trade $47.06 Avg. Losing Trade ($42.73) Ratio Avg. Win:Avg. Loss 1.1 Expectancy 0.01 Largest Winning Trade $165.51 Largest Losing Trade ($158.00) Max. Consecutive Winning Trades 12 Max. Consecutive Losing Trades 10 Total Shares/Contracts Held 7300 Total Commission $120.00 Return on Initial Capital 0.05% Annual Rate of Return 2.47% Buy & Hold Return -1.00% Trading Period 7 Dys, 6 Hrs, 11 Mins Max. Equity Run-up(Daily) $1,579.70 Date of Max. Equity Run-up 7/8/2011 15:00 Max. Drawdown(Daily) Value ($1,699.71) Date 7/7/2011 15:00 as % of Initial Capital 2.33% Max. Trade Drawdown ($175.74)
code:
Real-time Account Net Worth $73,076.70 Beginning Day Account Net Worth $71,472.33 Real-time Unrealized P/L ($354.35) Real-time Realized P/L (Today) $185.98
Hi Rol,
First off, nice to see you keeping up the effort and providing such detail.
I feel like I'm missing something here, though. From today's numbers:
A. Real-time Account Net Worth $73,076.70
B. Beginning Day Account Net Worth $71,472.33
C. Real-time Unrealized P/L ($354.35)
D. Real-time Realized P/L (Today) $185.98
... shouldn't A = B + C + D ?
Quote from heech:
Hi Rol,
First off, nice to see you keeping up the effort and providing such detail.
I feel like I'm missing something here, though. From today's numbers:
A. Real-time Account Net Worth $73,076.70
B. Beginning Day Account Net Worth $71,472.33
C. Real-time Unrealized P/L ($354.35)
D. Real-time Realized P/L (Today) $185.98
... shouldn't A = B + C + D ?
Quote from Rol:
Hi heech, thanks for following along. I read many of your posts on ET and respect your opinion and knowledge.
Since everything is MTM, the Beginning Day Account Net Worth included the ~$1700 DD, which I recovered from today.
A ~ B + C + D + $1700.
I like the number crunching that TradeStation does and how it displays strategy and actual entries and exits on charts. However from about midnight to market open, it miscalculates numbers, which is the problem I discovered and resolved in my mtm reporting. It may have to do with TS updating their database during this time or something.
Quote from heech:
Most platforms will give you some kind of intraday number account value based on last or ask/bid mid-point, and I take it that's what you're reporting.
I think that you're telling me is, B = your account value at open today = your account value at close yesterday - $1700?
Just my two cents, but I would find the information more clear if you didn't report the value B in its current form. I guess it's an indication of where the market moved before market open...? I'd just report yesterday-settlement, today-settlement values... and break up the difference into realized/unrealized P&L if you're so inclined.
Rol, how was the performance for you for the 11th and 12th?
nice journal btw
Quote from NikEy:
Rol, how was the performance for you for the 11th and 12th?
nice journal btw
. There are some, I believe who are more interested in the performance metrics I post weekly, so that is why I planned this to simply be a weekly journal from the start, with occasional intraweek updates when significant events occur or questions are asked.
code:
Initial Capital (7/1/2011) $73,028 Total Net Profit $780.79 (Per Share) $0.05 Gross Profit $3,699.28 Gross Loss ($2,918.49) Profit Factor 1.27 Total Number of Trades 120 Percent Profitable 54.17% Winning Trades 65 Losing Trades 55 Avg. Trade Net Profit $6.51 Avg. Winning Trade $56.91 Avg. Losing Trade ($53.06) Ratio Avg. Win:Avg. Loss 1.07 Expectancy 0.12 Largest Winning Trade $202.11 Largest Losing Trade ($207.00) Max. Consecutive Winning Trades 12 Max. Consecutive Losing Trades 10 Total Shares/Contracts Held 14600 Total Commission $253.80 Return on Initial Capital 1.07% Annual Rate of Return 27.23% Buy & Hold Return -1.09% Trading Period 14 Dys, 6 Hrs, 11 Mins Max. Equity Run-up(Daily) $3,042.20 Date of Max. Equity Run-up 7/15/2011 15:00 Max. Drawdown(Daily) Value ($2,101.71) Date 7/12/2011 15:00 as % of Initial Capital 2.88% Max. Trade Drawdown ($299.01)
code:
Real-time Account Net Worth $77,813.59 Real-time Unrealized P/L -$737.88
trading metrics
What software do you use to generate your trading metrics? Or do you calculate and graph them all manually? I have traded with multiple platforms and non have that in depth of stats.
I got a substantial reversal in many of my positions today. I had been in a 3.5% DD yesterday from my July 1 balance. I made fresh all-time equity highs also today. I am posting a flavor of my trading today. At one point I had about 37 positions going. I had several profit stop losses in place, but was relieved that they were not hit as the market was higher right out of the gate and didn’t give back much throughout the remaining day. I am up about $1600 for the month after spending much of it underwater. It just reinforces that I cannot be too concerned about daily performance, but should allow my trading to ferment and then drink deeply when the market is drunk with giddiness.
Yesterday, the debt ceiling debate weighed on the markets, but today it appears positive company earnings ruled the day. The market is rather schizophrenic (isn’t it always).
code:
Symbol Type Filled/Canceled LEAP Sell 07/19/11 02:59:50 PM ALL Sell 07/19/11 02:59:46 PM SSW Sell 07/19/11 02:59:32 PM CLGX Sell 07/19/11 02:59:16 PM INFA Sell 07/19/11 02:59:10 PM UAL Sell 07/19/11 02:59:10 PM ASMI Sell 07/19/11 02:59:09 PM AWI Sell 07/19/11 02:59:06 PM QUAD Sell 07/19/11 02:59:06 PM DW Sell 07/19/11 02:59:06 PM WBMD Sell 07/19/11 02:59:05 PM DB Sell 07/19/11 02:59:05 PM MDRX Sell 07/19/11 02:59:04 PM MXWL Sell 07/19/11 02:59:04 PM IPGP Sell 07/19/11 02:59:04 PM TIBX Sell 07/19/11 02:59:03 PM THO Buy 07/19/11 08:36:57 AM STT Buy 07/19/11 08:36:24 AM BRO Buy 07/19/11 08:33:11 AM LHCG Buy 07/19/11 08:31:26 AM LNCR Sell 07/19/11 08:31:22 AM CS Buy 07/19/11 08:31:06 AM LNCR Buy 07/19/11 08:31:03 AM Real-time Account Net Worth $78,612.80 Real-time Unrealized P/L ($1,182.85) Real-time Realized P/L (Today) $1,176.35
Re: trading metrics
Quote from jtrimbe:
What software do you use to generate your trading metrics? Or do you calculate and graph them all manually? I have traded with multiple platforms and non have that in depth of stats.
In the spirit of keeping this journal somewhat entertaining, I thought I would post the largest winning trade when it occurs each month. Here is the largest winning trade so far for July. I don't know if IB has this feature of displaying actual trades on a chart, so if not, it will be something I am going to miss.
code:
Initial Capital (7/1/2011) $73,028 Total Net Profit $2,158.66 (Per Share) $0.11 Gross Profit $5,972.55 Gross Loss ($3,813.89) Profit Factor 1.57 Total Number of Trades 160 Percent Profitable 54.38% Winning Trades 87 Losing Trades 73 Avg. Trade Net Profit $13.49 Avg. Winning Trade $68.65 Avg. Losing Trade ($52.25) Ratio Avg. Win:Avg. Loss 1.31 Expectancy 0.26 Largest Winning Trade $298.50 Largest Losing Trade ($206.75) Max. Consecutive Winning Trades 12 Max. Consecutive Losing Trades 10 Total Shares/Contracts Held 19500 Total Commission $365.80 Return on Initial Capital 2.95% Annual Rate of Return 50.03% Buy & Hold Return -0.32% Trading Period 21 Dys, 6 Hrs, 11 Mins Max. Equity Run-up(Daily) $4,333.32 Date of Max. Equity Run-up 7/21/2011 15:00 Max. Drawdown(Daily) Value ($2,101.71) Date 7/12/2011 15:00 as % of Initial Capital 2.88% Max. Trade Drawdown ($458.00)
code:
Real-time Account Net Worth $81,329.01 Real-time Unrealized P/L ($631.36)
I looked at my trades for the day tonight, and got a kick out of my SON entry. The stock traded 755,094 shares today, and those are my 100 shares that traded at the low! I currently have 1k of unrealized losses and exposure is 71%, so my entry with SON is just a novelty.
This was one of those "one-two punch" days reminiscent of the typical price action during late 2008, early 2009. If you wanted an example, this was it. The tricky part is if we string together a few days like this in a row, as was typical back then.
