Based on the various comments I received, I decided to add a filter to my original system so that it does not place trades every day but just on days when the filtered conditions are met. Using a 2:1 leverage and interest rate of 10% per annum, and trading the NDX100 stocks for the last 4 years, the results are as follows: Long + Short Starting Capital $1,000,000.00 Ending Capital $2,096,105.13 Net Profit $1,096,105.13 Net Profit % 109.61% Annualized Gain % 20.35% Exposure 36.12% Number of Trades 4,089 Avg Profit/Loss $268.06 Avg Profit/Loss % 0.48% Avg Bars Held 2.24 Winning Trades 2,866 Winning % 70.09% Gross Profit $4,164,397.29 Avg Profit $1,453.03 Avg Profit % 2.52% Avg Bars Held 1.59 Max Consecutive 40 Losing Trades 1,223 Losing % 29.91% Gross Loss ($3,061,302.07) Avg Loss ($2,503.11) Avg Loss % -4.28% Avg Bars Held 3.76 Max Consecutive 15 Max Drawdown ($284,261.38) Max Drawdown % -17.03% Max Drawdown Date 10/7/2008 Wealth-Lab Score 46.75 Profit Factor 1.36 Recovery Factor 3.86 Payoff Ratio 0.59 Sharpe Ratio 2.04 Ulcer Index 2.61 Wealth-Lab Error Term 1.63 Wealth-Lab Reward Ratio 12.52 Luck Coefficient 10.98 Pessimistic Rate of Return 1.32 Equity Drop Ratio 0.17 For reference, the original system under the same conditions produce the following results Long + Short Starting Capital $1,000,000.00 Ending Capital $1,755,566.89 Net Profit $755,566.89 Net Profit % 75.56% Annualized Gain % 15.13% Exposure 19.64% Number of Trades 2,290 Avg Profit/Loss $329.94 Avg Profit/Loss % 0.64% Avg Bars Held 2.18 Winning Trades 1,667 Winning % 72.79% Gross Profit $2,247,095.20 Avg Profit $1,347.99 Avg Profit % 2.69% Avg Bars Held 1.61 Max Consecutive 42 Losing Trades 623 Losing % 27.21% Gross Loss ($1,491,063.50) Avg Loss ($2,393.36) Avg Loss % -4.85% Avg Bars Held 3.69 Max Consecutive 10 Max Drawdown ($118,258.75) Max Drawdown % -9.04% Max Drawdown Date 10/7/2008 Wealth-Lab Score 70.06 Profit Factor 1.51 Recovery Factor 6.39 Payoff Ratio 0.55 Sharpe Ratio 2.2 Ulcer Index 1.72 Wealth-Lab Error Term 2.98 Wealth-Lab Reward Ratio 5.08 Luck Coefficient 7.96 Pessimistic Rate of Return 1.39 Equity Drop Ratio 0.08 A couple of observations: 1. The original system has less profits but a better Profit Factor and a great Sharpe Ratio. 2. Drawdowns are also lower for the original system. 3. The original system will be a pain in the butt to place 100 trades everyday if used manually. I will be posting the filtered system alerts too here. If one can stand a 17% drawdown, then this is a nice system... atleast theoretically till now. :
Symbol Date ChartScript Order Shares Type Price Signal Name ADBE 9/16/2009 %H&L - Filtered Buy 1000 Limit 30.45 H&L Filtered GENZ 9/16/2009 %H&L - Filtered Buy 600 Limit 54.27 H&L Filtered HOLX 9/16/2009 %H&L - Filtered Buy 2000 Limit 15.37 H&L Filtered LLTC 9/16/2009 %H&L - Filtered Buy 1200 Limit 25.59 H&L Filtered ORCL 9/16/2009 %H&L - Filtered Buy 1400 Limit 21.13 H&L Filtered QCOM 9/16/2009 %H&L - Filtered Buy 700 Limit 44.00 H&L Filtered XLNX 9/16/2009 %H&L - Filtered Buy 1500 Limit 20.66 H&L Filtered
