Can a system perform well on the ES but not stocks

Discussion in 'Index Futures' started by jem, Dec 15, 2001.

  1. jem


    I have an interesting dilemma. I trade using a discretionary, pullback type of style. However, for years on and off I have been attempting to design a system. I finally stumbled onto one that I threw together with just two simple indicators. (I have trouble believing in it because it buys highs as opposed to pull backs)

    I have back tested it on stocks and futures. On some stocks it does well, on some it kind of scratches or loses a little. On the NQ it is nicely profitable but it has more losing trades than winners and occasionally it has a fairly large losing trade.

    However, on the ES it does well, more winners than losers and the winners are bigger than the losers. It performed well in the back test and it is doing well real time this month.

    My question is--- should I be suspicious of a system that does well on ES but not so well on stocks?

    By the way it was not optimized on the data by a computer, however it was sort of based on observations that I have made in my own trading.

  2. dozu888


    From my own experience, I had played with a few systems which did OK in last year's volatile days but not too well on stocks. So I suppose your situation is certainly possible.
  3. PKJR


    The short answer is not - each market has its own personality and the moment you start fine tuning your system to one market it will not perform as well in another. I know some markets that are very harmonic but I can also find a lot that are not. If my system is based on certain behavior that is not found in some other places, it will eventually fail.

  4. tntneo

    tntneo Moderator

    I often hear these kind of questions..

    I fully agree with the comments so far. here are some reasons why it is the way it is :

    markets have a kind of signature. this signature is made of several components you can analyse.

    - bar size (bar volatility) : what is the variation of price (in % of the last price) ?

    - average volume per bar / per day

    - long term trend : is the market going up or going down (this has major consequences because the limit when going down is ZERO, going up is not limited.. this influences psychology of the market participants)

    - acceleration capability : some markets can accelerate up or down quickly. other markets are like walking zombies. you can make money with both.
    Nasdaq 100 is an example of a market with good acceleration capability. some nasdaq stocks have even more acceleration.

    - swing size : what is the average advance or decline before a reversal ( this is fractal there are several swing sizes interleaved)

    markets with similar characterics can be traded with the same strategies.

  5. What you should question more is a system that claims to trade equally well for futures and equities.

    Even a mechanical system that claims to trade well across all equities is unlikely due to differences in trading patterns that generally require a degree of customization or optimization to accomodate all the differences.
  6. I would be suspicous of all systems. Some perform better in certain market conditions than others. But if it's working why not stick with it. What software are you using to execute your trades?
  7. jem


    First I liked to say thanks for the input. To respond to the last question. I trade on a few different systems and I have a few ways to do executions.

    However to answer your question directly, lately when I do trade futures I use I.B. It is a great second system, the price is awesome, however, the systems does go down.

    I designed the mentioned system in Fibonacci trader. However, it came about because of a confluence of information and observation. Finally, I should say that the system was profitable as I observed the signals real time. However there were many more signals than trades taken by me. If fact I usually waited for a pullback before I took the trade even though the system was not a pullback type system. I would then run the results scan to see how the system was doing. Also as a stock daytrader I usually do not trade in the middle of the day and never took middle of the day futures trades either because I wasn't there to manage them. If the system is profitable in Jan. I may try to automate it.
  8. You can try automated execution at efloortrade. One of my friends is using it and said it's good.
  9. some of my systems do better on certain sectors than the overall market. So I'm not surprised if you have a system that works better on certain stocks than the ES/SPX.

    That being said, make sure you don't "optimize" your stock selection. It's not a surprise that you can find e.g. 5 out of 100 stocks that do well with a certain system while the system doesn't do well on the overall market.