Hope things are still humming along for you.
code:
Initial Capital (7/1/2011) $73,028 Total Net Profit ($4,390.67) (Per Share) ($0.17) Gross Profit $7,034.02 Gross Loss ($11,424.69) Profit Factor 0.62 Total Number of Trades 211 Percent Profitable 48.34% Winning Trades 102 Losing Trades 109 Avg. Trade Net Profit ($20.81) Avg. Winning Trade $68.96 Avg. Losing Trade ($104.81) Ratio Avg. Win:Avg. Loss 0.66 Expectancy -0.20 Largest Winning Trade $298.50 Largest Losing Trade ($758.00) Max. Consecutive Winning Trades 12 Max. Consecutive Losing Trades 19 Total Shares/Contracts Held 26500 Total Commission $468.80 Return on Initial Capital -6.01% Annual Rate of Return -75.44% Buy & Hold Return -1.27% Trading Period 28 Dys, 6 Hrs, 11 Mins Max. Equity Run-up(Daily) $4,333.32 Date of Max. Equity Run-up 7/21/2011 15:00 Max. Drawdown(Daily) Value ($6,869.67) Date 7/29/2011 15:00 as % of Initial Capital 9.40% Max. Trade Drawdown ($774.00)
code:
Real-time Account Net Worth $74,840.58 Real-time Unrealized P/L ($7,049.49) Current Market Exposure 172%
code:
Initial Capital (1-1-2011) $47,853 Total Net Profit $16,766.81 (Per Share) $0.10 Gross Profit $60,778.11 Gross Loss ($44,011.29) Profit Factor 1.38 Total Number of Trades 1481 Percent Profitable 60.84% Winning Trades 901 Losing Trades 579 Avg. Trade Net Profit $11.32 Avg. Winning Trade $67.46 Avg. Losing Trade ($76.01) Ratio Avg. Win:Avg. Loss 0.89 Expectancy 0.15 Largest Winning Trade $1,936.09 Largest Losing Trade ($796.50) Max. Consecutive Winning Trades 29 Max. Consecutive Losing Trades 38 Total Shares/Contracts Held 175239 Total Commission $3,592.14 Return on Initial Capital 35.04% Annual Rate of Return 52.00% Buy & Hold Return -2.21% Return Retracement Ratio 2.05 Trading Period 6 Mths, 27 Dys, 23 Hrs, 59 Mins Max. Equity Run-up(Daily) $23,836.07 Date of Max. Equity Run-up 7/21/2011 15:00 Max. Drawdown(Daily) Value ($6,876.67) Date 7/29/2011 15:00 as % of Initial Capital 14.37% Max. Trade Drawdown ($1,511.50)
FYI, I would find it interesting (and others probably would as well) if you ran correlation with S&P weekly numbers.
Just paste your % gains/losses every week into a column, and calculate S&P weekly columns in another. Use Excel's =CORREL().
Hey Rol, I'm also considering into automating my system, however I have zero programming experience. I was looking into hiring someone but as I have some free time at nights I would like to take a shot at it myself. How difficult would you say the process is and more importantly how and where do you start?
Quote from heech:
FYI, I would find it interesting (and others probably would as well) if you ran correlation with S&P weekly numbers.
Just paste your % gains/losses every week into a column, and calculate S&P weekly columns in another. Use Excel's =CORREL().
Quote from prjctdork:
Hey Rol, I'm also considering into automating my system, however I have zero programming experience. I was looking into hiring someone but as I have some free time at nights I would like to take a shot at it myself. How difficult would you say the process is and more importantly how and where do you start?
I completely understand, and I thank you for the reply. I've developed a strategy that works well for me. However, I would like to be able to automate it to take out the human emotion and anxiety out of the equation. I see myself making the same mistakes over and over again that go against my rules. So, taking out the advice, which books would you recommend someone to read, who has 0 knowledge on programming and when I mean 0, I mean what is coding?
Quote from Rol:
Thanks for the idea heech. What I came up with is presented here. It shows my usual % profit vs. SP500, and a correlation chart below it. 1 means it was correlated that week and -1 means it was not. I started out the year highly correlated it would appear, but later on it appears relatively uncorrelated.
Quote from heech:
Hey Roi,
Sorry, gave you incomplete instructions. Run CORREL over both series (like, =CORREL(A1:A25, B1:B:25)). The result should be a single number between -1.0 and +1.0.
code:
Date % Chg SP Chg COR 0.47 12/31/2010 0.00% 0.00% 1/7/2011 1.90% 1.11% 1/14/2011 3.42% 1.70% 1/21/2011 -2.64% -0.72% 1/28/2011 -0.74% -0.51% 2/4/2011 3.09% 2.69% 2/11/2011 4.28% 1.49% 2/18/2011 1.19% 1.07% 2/25/2011 -5.30% -1.64% 3/4/2011 2.73% 0.11% 3/11/2011 2.34% -1.23% 3/18/2011 1.41% -2.35% 3/25/2011 5.40% 2.77% 4/1/2011 1.59% 1.41% 4/8/2011 0.30% -0.22% 4/15/2011 4.24% -0.62% 4/21/2011 1.46% 1.32% 4/29/2011 1.90% 1.98% 5/6/2011 4.67% -1.63% 5/13/2011 2.55% -0.12% 5/20/2011 -0.05% -0.32% 5/27/2011 0.64% -0.07% 6/3/2011 -0.72% -2.31% 6/10/2011 -5.90% -2.16% 6/17/2011 3.40% -0.43% 6/24/2011 4.87% -0.19% 7/1/2011 1.65% 5.61% 7/8/2011 -1.43% 0.47% 7/15/2011 2.61% -2.13% 7/22/2011 2.22% 2.19% 7/29/2011 -8.53% -3.24%
Quote from prjctdork:
I completely understand, and I thank you for the reply. I've developed a strategy that works well for me. However, I would like to be able to automate it to take out the human emotion and anxiety out of the equation. I see myself making the same mistakes over and over again that go against my rules. So, taking out the advice, which books would you recommend someone to read, who has 0 knowledge on programming and when I mean 0, I mean what is coding?
code:
{ Buys if Price crosses over Avg and then stays above Avg for one or more bars } inputs: Price( Close ), Length( 9 ), ConfirmBars( 1 ) ; variables: Counter( 0 ) ; if Price > AverageFC( Price, Length ) then Counter = Counter + 1 else Counter = 0 ; if CurrentBar > ConfirmBars and Counter = ConfirmBars then { CB > ConfirmBars check used to avoid spurious cross confirmation at CB = ConfirmBars } Buy ( "MACrossLE" ) next bar at market ; { ** Copyright (c) 2001 - 2009 TradeStation Technologies, Inc. All rights reserved. ** ** TradeStation reserves the right to modify or overwrite this strategy component with each release. ** }
code:
inputs: Price( Close ), Length( 9 ) ; variables: Avg( 0 ) ; Avg = AverageFC( Price, Length ) ; if CurrentBar > 1 and Price crosses under Avg then { CB > 1 check used to avoid spurious cross confirmation at CB = 1 } Sell ( "MACrossLX" ) next bar at market ; { ** Copyright (c) 2001 - 2009 TradeStation Technologies, Inc. All rights reserved. ** ** TradeStation reserves the right to modify or overwrite this strategy component with each release. ** }
Rol, do you trade stocks which have released earnings? Quite a few of them fall throw the floor last week. Thanks.
Quote from macrotrader:
Rol, do you trade stocks which have released earnings? Quite a few of them fall throw the floor last week. Thanks.
Just from skimming your thread I can tell you -- for the benefit of others -- much of your success is from refusing to use stops and not relying on having perfect timing within the range of said stop.
I'm surprised you haven't been attacked by the ignorant ET'er about your refusal to use stops. I suspect that's because you posted a chart of your profit curve. Stops will kill any and all otherwise profitable strategies. I have studied it extensively but if you try to tell this to someone who is struggling you get hounded. Congratulations on discovering the weakness of stops and trying to time the market. The most consistent traders/investors don't rely on either. Diversification is a far superior form of risk management than stops any day of the year!
I was thinking about a stock like EW which went from 90 to 70 without any reversal. Strangely enough the news was very positive, but I suppose it was a technical reaction then. This happens from time to time - it seems there are periods where it happens more often than not.
TS doesn't have a function for filtering events I guess. The problem is if a earning season is bad, negative surprises will be highly correlated. One could probably build a decent indicator out of positive vs negative surprises for the general stock market. In my analysis perhaps 20-30% signals get filtered out. PEAD research suggest there is a trend after announcements, although the studies look at 1-3 months periods.
Quote from Rol:
...
code:
Real-time Account Net Worth $74,840.58 Real-time Unrealized P/L ($7,049.49) Current Market Exposure 172%
Quote from the1:
Just from skimming your thread I can tell you -- for the benefit of others -- much of your success is from refusing to use stops and not relying on having perfect timing within the range of said stop.
I'm surprised you haven't been attacked by the ignorant ET'er about your refusal to use stops. I suspect that's because you posted a chart of your profit curve. Stops will kill any and all otherwise profitable strategies. I have studied it extensively but if you try to tell this to someone who is struggling you get hounded. Congratulations on discovering the weakness of stops and trying to time the market. The most consistent traders/investors don't rely on either. Diversification is a far superior form of risk management than stops any day of the year!