Symbol Date ChartScript Order Shares Type Price Signal Name ADBE 9/17/2009 %H&L - Filtered Buy 1000 Limit 30.45 H&L Filtered AMAT 9/17/2009 %H&L - Filtered Buy 2300 Limit 12.85 H&L Filtered BIIB 9/17/2009 %H&L - Filtered Buy 600 Limit 48.92 H&L Filtered BRCM 9/17/2009 %H&L - Filtered Buy 1100 Limit 27.22 H&L Filtered CMCSA 9/17/2009 %H&L - Filtered Buy 2000 Limit 15.18 H&L Filtered GILD 9/17/2009 %H&L - Filtered Buy 700 Limit 44.86 H&L Filtered INTC 9/17/2009 %H&L - Filtered Buy 1600 Limit 19.17 H&L Filtered INTU 9/17/2009 %H&L - Filtered Buy 1100 Limit 27.15 H&L Filtered LLTC 9/17/2009 %H&L - Filtered Buy 1200 Limit 25.81 H&L Filtered LOGI 9/17/2009 %H&L - Filtered Buy 1700 Limit 17.88 H&L Filtered LRCX 9/17/2009 %H&L - Filtered Buy 1000 Limit 29.60 H&L Filtered MCHP 9/17/2009 %H&L - Filtered Buy 1200 Limit 25.41 H&L Filtered MRVL 9/17/2009 %H&L - Filtered Buy 2000 Limit 14.80 H&L Filtered MXIM 9/17/2009 %H&L - Filtered Buy 1700 Limit 17.93 H&L Filtered NVDA 9/17/2009 %H&L - Filtered Buy 2100 Limit 14.07 H&L Filtered ORCL 9/17/2009 %H&L - Filtered Buy 1400 Limit 21.13 H&L Filtered QCOM 9/17/2009 %H&L - Filtered Buy 700 Limit 44.00 H&L Filtered TEVA 9/17/2009 %H&L - Filtered Buy 600 Limit 49.93 H&L Filtered XLNX 9/17/2009 %H&L - Filtered Buy 1500 Limit 20.66 H&L Filtered
Symbol Date ChartScript Order Shares Type Price Signal Name ADBE 9/18/2009 %H&L - Filtered Buy 1000 Limit 31.21 H&L Filtered AMAT 9/18/2009 %H&L - Filtered Buy 2300 Limit 12.87 H&L Filtered BIIB 9/18/2009 %H&L - Filtered Buy 600 Limit 49.75 H&L Filtered CHKP 9/18/2009 %H&L - Filtered Buy 1100 Limit 26.71 H&L Filtered GILD 9/18/2009 %H&L - Filtered Buy 700 Limit 45.17 H&L Filtered HOLX 9/18/2009 %H&L - Filtered Buy 1900 Limit 15.71 H&L Filtered LLTC 9/18/2009 %H&L - Filtered Buy 1100 Limit 26.47 H&L Filtered LOGI 9/18/2009 %H&L - Filtered Buy 1700 Limit 17.94 H&L Filtered MCHP 9/18/2009 %H&L - Filtered Buy 1200 Limit 26.08 H&L Filtered MXIM 9/18/2009 %H&L - Filtered Buy 1700 Limit 17.93 H&L Filtered NVDA 9/18/2009 %H&L - Filtered Buy 2100 Limit 14.41 H&L Filtered ORCL 9/18/2009 %H&L - Filtered Buy 1400 Limit 21.24 H&L Filtered QCOM 9/18/2009 %H&L - Filtered Buy 700 Limit 43.86 H&L Filtered SYMC 9/18/2009 %H&L - Filtered Buy 2000 Limit 15.15 H&L Filtered
This is a tip: You only use the system with the highest sharpe ratio, and lever up. Your calmar was much higher with the original system, and I think you need to look back at why. The point is your system at 20% from 15% could have the exact same annualized return if you use .2/.15 more equity percentage wise with the system. So the original was the better system. The other way is to make it to where the drawdowns are comparable, in which case, you'd use .17/.09 more equity, going into margin, and you'll have a lot higher returns that way as well. I'm not sure the new one was an improvement looking at it, but at least we're over that 20% threshold. I also noticed a lot more trades over the first Mechanical Swing trading system thread you started. Was there a reason for this?
This variation is more aggressive and that is reflected in the larger number of trades. Thanks for the discussion. That helps not only me but the other readers as well.