nihabashi, there is something about your post that i'm not clear about. when you say volatility is trending (as opposed to price is trending), in your view what type of strategy takes avantage of trending volatility?
Nihaba, do you think it mostly difficult without the benefit of hindsight charting to determine if the current period is trending or not? For this reason might the better solution of switching between sets of trending and non-trending systems be to develop these so that in either type of market the superior outperforms the one at a disadvantage (continuously trading both sets)?
Without rules, nobody will be able to tell you what went wrong. Robust systems trade well in NQ for many years. Once a while , parameters must be adjusted for optimal performance.
The strategy lost only 2.7% in 2005, and much less than that in 2006 YTD or during the last 12 months. I wouldn't say that the strategy completely broke down. Those are minimal losses compared to the earlier results. Keep trading it... it will most probably come back.
guys i haven't been trading it. this is a backtest from yesterday. i'm saying had i found this in 2004 then i would have started trading it then.
Hi Hamlet, We as traders must study and analyze the prior trading days price action along with the current market price action to determine if its currently trending or not. Regardless, the current market conditions for NQ is a market where volatility is not trending and the volatility is in a consolidation period. Knowing that...I really can't imagine why someone would spend the time and effort to tweak (change) their trend following method to perform better in a non-trending environment. Further, it seems like m4a1 is not the designer of this method nor has he traded the method and that in itself I do believe eliminates any considerations by him to tweak (change) this method. Yet, your suggestion may be ok for him had he been the designer of the method along with knowing why the method performed so well between 2000 - 2004 and not so well for 2005 - current. Reality is that's not the situation based on the reasons why he started this thread. Simply, you need to first understand the price action and the method that's designed for a particular type of price action before attemting to tweak (change) a method for whatever reasons. Therefore, for him, it currently is not the better solution any may not be for a long time until he learns when to and when not to apply the method. Mark
Hi m4a1, Your strategy obviously is exploiting trending volatility. Other than that...any method that's designed to exploit volatility breakouts, price pullback to s/r zones along with applying the method when volatility tends to arrive nd many other stuff that's commonly discussed here at ET by trend following traders. Mark
First, you keep using words like this... Had I found this in 2004. Imagine me saying I found this book a year ago and then I respond to some replies by saying how do you know I didn't write the book. Thus, so far in this thread you have not disclosed the specific origination of the method. Yet, your most recent question would now suggest you are the designer of the method or why bother asking such a question? Further, its obviously you have no attention to reveal any further information about the method other than a brief performance record and that in itself limits how helpful others can be in responding to your questions... Anyone have an idea what might have happened? It is trading NQ. Was there some structural change in the contract or something? I think you got some useful opinions or suggestions from RoughTrader, bunanlover, Hamlet, Hombre and KS96 that may inspire you to do further research into understanding the method beyond what you already know regardless if your the designer of the method or not. To sum up my opinions in this thread as my last post. As traders, our goal is to make money from our trading instruments and learn as much as possible about our trading instruments. All trading instruments go through periods of trending and range bound environments. To avoid drawdown periods or reduce the impact of drawdown periods on our overall trading performance... We must adapt when market conditions change (it will change) via either switching to a method suitable for that particular type of trading instrument or change to a trading instrument that's suitable for the method. With that said, I do know you talk about other trading instruments elsewhere at ET. Therefore, applying the method to a different trading instrument should not be a problem for you. Just avoid trading instruments with similar like price action as NQ until the volatility is no longer range bound (consolidation) and has returned to similar like trending environment that the VIX or VXN displayed between 2000 - 2004 and brief periods of such in 2005 and 2006. The seeds have been planted about adapting...good luck. Mark