Quote from macrotrader:
I was thinking about a stock like EW which went from 90 to 70 without any reversal. Strangely enough the news was very positive, but I suppose it was a technical reaction then. This happens from time to time - it seems there are periods where it happens more often than not.
TS doesn't have a function for filtering events I guess. The problem is if a earning season is bad, negative surprises will be highly correlated. One could probably build a decent indicator out of positive vs negative surprises for the general stock market. In my analysis perhaps 20-30% signals get filtered out. PEAD research suggest there is a trend after announcements, although the studies look at 1-3 months periods.
Quote from shortie:
you have 4X intraday leverage, correct? have you ever gone more than 2x intraday, removing excess before EOD? do you have plans to add emergency funds if there is a large adverse move on Monday?
Hey Rol,
how is your day? as bad as mine? It's always nicer to suffer together ;)
Quote from NikEy:
Hey Rol,
how is your day? as bad as mine? It's always nicer to suffer together ;)
. I tell the market things like it can kiss my a$$, and it will have to pry my shares out of my cold dead hands...really profound stuff.
I performed a YTD backtest of paper trading, and it would appear I am in the lead, dollar wise and PF. Folks can take it for what it is worth.
any news? how is the current market environment affecting your strategy?
I am skipping the usual weekly stats for the time being. I did not follow my system very well during this market correction, and so the results are not very reflective of true system performance. The worst thing for me to do at this point for myself, as well as others, would be to shut down this thread at this point.
I am including two charts to encourage myself some as I attempt to regroup. I am still positive for the year by 1k, and am up over 12k since system implementation. The broader market is negative on the year. Current equity is 60k, so I am presently in a 26% DD from my equity high of $81300.
My system would have exited about half of my positions on 8-3, where you can see the uptick on the YTD chart. Not wanting to take my losses, I chose to override the exits on close as well as the next day stop losses. I also was gambling with day trading BP, hoping for an intraday reversal that never materialized. These two plan violations probably have resulted in my current losses being close to 2X what they should be.
I also realize I was taking on too much risk by allowing too many entries per day, as well as the overall maximum system positions. I think a good barometer to use would be if the losses ever seem too great to take relative to your account size, then you are taking on too much risk. It only takes a misstep on one day to short circuit your game plan.
I have already implemented changes to reduce risk going forward. I do not think I qualify as "blowing up" at this point. Blowing up to me would be more like a 50-70% DD. I will likely hold my current positions longer as now would seem like a good entry point on many of them. When you have a portfolio, there is a greater likelihood that some of them will recover. I will continue with regular "fund" contributions, as I would whether the market was rising or falling.
I did some interesting backtesting recently involving stocks above and below their 200 DMA. I have done this in the past, but was only focusing on the ending net equity for comparison. The backtesting showed a greater ending net equity when including stocks both above and below their 200 DMA, but the curve is much smoother when only entering when a stock is above its 200 DMA. Anyway, I will post some stats later on my findings.
I wanted to get these backtesting results posted so I can look them over this weekend when I am away from my computer.
The theory, I believe, is if a stock is above its 200 dma, then it is in a longer term uptrend and perhaps the fundamentals are OK on the stock. Also, when the broader market is bearish, you will get fewer signals and will be more on the sidelines.
Being already at 2000 trades in about 10 months, I think I may be over trading a bit. I wanted to keep it under 2000 trades for a 12 month period. There appears to be an advantage to restricting trades to those above their 200 dma. I will be scanning only for those stocks above their 200 dma going forward, and see if it improves performance.
These are YTD paper trading comparison stats.
Comparison Summary:
YTD Comparison charts:
Dear RoI,
very impressed with your work and your journal. Its high quality professional way of doing it, and especially impressive since you have no finance background and come from medical industry. The last post illustrates that even one day not following your system can be so deadly to the overall game-plan. Don't lose heart and keep up the good work. You have miles to go.
I experencied something similar, but I staid out the last 3 days, which saved me a good chunk of the inevitable drawdown. Question is, whether or not we are in crises mode, which can have unpredictable consequences. The last few days were already historic. A sustained downtrend like this occured only once or twice in the last 20 years. Will be looking forward to the rebuilding. I myself am staying out for a while.
I am posting a screen shot of the spreadsheet I use to calculate my position sizing. I am hoping by doing this it will cause me to be accountable to maintaining more conservative settings going forward. I will still leave the actual work of deriving the formulas to the individual.
To give a perspective on the excessive risk I had been taking, I was using a buying power factor of 4, and a scale in factor of 3. A BP factor of 2 might be suitable for 2X overnight BP. A BP factor of 1 would be for a cash account. A higher scale-in factor allows you to be able to add new positions for more days during a continued market decline.
The cells in BOLD are for manually entering desired settings, and the remaining cells are then calculated. This is all done on-the-fly by my auto trading program.
Quote from gmst:
Dear RoI,
very impressed with your work and your journal. Its high quality professional way of doing it, and especially impressive since you have no finance background and come from medical industry. The last post illustrates that even one day not following your system can be so deadly to the overall game-plan. Don't lose heart and keep up the good work. You have miles to go.
Rol
From your first post on this forum:
Quote from Rol:
........ Some reasons for starting this thread are to chronical my performance, force me to go 100% auto and not interfere with the system. ........ I knew after backtesting on a portfolio of stocks, that automation was the only way to achieve this. ........... I wanted to be able to take the human element out of it completely,even including stock selection and the maximum number of stocks to hold. ........ The discretionary trading dips on the equity curve are when I messed with the system.
Quote from Camdo:
Rol
Your posts of late have repeatedly mentioned manual intervention as detrimental to profits, so I thought a reminder of your original intentions would be in order.
Also
In your last batch of posts the table actual.png must be from inception to YTD, as you later show a graph with 1k profit 2011 YTD. So if that is correct then paper trade (8k profit) is better than actual (1K profit). Is this correct?
Still alive? Has a very 2008-like feeling to it.. gosh
Quote from macrotrader:
Still alive? Has a very 2008-like feeling to it.. gosh
Hey,
You don't use stops in your strategy, right? Instead control risk by having many small positions?
When days like today happen I don't see how you can justify that as a good strategy. I mean you started this journal in an environment where every dip was bought over and over again....
Are you changing your strategy at all to long / short or staying the course?
Quote from CA04:
Hey,
You don't use stops in your strategy, right? Instead control risk by having many small positions?
When days like today happen I don't see how you can justify that as a good strategy. I mean you started this journal in an environment where every dip was bought over and over again....
Are you changing your strategy at all to long / short or staying the course?
Quote from CA04:
You don't use stops in your strategy, right? Instead control risk by having many small positions?
When days like today happen I don't see how you can justify that as a good strategy. I mean you started this journal in an environment where every dip was bought over and over again....
I am changing my strategy to buy and hold, along with dollar cost averaging until things stabilize. [/B]
Quote from CA04:
Hey,
You don't use stops in your strategy, right? Instead control risk by having many small positions?
When days like today happen I don't see how you can justify that as a good strategy. I mean you started this journal in an environment where every dip was bought over and over again....
Are you changing your strategy at all to long / short or staying the course?
Quote from In2Deep:
Day's like Monday are exactly why you DON'T want stops IMO. That was pure panic selling. Every pundit had a different rationalization for it.
Hi Rol,
Long time since I commented. Sorry to see your recent events, but glad to see you're sticking to it.
The recent turn of events got me thinking. Your strategy is already somewhat insulated against black swan events for a particular stock, due to diversification. You've shown that major losses in a single trade are generally mitigated by the others.
However, as you have painfully discovered, your long only strategy is quite vulnerable to systematic changes in the market.
I'm wondering, if you developed a strategy to pick stocks to short, to pair with your long picks, whether that would help. It would not necessarily be like traditional pairs trading, where you had to pick a stock in the same sector or with a high correlation. In fact, you'd probably want the opposite.
Cons:
You cut your true buying power in half
More fees
How to pick pairs?
Less profits during good times?
Pros:
Insulated against market-wide down-swings
Less need to monitor or interfere with strategy?
Quote from Kohanz:
Hi Rol,
Long time since I commented. Sorry to see your recent events, but glad to see you're sticking to it.
The recent turn of events got me thinking. Your strategy is already somewhat insulated against black swan events for a particular stock, due to diversification. You've shown that major losses in a single trade are generally mitigated by the others.
However, as you have painfully discovered, your long only strategy is quite vulnerable to systematic changes in the market.
I'm wondering, if you developed a strategy to pick stocks to short, to pair with your long picks, whether that would help. It would not necessarily be like traditional pairs trading, where you had to pick a stock in the same sector or with a high correlation. In fact, you'd probably want the opposite.
Cons:
You cut your true buying power in half
More fees
How to pick pairs?
Less profits during good times?
Pros:
Insulated against market-wide down-swings
Less need to monitor or interfere with strategy?
I made some changes to my system going forward, which should minimize volatility. While I enter positions in 1/3 and then 2/3 increments, I was working under the false assumption that not all my positions would get the full 3/3 fill, which happened during the great sell-off of 2011. In normal times only about 1/3 of my positions go to the full 3/3 fill before exit, so I had been balancing risk for the "good times."
