You are right Ash. Infact, I have said in the original post that I would, if the logic would have considered "worth of trying" by the experts of the board. That is the reason of the discussion. To gather possible comments/improvements before, in case, implementing it in code and backtesting it. Some experts here have expressed the "a priori" opinion that something so simple is just newbie stuff that cannot work. Probably they are right, considered that when you state that a strategy will not work it's * very * unlikely that you are wrong! Others have provided nice suggestions and I think there is already an improvement to the original idea. Also, thoughts about the parameters could be useful. I will see the final "verdict", after some discussion, and in case it is not negative, I will proceed with tests... Tommaso
It's already been said here, but to reiterate, there is NEVER an advantage to holding a long and short position at the same time. It is identical to being flat and thus results in extra commission and slippage, which you should be trying hard to eliminate.
Though there is an advantage to running separate systems on top of each other, whether in a single account or not. As long as both systems are proven independently profitable (vastly independent equity curves are even better).
That's correct, but it's a different issue than opening a long and short position at the same time for no reason.
Right, I think we already did, by converting the first idea to the 1 acct version. Which is also nice because it would also allow to play easily multiple instances of the same strategy ("dependent" or "independent" is to be seen...). But, as walterjennings suggests, if they run each with its (hopefully profitable) logic, we might still see (by chance) that occurrence ("holding a long and short position at the same time"). Or are you suggesting, that - in general - we should always avoid the occurrence (by forcing some close) when running multiple systems, because doing so would anyway yield a better strategy? T
No, it's perfectly okay to have the natural result of being "long" and "short" at the same time, as long as you're not doing it for the sole purpose of doing it. Two separate systems being long and short at the same time, both with solid mone management parameters, can yield good results. Each just needs a reason to be long or short. I've often heard people say, more often in forex, which I gather really draws the newbies, that they "hedge" themselves by taking the opposite position of their existing one. For some reason, the obvious fact that they've simply closed their initial position seems to elude them. My simple point is that opening an equally sized long and short position in 2 separate accounts at the same time is useless, unless each trade has a specific purpose and different exit parameters. Your initial post indicated that you would open both positions, which serves no purpose. Simply wait for your conditions to be achieved, take the subsequent trades, and you may have something.
Agreed. Your comment is very wise. I am still unsure about the fact that, in case one uses a pair of account, they should run independently, or perhaps some form of dependence [like the one i previously called "relay race" (i made it up!) ] could improve. I guess it's hard to forecast without testing... In case we do not specify a "target unrealized" G and let the price run down until some price "inversion" occurs again (which seems more sensible to me), it may be nice that the other account prepares to open (long) while taking as "base price" p that one where the other account begun it's race (hopefully) down. [I guess that also this "relay race" mechanism could be done, by "constraining" the parameters, on a unique account. ] Tommaso
based on reactions, not even worth studying this. Start simple, don't post your thesis for people , we have better things to do with our time. And yes it has been done before, and yes it probably does not work like you dream...
I am definitely sure it will not change your thumbs up, but note we have switched talking about the revised version on pag. 2: http://www.elitetrader.com/vb/showthread.php?s=&threadid=169047&perpage=6&pagenumber=2 Note also I am not dreaming anything about this specific algorithm. I have been asked to take a look and I am just enjoying sharing thoughts with the bright people on this board. And if you have any is most welcome. T
I have seen this method of trading before. We called it hedging. LONG SIDE: As the stock went higher (and your were profitable) you added more shares to your winners. As soon as it starts to turn down, you close the first long position. SHORT SIDE: As the stock goes higher, you just hold the short position. Then when the stock price starts to go down (when the first Long position is closed), you add to your short position. The price doesn't have go down far for you to take profits on your 2nd short position. and so forth... It sounds complicated but it's not. However, it is near impossible if done manually. It's easy with an ATS and requires 2 accounts. I don't think it can be done with 1 account. When I was doing it though I was actually doing it with crummy stocks that weren't moving enough, and because I was so caught up with other trading strategies and software development I pursue this strategy. It certainly cannot hurt to simulate it a while see if it pans out. Ed