Equidistant Trailing Stop Daytrader

Discussion in 'Strategy Building' started by profitseer, Jan 11, 2003.

  1. nitro, Yes, I trade all kinds of random systems. I constsantly test all kinds of variations. When I am not seeing the market well, I fall back on random systems.

    Random beats the heck out of bad trading, when you are doing everything exactly wrong.

    Random trading gets me back to equal, then all that is needed is a very tiny read to get an edge over random.

    They are not technically random systems. I have one that buys the next lower even number and sells the next higher odd number.

    I can hit 50% with that one with 2 pt targets and stops. It is a relatively minor adjustment to cut a loss a little short and let a profit run. It takes very little skill to read the market to tip the odds slightly in the traders favor if he knows what he can do with a coin toss.
    #11     Jan 11, 2003
  2. The trailing stops magic is it forces smaller losses than max profit.
    No, I don't use them, but for a patient trader, moving the stop up to breakeven and then trailing beats anything that I now use.

    I use targets and fixed stops because those limitations provide dependability.
    #12     Jan 11, 2003
  3. right Eddy, Now you are thinking right. As soon as you trail, you take away the 50/50 odds. So hitting 50% with a fixed stop should be easy and mathmatically normal.

    Hitting it with a trailing stop would require some skill.

    Just something to think about.

    appreciate the analysis.

    acrary tested an always in stop and reverse trailing stop on the S&P and the darn thing tested profitable.

    the idea isn't to trade these systems, the idea is to know how stupid you can be and still make money.
    #13     Jan 11, 2003
  4. Ooops my bad!

    I have to learn to read the posts more thoroughly. I didn't see profitseer's use of "magic" in his original post. Now I understand both Mr S's reference and Profitseer's clarification of the same.

    Geez, if there is a positive correlation to profits and stupidity I should be making a fortune by now... at least a small one.

    #14     Jan 11, 2003
  5. well, anybody think they could hit a 6 pt target before getting stopped out with a 6 pt trailing stop 50% of the time? What the heck good is TA if you can't even do that?
    #15     Jan 11, 2003
  6. Anyone want to come over and help me unload three rolls of carpet and three rolls of pad from the van? I'll give you 6 points guaranteed!

    Using TA should make a positive difference vs guessing. I have been scalping the es for single points only, although I have been working on a larger take play also. I have never used the trailing stop in any method I trade whether long or short term. Maybe it is something I should consider.

    I would think that an appropriate trailer would be the result of a study that determines the average swing during the time of day for a particular time interval. I don't want to do that.

    #16     Jan 11, 2003
  7. The 3 prong approach
    1. Thinking right
    2. Money Management
    3. Reading the market

    to me thinking right is most important

    for example, when I say I can hit 50% just by buying even and selling odd numbers, if you think that's not possible, then the first thing you should be thinking is, "If it's not possible to hit 50% buying even selling odd, then it must be possible to hit better than 50 selling even buying odd."

    It is very very difficult, I have never ever found anything which works more that 50% or less than 50%. So you can trade off anything, ma, rsi, bb, even odd, if you have a money management system which captures good luck, and just the slightest ability to read the market.

    Where guys get screwed up is they don't stick with a 50/50 system. If you buy even and lose, then trade an ma and lose, then trade bb and win, and trade bb again and lose and see that buying even would have worked and go back and buy even, that's what messes you up. Too much brains.

    Not sure where reading the market comes in. I think everybody is just born with it. It's always there when you need it, if you don't rely on it when you don't need it.

    So thinking right and reading the market can very rarely be discussed, and I get lonely, so the only thing left to talk about is money management.

    I usually come up with these systems after a good week. I look back and say, "If I'm so smart, how come my losers were so terrible?" And that's when I wonder if anything other than money management had anything at all to do with my success.
    #17     Jan 11, 2003
  8. Eddy



    I just wanted to put some figures on the study case I defined at the start of the thread..

    So, I run some backtests on the ES for the full year 2002. I entered systematically the market every day at 09.30.
    Now, the hard part was to find a signal which should be correct 50%. I remembered having read once that the daily market direction on the long term was split equally between up and down days, when using CL - OP as up/dn trend indicator (and that bull/bear markets were achieved by an higher average of % net change during the up (resp. down) days)

    So I decided to test this nice assumption by going short 1 ES contract every day at market open. Possible exit rules were a profit target of 6 pt and a stop of 6 pt.
    For run A (the “reference” run), this was a fixed initial stop loss of 6 pt. For run B, I replaced it by a 6 point trailing stop. If no profit target / stop loss were hit, trade was exited at 16.00

    Detailed results are shown in the attached jpeg file

    With a fixed stop loss, I was amazed to see that I got indeed 51 % winners. This 50/50 split between up & down days was (at least) almost true for 2002...
    Anyhow, the avg trade ended up at 2.6 $ !! (with no com/slippage incl.). On 9 days, the trade was closed at 16.00 (5 winners / 4 losers), this explains why the average winner/loser trades are not exactly equal to 300 $.

    On Run B, the percent winners went down (as expected) to 39.3%, ie on 29 days, there was a retracement of at least 6 point, which transformed a former winner into a loser.
    However, the resulting PL loss was balanced by the impact of the trailing stops on all the former loser. Average trade ended up at 10.8 $.

    Finally, i did the same exercise (runs C and D), but this time, i entered systematically long.
    The rules for the run A and C being strictly "symmetrical" between the long and short side, the results in case C are no surprise. However, for the run D (trailing stop being implemented), the global impact is still positive (from -2.6 $ to + 0.4), but really marginally.. In this case, positive and negative impact of the trailing stop on both losing and winning trade have almost the same size...

    Any comment/reaction is welcome…

    #18     Jan 11, 2003
  9. Eddy you're a good guy. Thanks for the test.

    Personally, I have areal problem with taking small profits. So for me, it's either the target or the highway. Otherwise I will close every trade out at 1 tick.

    My numbers went up nicely though when I started at least protecting my entry plus commissions after a reasonable gain. So maybe that is a worthwhile tweak.

    I have a million of these. It is very hard to find anything more or less than 50% when you put them on a fair playing field. If you could find one you'd be holy grailing. Yet so many scoff at any ridiculous idea stating you can't make money from it. If that is true, then why not simply fade it?

    Nice work, I like your style.
    #19     Jan 11, 2003
  10. Best run out of 4 has 2668 Gross Profit and 6025 Drawdown... Uhh, no thanks..
    #20     Jan 11, 2003