I am returning to position sizing per equal cost rather than equal shares. While I was estimating actual average share price relatively well, it is difficult to gauge the risk taking. When I started my journal some of the smoothness of the curve was due to this equal position sizing by cost, I think.
I have coded my trading platform to alert me when the E mini crosses below its 200 DMA. In addition, I coded my system to only take trades when the E minis, as well as the individual equity, are above their 200 DMA, although it is a little late for that during this end of the cycle. I want to focus on buying dips on stocks that are in longer-term up trends as well as the overall market being in a healthy uptrend. For the time being, I may allow new positions as long as they are above their 200 DMA, even though the E mini is not.
I think the media, market technicians, and algo traders, give so much attention to the 200 DMA, that it is becoming a "self fulfilling prophecy" of sorts that when the market tests the moving average, it can signal a regime change. What I want to avoid are poor quality stocks dropping into the abyss, as well as large down moves in the broader market.
I exited some holdings today to reduce exposure that the system had already exited. Some were for less of a loss and some for more. I am holding on to the remainder of my stock portfolio for the time being in the hopes the market finds a bottom here, and then can trend higher for the remainder of the year. I know "hope" is not a strategy, but it is all I have going at this point.
I started the year with $47,853 and the current balance is $60,806. Net profit is $1,740 and the rest of the gains are from contributions. I can look on the bright side and just pretend that I have remained out of the market this year, and just now am entering.
code:
Initial Capital (8/1/2011) $75,829 Total Net Profit ($15,425.97) (Per Share) ($0.73) Gross Profit $7,796.54 Gross Loss ($23,222.51) Profit Factor 0.34 Total Number of Trades 149 Percent Profitable 43.62% Winning Trades 65 Losing Trades 83 Avg. Trade Net Profit ($103.53) Avg. Winning Trade $119.95 Avg. Losing Trade ($279.79) Ratio Avg. Win:Avg. Loss 0.43 Expectancy -0.38 Largest Winning Trade $1,075.00 Largest Losing Trade ($1,767.00) Max. Consecutive Winning Trades 7 Max. Consecutive Losing Trades 18 Total Shares/Contracts Held 21209 Total Commission $344.20 Return on Initial Capital -20.34% Annual Rate of Return -322.08% Buy & Hold Return -4.20% Trading Period 21 Dys Max. Equity Run-up(Daily) $15,958.98 Date of Max. Equity Run-up 8/17/2011 15:00 Max. Drawdown(Daily) Value ($28,048.64) Date 8/8/2011 15:00 as % of Initial Capital 36.99% Max. Trade Drawdown ($3,114.00) Net Worth $61,827 Weekly Performance 0.31% S&P -4.57% YTD Correlation to S&P 0.65
I took a couple fades off the open with two short ETFs. Only problem was I forgot to change the input setting for position size when I changed my code back to per dollar amount rather than per share, so rather than buying 100 shares of each, I bought 100 dollars of each, lol.
Things have been improving for me. My equity is 67K and it had gotten down to 47K at one point. I still have a ways to go to get back to my equity high of 81K.
I was flat at today's close, but bought 6500 shares of BAC after hours, hearing about Warren Buffett's 5 Billion investment. The stock appears to have broken out of a trading range on a gap up today with increased volume. I wish to treat this as a momentum play, and hold for several months. Could be that retail traders have given up on the stock, and now professionals are beginning to accumulate, or so the story goes.
A went to Barnes & Nobles over the weekend and picked up several books on trading, many on trend following. Here is what I picked up:
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Initial Capital (8/1/2011) $75,829 Total Net Profit ($9,484.48) (Per Share) ($0.31) Gross Profit $11,113.71 Gross Loss ($20,598.19) Profit Factor 0.54 Total Number of Trades 175 Percent Profitable 58.29% Winning Trades 102 Losing Trades 72 Avg. Trade Net Profit ($54.20) Avg. Winning Trade $108.96 Avg. Losing Trade ($286.09) Ratio Avg. Win:Avg. Loss 0.38 Expectancy -0.20 Largest Winning Trade $1,075.00 Largest Losing Trade ($1,767.00) Max. Consecutive Winning Trades 19 Max. Consecutive Losing Trades 17 Total Shares/Contracts Held 30646 Total Commission $527.68 Return on Initial Capital -12.51% Annual Rate of Return -153.73% Buy & Hold Return -2.69% Trading Period 28 Dys Max. Equity Run-up(Daily) $18,564.16 Date of Max. Equity Run-up 8/26/2011 15:00 Max. Drawdown(Daily) Value ($28,048.64) Date 8/8/2011 15:00 as % of Initial Capital 36.99% Max. Trade Drawdown ($3,114.00) Net Worth $67,328.49 Weekly Performance 10.82% S&P 4.77% YTD Correlation to S&P 0.69
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Initial Capital (1-1-2011) $47,853 Total Net Profit $7,162.37 (Per Share) $0.03 Gross Profit $70,131.11 Gross Loss ($62,968.74) Profit Factor 1.11 Total Number of Trades 1677 Percent Profitable 60.94% Winning Trades 1022 Losing Trades 653 Avg. Trade Net Profit $4.27 Avg. Winning Trade $68.62 Avg. Losing Trade ($96.43) Ratio Avg. Win:Avg. Loss 0.71 Expectancy 0.04 Largest Winning Trade $1,936.09 Largest Losing Trade ($1,446.00) Max. Consecutive Winning Trades 29 Max. Consecutive Losing Trades 38 Total Shares/Contracts Held 205594 Total Commission $4,213.85 Return on Initial Capital 14.97% Annual Rate of Return 20.71% Buy & Hold Return -2.21% Return Retracement Ratio 0.78 Trading Period 8 Mths, 1 Dy, 23 Hrs, 59 Mins Max. Equity Run-up(Daily) $23,836.07 Date of Max. Equity Run-up 7/21/2011 15:00 Max. Drawdown(Daily) Value ($34,775.71) Date 8/8/2011 15:00 as % of Initial Capital 72.67% Max. Trade Drawdown ($2,342.00) Net Worth $67,042 Weekly Performance -0.52% S&P Wkly Performance -0.18% S&P YTD Performance -6.35% YTD Correlation to S&P 0.68
Sorry if you already provided the answer to this, but what's the difference between the composed equity curve and equity curve?
Quote from doublet83:
Sorry if you already provided the answer to this, but what's the difference between the composed equity curve and equity curve?
This has been a good thread Rol. Perhaps you will redouble your efforts, use the difficult markets as a motivation tool to improve on your strategy or find alternative ones...
What is your plan of action? Please could you share some of your observations and lessons learned?
Has the journal been worthwhile from your perspective?
Quote from benwm:
This has been a good thread Rol. Perhaps you will redouble your efforts, use the difficult markets as a motivation tool to improve on your strategy or find alternative ones...
What is your plan of action? Please could you share some of your observations and lessons learned?
Has the journal been worthwhile from your perspective?
I just finished programming a disaster stop into my system. If system wide open losses exceed 20% of the net equity, then all positions are closed. This should help keep me from over using margin, and get me out if markets go into a 1929, 1987 type free fall. It appears all the great traders have an uncle point where they get out so that they can think more clearly.
Here is a comparison of 1929, 1987, and 2011. Note how the DOW really drops once the 200 dma is breached:
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Initial Capital (9/1/2011) $66,969 Total Net Profit $1,074.49 (Per Share) $0.17 Gross Profit $1,515.08 Gross Loss ($440.58) Profit Factor 3.44 Total Number of Trades 45 Percent Profitable 68.89% Winning Trades 31 Losing Trades 14 Avg. Trade Net Profit $23.88 Avg. Winning Trade $48.87 Avg. Losing Trade ($31.47) Ratio Avg. Win:Avg. Loss 1.55 Expectancy 0.76 Largest Winning Trade $201.77 Largest Losing Trade ($60.60) Max. Consecutive Winning Trades 6 Max. Consecutive Losing Trades 5 Total Shares/Contracts Held 6390 Total Commission $128.02 Return on Initial Capital 1.60% Annual Rate of Return 70.36% Buy & Hold Return 0.97% Trading Period 8 Dys, 6 Hrs, 19 Mins Max. Equity Run-up(Daily) $1,118.97 Date of Max. Equity Run-up 9/9/2011 15:00 Max. Drawdown(Daily) Value ($139.71) Date 9/2/2011 15:00 as % of Initial Capital 0.21% Max. Trade Drawdown ($314.25) Net Worth $68,046 Wkly Performance 1.83% S&P Wkly Performance -1.56% YTD Performance 16.82% S&P YTD Performance -7.82% YTD Correlation to S&P 0.68
From what I can tell, dip buying is back in favor. I sold my IWM as it topped out this morning, bought it back in the afternoon, and then sold at the close. I want to be more mindful of when an opening range is established like today, and then place buy or sell orders around these extreme support resistance levels. At the same time I should avoid trying to trade the middle of the day when it is choppy.
