JACK HERSHEY METHOD EXPOSED AS FRAUD! *Debated*

Backtest was from 6/15/2006. When I took it even further back it lost a lot of money to where I had to add a 3% stop to make it work. Even then it only made $8k total since 2004 on $147k. Horrible.

Jack's into modifying the appearance of his scripts more than making them work.

<i> I MUST DRAW A LINE!</i>

 

I guess I'm missing the close out EOD spot, so I'll have to come back and redo the backtests. But you want to know what I think before I do that? It's not going to help in the least bit. I think that will put it over the edge to unprofitable, even though it's already there.

 

Here it is with a sell on the close. It does look like the EOD exit helped results, and I probably don't need the 3% stop anymore:
for Bar := 5 to BarCount - 1 do
begin

var SMADiff : float =(SMA( bar, #close , 20 ) - SMA( bar - 1, #close, 20 ));
var MACDday : integer = MACDExSeries( #Close, val1, val2 );
if lastbar(bar) then begin
lbar:=bar;
end;
if (bar>lbar+2) and (gettime(bar)<1600) and (@#Volume[bar]>20000) then begin
if not (lastpositionactive) and (crossovervalue(bar,HersheyStochK,50)) then begin
buyatmarket(Bar+1,'Jacks friend scott d says to buy here');
end;
if not (lastpositionactive) and (crossundervalue(Bar,HersheyStochK,50)) then begin
shortatmarket(Bar+1,'Jacks friend scott d says to sellshort here');
end;
if (positionlong(lastposition)) and (@HersheyStochK[bar]<@HersheyStochD[bar]) and (crossundervalue(Bar,HersheyStochK,80)) then begin
sellatmarket(Bar+1,LastPosition,'');
end;
if (positionshort(lastposition)) and (@HersheyStochK[bar]>@HersheyStochD[bar]) and (crossovervalue(Bar,HersheyStochK,20)) then begin
coveratmarket(Bar+1,lastposition,'');
end;
if (positionlong(lastposition)) and (abs(@HersheyStochD[bar]-SMA(Bar,HersheyStochD,6))<1.4) then begin sellatmarket(Bar+1,LastPosition,''); end;
if (positionshort(lastposition)) and (abs(@HersheyStochD[bar]-SMA(Bar,HersheyStochD,6))<1.4) then begin coveratmarket(Bar+1,LastPosition,''); end;
if (gettime(Bar)=1555) and positionlong(lastposition) then sellatmarket(Bar+1,#All,'');
if (gettime(Bar)=1555) and positionshort(lastposition) then coveratmarket(Bar+1,#All,'');

end;
end;

 

The attachment is an exact duplicate of SCOTTD's AKA Jack Hershey TS easylanguage.

It's written in WL so we have something to work with, and the script has these results, since 6/1/2006:
</b>Long + Short</b>
Starting Capital $147,000.00
Ending Capital $202,751.03
Net Profit $55,751.03
Net Profit % 37.93%
Annualized Gain % 13.49%
Exposure 0.85%

Number of Trades 105
Avg Profit/Loss $530.96
Avg Bars Held 45.42

Winning Trades 43
Winning % 40.95%
Gross Profit $123,744.15
Largest Winning Trades $29,588.97
Avg Profit $2,877.77
Avg Bars Held 76.26
Max Consecutive 3

Losing Trades 62
Losing % 59.05%
Gross Loss ($67,993.13)
Largest Losing Trade ($7,734.99)
Avg Loss ($1,096.66)
Avg Bars Held 24.03
Max Consecutive 5

Max Drawdown ($48,485.48)
Max Drawdown Date 10/10/2008
Max Drawdown % -20.10%
Max Drawdown % Date 10/10/2008

APD 19.7908
APAD 107.2647
Wealth-Lab Score 1,261.53
RAR 1,578.97
MAR 0.6711
Profit Factor 1.82
Recovery Factor 1.1498
Sharpe Ratio 0.9248
Sortino Ratio 4.845
Ulcer Index 8.3615
WL Error Term 5.174
WL Reward Ratio 2.6078
Luck Coefficient 10.2819
Pessimistic Rate of Return 1.3686
Equity Drop Ratio 0.2989
K-Ratio 0.0063
Seykota Lake Ratio 0.065
Expectancy 0.1546
Expectancy Score 3.1717
Max Losers Held 1
Max Winners Held 1

<b>Long Only</b>
Starting Capital $147,000.00
Ending Capital $150,327.36
Net Profit $3,327.36
Net Profit % 2.26%
Annualized Gain % 0.88%
Exposure 0.10%

Number of Trades 53
Avg Profit/Loss $62.78
Avg Bars Held 7.96

Winning Trades 20
Winning % 37.74%
Gross Profit $32,642.91
Largest Winning Trades $9,076.52
Avg Profit $1,632.15
Avg Bars Held 12.65
Max Consecutive 3

Losing Trades 33
Losing % 62.26%
Gross Loss ($29,315.55)
Largest Losing Trade ($4,225.51)
Avg Loss ($888.35)
Avg Bars Held 5.12
Max Consecutive 5

Max Drawdown ($15,065.73)
Max Drawdown Date 9/8/2008
Max Drawdown % -9.43%
Max Drawdown % Date 9/8/2008

APD 3.0609
APAD 79.576
Wealth-Lab Score 815.4884
RAR 900.4178
MAR 0.0937
Profit Factor 1.1135
Recovery Factor 0.2209
Sharpe Ratio 0.2341
Sortino Ratio 9.016
Ulcer Index 2.1072
WL Error Term 1.32
WL Reward Ratio 0.6693
Luck Coefficient 5.5611
Pessimistic Rate of Return 0.7363
Equity Drop Ratio 0
K-Ratio 0.0031
Seykota Lake Ratio 0.0106
Expectancy -0.1031
Expectancy Score -2.4526
Max Losers Held 1
Max Winners Held 1