System trades executed flawlessly. When I first went live with my system, I did not realize that most entries occurred around the open as gap fades, since I only used daily data. For the most part, it just seems to work out that way. As someone who holds a couple days on average, I believe I am classified as an overnight trader, or somewhere between a day trader and swing trader.
I reread the free Turtletrader.pdf recently. I would highly recommend it as there are many nuggets in there. I think the trading rules are more suitable for commodities that can establish long term trends though.
I want to get my NW above 70K by end of the week. I may make a <1K contribution to help it along.
Real-time Account Net Worth $68,749.28
Real-time Cost of Positions $22,452.96
Real-time Unrealized P/L $115.59
Real-time Realized P/L (Today) $621.53
Exposure: 33%
I am holding a couple gold stocks and one silver stock entered today, while selling the rest of my holdings either by being stopped for a gain or exited at the close. Which brings up why I am posting. I decided to disable my stop when a trade has turned a decent profit. What happened today was that 3 trades got stopped out early in the day and then reversed higher. I gave up some larger profits as a result. This goes along with the thinking of letting your winners run. Besides, I want to try and match the portfolio paper trading better. It is difficult to see profits slip away, but to let winners run, you have to accept that you will be giving back some to reach bigger gains.
Real-time Account Net Worth $69,171.74
Real-time Cost of Positions $8,978.38
Real-time Unrealized P/L $144.60
Real-time Realized P/L (Today) $397.69
Before I get into this month's performance, I wanted to talk about my SLW trade as there were several elements to it, and it happens to be my largest winner so far this month. It would have exited around the open had my now disabled profit stop been enabled. However, seeing how it had opened higher and looked to be pulling back to support, rather than settling for a small gain, I added 200 more shares in what I deemed was still the longer-term trend. My entry yesterday was right at the 200 DMA. In addition, the gold and silver sector had been down as a whole, so I felt recent weakness was not company specific. I peeled off 100 shares near the high, and put a tight stop in place, but by this time, it was near the close and looked as if the stock was battling some upward resistance. I had a mental stop to exit BE if things went sour this AM. It is easier to add when you are already up and feel that the stock may be able to gain momentum. I should only do this in the AM, to give it the day to play out.
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Initial Capital (9/1/2011) $66,969 Total Net Profit $3,344.79 (Per Share) $0.35 Gross Profit $3,947.09 Gross Loss ($602.30) Profit Factor 6.55 Total Number of Trades 75 Percent Profitable 76.00% Winning Trades 57 Losing Trades 18 Avg. Trade Net Profit $44.60 Avg. Winning Trade $69.25 Avg. Losing Trade ($33.46) Ratio Avg. Win:Avg. Loss 2.07 Expectancy 1.33 Largest Winning Trade $274.75 Largest Losing Trade ($60.60) Max. Consecutive Winning Trades 20 Max. Consecutive Losing Trades 5 Total Shares/Contracts Held 9501 Total Commission $199.45 Return on Initial Capital 4.99% Annual Rate of Return 116.63% Buy & Hold Return 1.21% Trading Period 15 Dys, 6 Hrs, 19 Mins Max. Equity Run-up(Daily) $3,418.92 Date of Max. Equity Run-up 9/16/2011 15:00 Max. Drawdown(Daily) Value ($139.71) Date 9/2/2011 15:00 as % of Initial Capital 0.21% Max. Trade Drawdown ($314.25) Net Worth $71,106 Wkly Performance 4.04% S&P Wkly Performance 4.93% YTD Performance 21.54% S&P YTD Performance -3.28% YTD Correlation to S&P 0.67
Here is an example where adding to a net profitable position did not work out. I added 200sh as support held and it began moving back higher. However, as the overall market began selling off in the afternoon, CDE followed suit. I think I need to place a hard stop that would guarantee a bigger profit when adding in the direction of the trend, if the original support breaks later in the day. Anyway, I was able to net $30 on the overall trade.
I am in better shape this time then back on August 8 when the S&P closed at 1119. Today it closed 10 points higher at 1129, after the >3% drop in the market along with yesterday’s beating. I took a drubbing in JVA, but managed to exit on a pop today to reduce losses. Current exposure is 197% of Net Worth. I exceeded overnight BP at the open because several entries were triggered simultaneously. I was able to exit enough excess entries for a small profit. Occasionally orders don’t get cancelled fast enough when they all trigger at the same time at the open, so the day could definitely have turned out worse.
I see I got two one star ratings recently. I can’t say I blame you, as performance has been less than stellar. I am still green for the year by about 5%, but the S&P is now down around 10%. I think I am afraid to short the market because I tried it in 2009 as the market continued back above its 200dma. I think the path of least resistance at the present time appears to be down, although I haven’t heard much mention in the media of this being a bear market. Maybe when the majority concludes it is a bear market that will be the bottom. If I was at my computer when the Fed makes any announcements, I could probably make a nice strategy of following any strong trend that develops as a result.
Real-time Account Net Worth $63,297.21
Real-time Unrealized P/L ($6,657.22)
Real-time Realized P/L (Today) ($1,266.17)
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Initial Capital (9/1/2011) $66,969 Total Net Profit ($4,448.32) (Per Share) ($0.28) Gross Profit $5,404.14 Gross Loss ($9,852.47) Profit Factor 0.55 Total Number of Trades 132 Percent Profitable 62.88% Winning Trades 83 Losing Trades 49 Avg. Trade Net Profit ($33.70) Avg. Winning Trade $65.11 Avg. Losing Trade ($201.07) Ratio Avg. Win:Avg. Loss 0.32 Expectancy -0.17 Largest Winning Trade $274.75 Largest Losing Trade ($1,181.00) Max. Consecutive Winning Trades 20 Max. Consecutive Losing Trades 18 Total Shares/Contracts Held 15920 Total Commission $314.65 Return on Initial Capital -6.64% Annual Rate of Return -105.51% Buy & Hold Return -0.90% Trading Period 22 Dys, 6 Hrs, 19 Mins Max. Equity Run-up(Daily) $3,397.53 Date of Max. Equity Run-up 9/19/2011 15:00 Max. Drawdown(Daily) Value ($7,828.63) Date 9/23/2011 15:00 as % of Initial Capital 11.69% Max. Trade Drawdown ($1,945.42) Net Worth $63,298 Wkly Performance -13.40% S&P Wkly Performance -6.78% YTD Performance 5.22% S&P YTD Performance -9.92% YTD Correlation to S&P 0.72
I took a fairly large equity swing today. Unrealized losses were over 10k early on and NW dipped below 60k. I recovered by the end of the day with an $800 profit. I am going back to a smaller position size, with more allowed positions, since I am not comfortable with the larger position size relative to NW, and the associated individual stock DD. I am still over weighted in commodity stocks, but there is much talk about how poorly commodities are doing, so perhaps a bottom might be able to form here. It was also in the news that world markets crossed the bear market threshold recently (-20%), so maybe a short here could be viewed as being late to the market.
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Real-time Account Net Worth $67,218.40 Real-time Unrealized P/L ($3,583.11) Real-time Realized P/L (9-26-11) $801.55
Seems to me you have a viable strategy here. With a strategy like this you're bound to have a big draw down when the market tanks, while outperforming the market in other periods.
The fact that you are still outperforming the market materially during a year with an impressive correction is a very good sign.
I wanted to ask, what is your average position size and how many positions do you typically have on at one time?
Quote from doublet83:
Seems to me you have a viable strategy here. With a strategy like this you're bound to have a big draw down when the market tanks, while outperforming the market in other periods.
The fact that you are still outperforming the market materially during a year with an impressive correction is a very good sign.
I wanted to ask, what is your average position size and how many positions do you typically have on at one time?
I use briefing.com but I only have about 120 or so companies that I'm close to so I watch those guys closely anyway.
Wow! Amazing what a change 2 days in the market can bring. NW went from an intraday low of 60K yesterday, to today’s close of 72K. I gave back about 1K from equity highs today as the markets gave back about half of their gains for the day. I spent most of the late morning lightening up on positions on a discretionary basis, as several of them would have exited yesterday anyway. It was good that I did because the retreat came in the afternoon, so I locked in some gains. Of course I will regret it tomorrow if markets continue higher. However, in this climate, the market has not proven to have much of an appetite for equities. It feels good once again to have a higher cash position.
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Real-time Account Net Worth $72,401.90 Real-time Unrealized P/L ($653.41) Real-time Realized P/L (Today) $2,255.29 Current Exposure: 27%
I took a deviation from my strategy with a core position of 1300 shares in IWM, Russell 2000 Index ETF. My average price is $65.83. I will avoid adding to it unless it hits $60, which would be the low going back to August 2010. I am holding small positions in EBAY, PCLN, and a few others. There are not many stocks left above their 200 DMA… LOL. With the overall market in a trading channel the past couple of months, my entry is on the lower end of the channel. I am up about $850 now with IWM.
I was hedging today using TWM, Proshares Ultra short ETF. My short position was about 1/3 my long, but is 2X, while IWM is 1X. I actually closed TWM near the high today for a net $485 profit. I got out because it really felt like the market was experiencing a blow off bottom. I never thought I would be able to exit it for a gain, and was just using it to minimize losses on my longs. Tomorrow, I may keep trading it as downside protection. Trading TWM today really gave me a feeling of what it is like to trade in the direction of least resistance, while my IWM position is more for a longer-term swing.
Tomorrow is the end of the month, which is another reason I attempted an outsized long position today. I think each new month is like a unique round in the market, with its own challenges, and I am in the ring. Maybe institutions will begin accumulating beginning next month, and bid the market back up. It would be nice if I can hold IWM for a longer-term position play. I managed to dodge a few bullets this month, especially by bailing out last Tuesday, and then allowing my stop losses to trigger on Wednesday, so I want to keep striking while the iron is hot.
I feel like I did when I put on a large short position in July http://www.elitetrader.com/vb/showt...879#post3231879
, but got shaken out of. Now I am on the opposite end of the spectrum. I hope that this time I can follow through with real money in the game, as I really see the markets higher from here by the end of the year.
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Real-time Account Net Worth $74,649.43 Real-time Unrealized P/L $689.75 Real-time Realized P/L (Today) $485.17 Exposure: 130%
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Initial Capital (9/1/2011) $66,969 Total Net Profit $2,668.06 (Per Share) $0.11 Gross Profit $11,676.47 Gross Loss ($9,008.40) Profit Factor 1.3 Total Number of Trades 229 Percent Profitable 64.19% Winning Trades 147 Losing Trades 82 Avg. Trade Net Profit $11.65 Avg. Winning Trade $79.43 Avg. Losing Trade ($109.86) Ratio Avg. Win:Avg. Loss 0.72 Expectancy 0.10 Largest Winning Trade $719.26 Largest Losing Trade ($1,181.00) Max. Consecutive Winning Trades 20 Max. Consecutive Losing Trades 17 Total Shares/Contracts Held 25149 Total Commission $521.01 Return on Initial Capital 3.98% Annual Rate of Return 48.74% Buy & Hold Return -1.16% Trading Period 29 Dys, 6 Hrs, 34 Mins Max. Equity Run-up(Daily) $10,141.45 Date of Max. Equity Run-up 9/30/2011 8:09 Max. Drawdown(Daily) Value ($7,822.63) Date 9/23/2011 15:00 as % of Initial Capital 11.68% Max. Trade Drawdown ($1,945.42) Net Worth $71,146 Wkly Performance 13.65% S&P Wkly Performance -0.33% YTD Performance 19.53% S&P YTD Performance -10.01% YTD Correlation to S&P 0.67
still 130% exposure into Monday?
code:
Initial Capital (1-1-2011) $47,853 Total Net Profit $9,853.63 (Per Share) $0.04 Gross Profit $81,477.75 Gross Loss ($71,624.12) Profit Factor 1.14 Total Number of Trades 1890 Percent Profitable 61.53% Winning Trades 1163 Losing Trades 725 Avg. Trade Net Profit $5.21 Avg. Winning Trade $70.06 Avg. Losing Trade ($98.79) Ratio Avg. Win:Avg. Loss 0.71 Expectancy 0.05 Largest Winning Trade $1,936.09 Largest Losing Trade ($1,446.00) Max. Consecutive Winning Trades 29 Max. Consecutive Losing Trades 38 Total Shares/Contracts Held 228791 Total Commission $4,697.16 Return on Initial Capital 20.59% Annual Rate of Return 24.96% Buy & Hold Return -1.71% Return Retracement Ratio 1.05 Trading Period 8 Mths, 29 Dys, 23 Hrs, 59 Mins Max. Equity Run-up(Daily) $24,160.55 Date of Max. Equity Run-up 9/30/2011 8:09 Max. Drawdown(Daily) Value ($34,775.71) Date 8/8/2011 15:00 as % of Initial Capital 72.67% Max. Trade Drawdown ($2,342.00) Net Worth $71,138 Weekly Performance 13.63% S&P Wkly Performance -0.33% YTD Performance 19.52% S&P YTD Performance -10.01% YTD Correlation to S&P 0.67
Quote from shortie:
still 130% exposure into Monday?
Here are 3rd quarter daily realized gains/losses. Other than the roughly 12 trading days straight sell off, performance was on par. I need to pay more attention to major news, like new hints of recession with the GDP decrease, and the U.S. debt rating downgrade, to which the markets reacted negatively. Go with the trend.
I will be shorting freely this week with my remaining BP, to hedge my longs. I think when earnings season kicks in starting the 11th next week with Alcoa, the Euro zone and Greece will be forgotten about at least temporarily. Maybe the focus will return to company earnings. With many downward revisions, companies should be able to beat expectations. The usual game I see played by analysts.
I pocketed 1.8K through shorting today, but have 10K in unrealized losses on my longs. We are at new lows for the year. I am at 200% exposure, so if markets keep heading lower, I will have to lighten up holdings. My IWM positions is down ($7,052.58) -6.77%. Average price is 65.08 on 1,600 shares. I plan to hold it through the end of the year. I will be turning off strategy automation for new entries.
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Real-time Account Net Worth $65,788.93 Real-time Unrealized P/L ($10,317.05) Real-time Realized P/L (Today) $1,843.66
you have a great strategy. the market is testing your strategy limits.
p.s. and your limits as well
Quote from shortie:
you have a great strategy. the market is testing your strategy limits.
p.s. and your limits as well
Long 100 AAPL. Will be exiting at the close.
Did you hang on through the dip, Rol? If so, you were absolutely rewarded for your positioning. What a rally at the close, there...
Quote from heech:
Did you hang on through the dip, Rol? If so, you were absolutely rewarded for your positioning. What a rally at the close, there...
I would have had a better day if I had just sat tight. I got stopped out of all positions as the market tested support at the open, at least for a decent gain. I believe I could not sit tight because my position size was too large, and recent equity swings were still fresh. Seeing buying strength soon return, I reentered 900 shares long IWM, and 300 TWM as a hedge. Plan to sit tight for now.
Real-time Account Net Worth $76,224.65
Real-time Unrealized P/L $110.71
Real-time Realized P/L (Today) $851.27
I just sold my 900 IWM long position AH. Reason: Government to issue its monthly jobs report tomorrow.
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Initial Capital (10/1/2011) $71,377 Total Net Profit $5,142.96 (Per Share) $0.37 Gross Profit $7,732.71 Gross Loss ($2,589.75) Profit Factor 2.99 Total Number of Trades 120 Percent Profitable 68.33% Winning Trades 82 Losing Trades 38 Avg. Trade Net Profit $42.86 Avg. Winning Trade $94.30 Avg. Losing Trade ($68.15) Ratio Avg. Win:Avg. Loss 1.38 Expectancy 0.63 Largest Winning Trade $1,095.58 Largest Losing Trade ($348.07) Max. Consecutive Winning Trades 12 Max. Consecutive Losing Trades 7 Total Shares/Contracts Held 13799 Total Commission $252.41 Return on Initial Capital 7.21% Annual Rate of Return 363.04% Buy & Hold Return -1.69% Trading Period 7 Dys Max. Equity Run-up(Daily) $10,251.11 Date of Max. Equity Run-up 10/7/2011 15:00 Max. Drawdown(Daily) Value ($5,111.86) Date 10/3/2011 15:00 as % of Initial Capital 7.16% Max. Trade Drawdown ($5,473.00) Net Worth $76,529 Wkly Performance 9.25% S&P Wkly Performance 2.22% YTD Performance 30.78% S&P YTD Performance -8.02% YTD Correlation to S&P 0.68
I closed my COST position midday and then began accumulating 500 shares IWM. Historically, I would have felt I missed out on the big move today and would just sit it out. After reading Reminiscents of a Stock Operator, I just followed the recent trend and jumped back in. The market seems able to “climb a wall of worry” for right now.
code:
Real-time Account Net Worth $77,269.08 Real-time Unrealized P/L $357.37 Real-time Realized P/L (Today) $405.55
Hi Rol, thanks for your thread.
I've been following you for the past few weeks and really enjoyed your comments even if it was not the easiest market to trade recently for a counter-trend trader like you !
I was just wondering what was your criteria to scan stocks ? Do you follow the entire US stocks market or have some kind of filters with regard to volume or volatility ?
Keep up the good work !
Quote from Joman:
Hi Rol, thanks for your thread.
I've been following you for the past few weeks and really enjoyed your comments even if it was not the easiest market to trade recently for a counter-trend trader like you !
I was just wondering what was your criteria to scan stocks ? Do you follow the entire US stocks market or have some kind of filters with regard to volume or volatility ?