<b>Short Only</b>
Starting Capital $147,000.00
Ending Capital $199,423.67
Net Profit $52,423.67
Net Profit % 35.66%
Annualized Gain % 12.75%
Exposure 0.78%

Number of Trades 52
Avg Profit/Loss $1,008.15
Avg Bars Held 83.6

Winning Trades 23
Winning % 44.23%
Gross Profit $91,101.25
Largest Winning Trades $29,588.97
Avg Profit $3,960.92
Avg Bars Held 131.57
Max Consecutive 4

Losing Trades 29
Losing % 55.77%
Gross Loss ($38,677.58)
Largest Losing Trade ($7,734.99)
Avg Loss ($1,333.71)
Avg Bars Held 45.55
Max Consecutive 6

Max Drawdown ($48,485.48)
Max Drawdown Date 10/10/2008
Max Drawdown % -20.39%
Max Drawdown % Date 10/10/2008

APD 30.3035
APAD 119.0599
Wealth-Lab Score 1,305.90
RAR 1,640.28
MAR 0.6256
Profit Factor 2.3554
Recovery Factor 1.0812
Sharpe Ratio 0.96
Sortino Ratio 11.775
Ulcer Index 8.5992
WL Error Term 4.562
WL Reward Ratio 2.7957
Luck Coefficient 7.4702
Pessimistic Rate of Return 1.5723
Equity Drop Ratio 0.3181
K-Ratio 0.0063
Seykota Lake Ratio 0.075
Expectancy 0.1649
Expectancy Score 1.8456
Max Losers Held 1
Max Winners Held 1

You should be able to see that Jack's Script is mostly a short script, and that his longs are ineffective at best, adding no risk adjusted value to the script.

 

One thing that stands out is this system is profitable with a win rate below 50%. I agree that this system is not worth the risk but it appears as though there is certainly something to work on here. Improve the weaknesses of this system and we'll probably have something pretty good.

 

For comparison purposes, some of my best scripts look like this. The biggest difference is how much larger the APR is compared the drawdown. Jack has failed miserably for years in creating a decent risk adjusted system.

This is actually what it is supposed to look like, and, it's in the same time period with the exact same settings:
Long + Short
Starting Capital $147,000.00
Ending Capital $304,964.40
Net Profit $157,964.40
Net Profit % 107.46%
Annualized Gain % 33.86%
Exposure 3.14%

Cash Interest $17,094.23
Margin Loan Interest $0.00
Total Commission ($2,238.00)
DividendsPaid $0.00

Number of Trades 68
Avg Profit/Loss $2,323.01
Avg Profit/Loss % 1.17%
Avg Bars Held 3.1

Winning Trades 59
Winning % 86.76%
Gross Profit $212,349.44
Avg Profit $3,599.14
Avg Profit % 1.88%
Avg Bars Held 2.97
Max Consecutive 14

Losing Trades 9
Losing % 13.24%
Gross Loss ($71,479.27)
Avg Loss ($7,942.14)
Avg Loss % -3.50%
Avg Bars Held 4
Max Consecutive 1

Max Drawdown ($39,348.53)
Max Drawdown Date 10/9/2008
Max Drawdown % -12.81%
Max Drawdown % Date 10/9/2008

Wealth-Lab Score 939.1762
RAR 1,077.15
Profit Factor 2.9708
Recovery Factor 4.0145
Payoff Ratio 0.5371
<b>Sharpe Ratio 3.9818</b> Jacks at around 1 is 4 times as risky as this particular system. Thus, why I say, when I have systems of my own that are significantly better than what Jack is putting out there, I really can be quite pessimistic. His system isn't worth the risk that it is taking, and there's much better out there.
Ulcer Index 2.1978
WL Error Term 2.452
WL Reward Ratio 13.8093
Luck Coefficient 8.4729
Pessimistic Rate of Return 2.2971
Equity Drop Ratio 0.0511



I'd much rather trade this with futures than Jack's no return for the risk taken version.

 

I noticed that, too, and it surpised me. I can see improvement, but I don't see a way to improve it to getting APR to DD at parity. It still wouldn't be worth it on that basis.

 

Dare I say: Shall I optimize the MACD and curve fit? One thing Jack has always stuck to is the MACD values, both in slow stochastic and the MACD versions. I'm surprised they haven't experimented in TS, because it's much faster than WL at doing that.

I guess if you've been telling people for so long, what the MAGIC BEAN Numbers are, then you can't change in the middle of it.

Also, it appears there's more indicators available in the script than what I'm using, so anybody know how to use the
PVAD score? or the price volume AD whatever score? He also has second derivative junk that doesn't make any sense, but I've not heard him discuss this.

It appears that these functions are the "Secret Sauce", and I'll have to look here http://wl4.wealth-lab.com/cgi-bin/WealthLab.DLL/viewfamily?family=Jack Hershey Equities Method to see what they're doing with those indicators.

 

Don't suppose you'd like to post the code for this one?

 

What'd you think the answer was? It's for sale, and I sell subscriptions to it at www.collective2.com/go/pairsqidqld

Granted, I've had to improve it every now and then. That link will take you to the first two versions, and I've only recently started to use this one after the hiatus. Too bad the DD was on the first trade I tried with it, after going through another DD with the second version.

Kind of the evolving aspect to the system went:

static overbought oversold to
volatility based overbought oversold
and then to
futures volatility based integration overbought oversold