Keep up the good work !
code:
Initial Capital (10/1/2011) $71,377 Total Net Profit $5,517.51 (Per Share) $0.26 Gross Profit $9,206.09 Gross Loss ($3,688.58) Profit Factor 2.5 Total Number of Trades 196 Percent Profitable 62.76% Winning Trades 123 Losing Trades 72 Avg. Trade Net Profit $28.15 Avg. Winning Trade $74.85 Avg. Losing Trade ($51.23) Ratio Avg. Win:Avg. Loss 1.46 Expectancy 0.54 Largest Winning Trade $1,095.58 Largest Losing Trade ($348.07) Max. Consecutive Winning Trades 12 Max. Consecutive Losing Trades 12 Total Shares/Contracts Held 21214 Total Commission $413.43 Return on Initial Capital 7.73% Annual Rate of Return 194.26% Buy & Hold Return -0.63% Trading Period 14 Dys Max. Equity Run-up(Daily) $10,938.46 Date of Max. Equity Run-up 10/10/2011 15:00 Max. Drawdown(Daily) Value ($5,111.86) Date 10/3/2011 15:00 as % of Initial Capital 7.16% Max. Trade Drawdown ($5,473.00) Net Worth $78,308 Wkly Performance 0.26% S&P Wkly Performance 5.97% YTD Performance 31.37% S&P YTD Performance -2.53% YTD Correlation to S&P 0.63
Most of today’s profit resulted from entries this morning as the market appeared to be continuing yesterday’s decline, but then reversed to trend higher into the close. I passed up several additional entries that would have worked out as my current settings are not overly aggressive. I may reevaluate the system to be a bit more aggressive the remainder of the year, but not nearly as aggressive as I was starting this year. I am counting on downside volatility to subside over the next few months. Just when people think they have the game figured out from recent market behavior, the market has a habit of changing the game.
I left a lot of profit on the table when I closed my QID too early yesterday. I was reluctant to take any heat on it, and so my stops were too tight.
Real-time Account Net Worth $78,935.56
Real-time Unrealized P/L ($209.85)
Real-time Realized P/L (Today) $482.79
I got the urge today to trade in and out of QID, and caught a piece of the afternoon slide with 300 shares to net around $240. I got stopped out on EDU and NFLX for the rest of the gains. I have turned back on intraday stops on profitable trades. I flip flop on using it because days like today it helps stem losses, but hurts when stocks begin to give up gains and then reverse to close higher. With the nasdaq dropping 2% today, by today’s hedging actions and profit taking, I was able to only drop $150 in net worth on the day. Current exposure is comfortable at 25%.
Real-time Account Net Worth $78,798.05
Real-time Unrealized P/L ($644.36)
Real-time Realized P/L (Today) $297.30
Today’s action looked as if sub 1200 on the S&P was bought up again. I went ahead and entered 300 shares SPY midday to give myself a bit more exposure. If 1191 support gets broken, I will look to short aggressively in the coming days to hedge.
Real-time Account Net Worth $79,112.95
Real-time Unrealized P/L ($472.95)
Real-time Realized P/L (Today) $146.51
Current Exposure: 107%
code:
Initial Capital (10/1/2011) $71,377 Total Net Profit $7,880.81 (Per Share) $0.23 Gross Profit $13,094.54 Gross Loss ($5,213.72) Profit Factor 2.51 Total Number of Trades 341 Percent Profitable 66.86% Winning Trades 228 Losing Trades 112 Avg. Trade Net Profit $23.11 Avg. Winning Trade $57.43 Avg. Losing Trade ($46.55) Ratio Avg. Win:Avg. Loss 1.23 Expectancy 0.49 Largest Winning Trade $1,095.58 Largest Losing Trade ($348.07) Max. Consecutive Winning Trades 13 Max. Consecutive Losing Trades 12 Total Shares/Contracts Held 34246 Total Commission $705.03 Return on Initial Capital 11.04% Annual Rate of Return 182.16% Buy & Hold Return -0.82% Trading Period 21 Dys Max. Equity Run-up(Daily) $13,026.27 Date of Max. Equity Run-up 10/21/2011 15:00 Max. Drawdown(Daily) Value ($5,111.86) Date 10/3/2011 15:00 as % of Initial Capital 7.16% Max. Trade Drawdown ($5,473.00) Net Worth $80,797 Wkly Performance 3.96% S&P Wkly Performance 1.14% YTD Performance 36.57% S&P YTD Performance -1.42% YTD Correlation to S&P 0.64 Real-time Unrealized P/L ($258.53) Real-time Realized P/L (Today) $1,471.09 Current Exposure 15%
I forgot to mention that I activated the index monitor, which shuts down the strategy when the index I track crosses below its 200DMA. I currently use the E-Mini Nasdaq-100. It is the only one above its 200DMA I track. Eventually, I will switch to the mini Russell 2000. The Russell 2000 was the first to breach its 200 DMA on July 29. I noticed in July how many stocks began dropping below their 200DMA, but did not heed the warning. Besides, I thought my strategy was "bulletproof." I like using the futures, because they will alert me to overnight action when they are trading. I feel all this vigilance is necessary to allow me to observe for longer term topping action, and prepare for shorting, rather than succumbing to what happened to me in August.
Outstanding performance Rol
I'm glad you've "immunized" your portfolio with some defensive tactics.
Quote from fickletrader:
Outstanding performance Rol
I'm glad you've "immunized" your portfolio with some defensive tactics.
don't you get an order rate problem? It looks to me like you're sending an awful amount of orders, but will probably be only executed on a portion of it each day. If you're with IB, they would block your account if your execution vs order rate is less than 10%
Quote from NikEy:
don't you get an order rate problem? It looks to me like you're sending an awful amount of orders, but will probably be only executed on a portion of it each day. If you're with IB, they would block your account if your execution vs order rate is less than 10%
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Initial Capital (10/1/2011) $71,377 Total Net Profit $8,519.40 (Per Share) $0.15 Gross Profit $17,036.49 Gross Loss ($8,517.09) Profit Factor 2 Total Number of Trades 565 Percent Profitable 62.65% Winning Trades 354 Losing Trades 210 Avg. Trade Net Profit $15.08 Avg. Winning Trade $48.13 Avg. Losing Trade ($40.56) Ratio Avg. Win:Avg. Loss 1.19 Expectancy 0.37 Largest Winning Trade $1,095.58 Largest Losing Trade ($348.07) Max. Consecutive Winning Trades 23 Max. Consecutive Losing Trades 27 Total Shares/Contracts Held 57575 Total Commission $1,165.50 Return on Initial Capital 11.94% Annual Rate of Return 147.09% Buy & Hold Return 0.09% Trading Period 28 Dys Max. Equity Run-up(Daily) $14,898.96 Date of Max. Equity Run-up 10/26/2011 15:00 Max. Drawdown(Daily) Value ($5,111.86) Date 10/3/2011 15:00 as % of Initial Capital 7.16% Max. Trade Drawdown ($5,473.00) Net Worth $82,779 Wkly Performance 0.87% S&P Wkly Performance 3.73% YTD Performance 37.78% S&P YTD Performance 2.27% YTD Correlation to S&P 0.62
Roi, You mentioned you have 65% of the 8k stks on profit on your testing. Do you have min price and min volume filter rules on your testing or merely entries rules? How do you select your stock to be on live trading from the testing 8k stks? Using percent profit and profit factor to be above some value or manually decide is the equity curve smooth enough for live trading?
Quote from clarodina:
Roi, You mentioned you have 65% of the 8k stks on profit on your testing. Do you have min price and min volume filter rules on your testing or merely entries rules? How do you select your stock to be on live trading from the testing 8k stks? Using percent profit and profit factor to be above some value or manually decide is the equity curve smooth enough for live trading?
RoI, Hello, you have been doing great ! Especially the way you managed last few month's volatility. Very nice.
I trade primarily fx and am trying to think how to approach stocks. I had a basic question on order execution at open and close. Can you please share your experiences on the following thread: Thanks.
http://www.elitetrader.com/vb/showt...=6&pagenumber=1
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Initial Capital (1-1-2011) $47,853 Total Net Profit $17,875.69 (Per Share) $0.06 Gross Profit $97,376.55 Gross Loss ($79,500.86) Profit Factor 1.22 Total Number of Trades 2458 Percent Profitable 61.64% Winning Trades 1515 Losing Trades 940 Avg. Trade Net Profit $7.27 Avg. Winning Trade $64.27 Avg. Losing Trade ($84.58) Ratio Avg. Win:Avg. Loss 0.76 Expectancy 0.08 Largest Winning Trade $1,936.09 Largest Losing Trade ($1,446.00) Max. Consecutive Winning Trades 29 Max. Consecutive Losing Trades 38 Total Shares/Contracts Held 284957 Total Commission $5,874.41 Return on Initial Capital 37.36% Annual Rate of Return 37.89% Buy & Hold Return -2.54% Return Retracement Ratio 1.53 Trading Period 10 Mths, 23 Hrs, 59 Mins Max. Equity Run-up(Daily) $30,922.59 Date of Max. Equity Run-up 10/26/2011 15:00 Max. Drawdown(Daily) Value ($34,775.71) Date 8/8/2011 15:00 as % of Initial Capital 72.67% Max. Trade Drawdown ($2,342.00) Net Worth $82,333 YTD Performance 36.85% S&P YTD Performance -0.20% YTD Correlation to S&P 0.62
That's a pretty good comeback Rol. Well done.
I'm sure you've learnt a lot during the process to improve your system.
Quote from Rol:
Hi clarodina,
It is always nice to see a stock return a high PF in backtesting, but I don’t limit stocks to only those with a high PF. That would be too easy to exploit (I have tried it). Past equity curves of a stock do not predict future success. Unforeseen events could always strike a company. The edge, I believe, comes from overlaying all of the individual equity curves to produce a “net equity curve,” and trying to determine if that curve is realistic and acceptable.
Quote from clarodina:
Not talking about having min price and vol filter on your live filtering but rather on your testing rules on historical data. Some stks have OHLC having good equity curve on testing but they are not realistic on live trading due to liquidity problem and low price but they have good curve. Do you have min vol rule on your testing?
You don't choose stks with high pf or equity curve? What do you use? You would choose a stk with side way equity on your testing for live trading?
Isn't layering the sideway curve reduce the good curve of net equity curve?
Quote from Rol:
I could remove the net losers, but as trades occur the equity curves are changing, and stocks may move from the net winner column to net loser column, and vice versa. I don't know how a stock will perform when I buy it. This unknowingness of which stocks will perform and which ones will not can be an asset
Quote from clarodina:
Rol, have you consider the smooth curves are due to random factors on testing individual stk? you mention about as trades occur the equity curves are changing, and stocks may move from the net winner column to net loser column. Isn't this suggesting that the rules do not have an edge. If the rules have an edge on the particular individual stk, smooth curve should continue at least not much less compare to sideway curve from another indivudual stk. And layering of many different smooth curve should be better than layering of many smooth curve and not so smooth curve on live trading. This bring to the issue of should the sideway or downtrend curves be eliminated.
Curve 1
Quote from Rol:
I have thought of and tried before what you suggest of removing stocks that are losers, but in live trading it did not appear to help any. I am not able to take every trade anyway a stock triggers, due to BP limitations. I would have to take every trade to be able to benefit from any smooth uptrend. My strategy is portfolio based so some of the logic does not apply as if you were using a strategy applied to a futures contract. I don’t really ask why my strategy works at a particular time on a particular stock, and not another stock and another time. It just appears to me in live trading that given enough BP this is a strategy that works for me. I would say only about 10% of the equity curves could be called smooth. Most are not. I mentioned earlier in my journal that individual curves are often jagged. When would you determine that a curve is smooth enough to accept while going through a few thousands symbols? It is only the portfolio equity curve that becomes smooth over a long enough time period, and even it has occasional large DD. Newer stocks may not have much backtesting data to generate a meaningful curve. Would I eliminate those too? Sure I could optimize for an individual stock to produce a nice smooth equity curve, but it would be subject to curve fitting. I have tried to optimize for all stocks with a “best fit”. Given enough time, maybe decades, I think all stocks would become net profitable with my strategy. I just don’t have the luxury of waiting that long. The trick to interpreting backtesting data comes when applying it to the real world. Why don’t you post 6 random stocks you would like to see equity curves on, and later I will show them with my current settings? Maybe it will give you an idea of how difficult it might be to do what you suggest.
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Rol, some pics for you. One of them is sideway. The other is uptrend and one with period of no trades due to min vol or min price not satisfy. There are other pics with downtrend. Do you have pic of the first one the one with period of no trades? You mentioned you have min vol and min price on your rules for historical testing. You include those sideway curve on layering? You try filtering the sideway curve and the result of live trading didn't out do without filtering? Would you provide some stat?
Quote from clarodina:
Rol, some pics for you. One of them is sideway. The other is uptrend and one with period of no trades due to min vol or min price not satisfy. There are other pics with downtrend. Do you have pic of the first one the one with period of no trades? You mentioned you have min vol and min price on your rules for historical testing. You include those sideway curve on layering? You try filtering the sideway curve and the result of live trading didn't out do without filtering? Would you provide some stat?
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Initial Capital (11/1/2011) $81,531 Total Net Profit $714.89 (Per Share) $0.03 Gross Profit $3,818.05 Gross Loss ($3,103.16) Profit Factor 1.23 Total Number of Trades 139 Percent Profitable 39.57% Winning Trades 55 Losing Trades 84 Avg. Trade Net Profit $5.14 Avg. Winning Trade $69.42 Avg. Losing Trade ($36.94) Ratio Avg. Win:Avg. Loss 1.88 Expectancy 0.14 Largest Winning Trade $1,311.66 Largest Losing Trade ($386.32) Max. Consecutive Winning Trades 10 Max. Consecutive Losing Trades 34 Total Shares/Contracts Held 21286 Total Commission $359.66 Return on Initial Capital 0.88% Annual Rate of Return 79.72% Buy & Hold Return -0.12% Trading Period 4 Dys Max. Equity Run-up(Daily) $1,859.69 Date of Max. Equity Run-up 11/3/2011 15:00 Max. Drawdown(Daily) Value ($669.01) Date 11/2/2011 15:00 as % of Initial Capital 0.82% Max. Trade Drawdown ($654.00) Net Worth $83,017 Wkly Performance 0.29% Dollar Gain/Loss $192 S&P Wkly Performance -2.32% YTD Performance 38.28% S&P YTD Performance -0.10% YTD Correlation to S&P 0.62 Real-time Unrealized P/L ($780.96) Real-time Realized P/L (Today) $22.58 Current exposure 61%
Rol, trying to search your post on min volume and price filter you use for the filtering out the stks. Whats your min volume and min and lax price do you use for live trading? Typically you have how many stks for live trading satisfying the min vol and price filter? And you mention you have a equal dollar for each stk. You have code autoing the calculation of the size number for order on ts code or the macro for auto placing order? Did not use ts
I am down 2.7K on Diamond Foods, DMND. There are several class action lawsuits regarding financial reporting. I was down 1.5K by the time the lawsuits made the news. I forgot my rule of just exiting when there are new class action lawsuits on a company. I can't generate an equity curve right now because TS hangs because I added 100sh afterhours yesterday. I still have $400 in net profits for the month, and am at new equity highs due to contributions. There are going to be a few bombs like this a year, so it reminds me to keep my position sizes small. I noticed several stocks gapping down double digits recently, so I guess I was bound to hit a landmine. My current plan is to keep DMND for the time being, but not try to add until the stock gets to 30. Right now, it is at 35.74. The CEO was on Cramer in September when the stock was in the 90s, saying how great things were and that the acquisition of Pringles would happen in December.
Real-time Account Net Worth $84,115.98
Real-time Unrealized P/L ($3,303.23)
Thread dead? Too bad, it was an interesting read.
Quote from d08:
Thread dead? Too bad, it was an interesting read.
Quote from Kohanz:
10 days without an update is a bit early to be calling the thread "dead"...
Greetings d08 and Kohanz, I wondered how long it would be before those following along wondered what happened to me ;). I am in my usual DD along with the market, but it is worse due to not following my system (12K DD). I thought keeping this journal would make me stick to my system better, but it has not. I originally intended my strategy to be completely passive and when I try hedging discretionary, it spills over into all of my trading, and I lose control. A major goal of mine was to see if a 100% mechanical system is possible. I am reading Alexander Elder's Trading For A Living, and he talks about losing traders as alcoholics, and to be a successful trader you need to view yourself as a recovered alcoholic for the rest of your trading career. When I start trading discretionary, I feel like a recovered alcoholic that starts drinking again. I am net negative with my shorting efforts for the year, so hedging has not worked for me. It might work for others, but I have to acknowledge and respect my weaknesses. It may seem dumb to others, but I feel more comfortable viewing myself as a Captain that has the courage to go down with his sinking ship, confident that it is seaworthy, rather than abandoning ship at the first signs of an approaching storm, to cling to any driftwood that floats along, hoping the sharks don't get him. I have decided to withdraw about 30K, to pay off an auto loan, a credit card, and a loan from my 403B. I also think my goal of trying to hit 100K by end of year has not helped and may have contributed subconsciously to my discretionary trading. At least for me, setting dollar goals is not helpful because I don't know how the markets will behave. Traders should get use to sporadic gains and losses as the norm. I may start a new journal beginning the New Year with a clean slate. I feel like I need a break. Switching to IB will have to wait. I would likely need closer to 130K anyway to use portfolio margin effectively because a DD could put me under 100K which would trigger a margin call. Looking on the bright side, my system looks as if it took some nice entries in futures, which often end up profitable.
Sad to hear that. Your journal was the most interesting one, not only because I follow a similar type of strategy but because you offered the most insight into the development process.
We've all had the "itch" to interfere and it's one of those things you just need to control. You have to be "perversely" disciplined about it, in that you have to have blind trust in your system. I guess since you were successful or at least a breakeven trader with your discretionary methodology, it gave you extra confidence which ended up hurting you when trading auto.
In my view, hedging is needed only in the following cases: drawdown sensitive fund managers who need to offset risk and are willing to sacrifice returns or when it's a part of the strategy. The proper way to hedge an RTM strategy is to use another trending one which more often than not wouldn't correlate, easier said than done.
Hope to see you going again in 2012.
A very good journal. Thanks Rol for sharing.
Come back stronger...
You can read my new journal here Hammering away, slow and methodical.
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