maos, Considering that you use 0.8% slippage costs...etc.. I think you have a good system. I like the "time in trade", too...(you earlier mentioned up to 10 days). Do you have intraday occurrences? I think you should go ahead and Forward test live. Would you consider to start a Journal here when your ready? If you can't get entry's on your shorts and they are unavailable how would this effect your mix of 100 holdings, I wonder? Michael B.
another concern is scalability. check the number of shares traded vs the average daily volume, etc. with that equity run up if you're trading small caps it will not work
Morgan, thank you on your reply, it was just the kind I was hoping for. I believe that , at least in this context, by results you mean profit or %return... Profit figures are one of the things I pay least respect to because I believe that they are influenced by so many different uncontrollable elements that they are all but unpredictable in any way. During development I focused on measurments like %win, payoff /winloss ratio, %drawdown as well as robustness of overall strategy in the terms of keeping those figures as constant as possible over different stocks and market cycles. I am aware of that, but what I wanted to accomplish when I finished developing this strategy is to see how it could cope with everything I could ''throw'' at her in terms different price data, changing market conditions, cycles, volatility and so on I designed this strategy with all that in mind, trying to accomplish that the strategy checks the history of each stock it trades(on a year by year basis) and adjusts to that particular stock and it's characteristics. Which, I believe, is why it performs well over any portfolio i test it...So, I'm not entirely sure that I understand the effects the absence of entirely independent tests could have on my system performance. I know for certain that what the overall market does affects the performance of my strategy, because it forms an index of stocks in a portfolio it trades and blocks certain trades in respect to what that index does...considering that every portfolio has 130+ stocks, the index that is formed resembles the market index(in some cases closely)...here again pops out the question of independent tests...suggestions? Yeah, that is the main problem. I initially planned on developing three systems that would later be combined into one master system: one for rising markets(long), one for declining(short), and one for sideways markets(long)...the first two are finished and I plan on developing the third as soon as i get started trading what I finished because I can't afford to wait for six more months... So, to answer your question, I believe(hope) I know the reason. The market stopped rising and went into a kind of sideways mode after an uptrend which is the ugliest period for the strategy at this stage. Long strategy is still signaling trades( that after entering just keep falling...it isn't the pullback the strategy belives it is, but down move during sideways action which tend to be larger ) because the downtrend hasn't really started, which is the reason the short part of the strategy isn't making enough money to account for the losing long trades...the part where the sideways part of the strategy would fit in nicely. tried already... both break down completely... Systematic pullback buyers out there are welcome to share their experiences...
Many people I know of have reported poor results from pullback buyers for most of the first half of 2005. I have been trading pullbacks for a couple of years. Here are a couple of sudgestions. Since you are using entirely market orders (ie at open and close of market), you may need all that slippage you have set. DipBuyers trade at the volatile end of a stocks' spectrum and its hard to nail the openning price (which is not to say the system wont work just start small till you get a feel for it). Also I've found it a lot easier to create a DipBuy system that trades thinly traded stocks, but far more difficult to trade it. Make sure you can trade the system on as little as 1% or 2% of daily volume at your account size. "the strategy checks the history of each stock it trades" Are you saying it checks the results of trading (WFO, walk forward optimisation), or it checks the history of the stock prices. I'm sure I'm not telling you anything new but in either case you need to be careful that your trading is outside of the test sample period.
Hi everyone. My first post on this board. The system you posted seems reasonably good (although I personally wouldn't trade it as is because of the quite large drawdown), but I would retest it with a higher slippage figure. On the topic of slippage, especially regarding to pullback systems, there are two components that need to be distinguished. The first is the difference between ideal and actual fills, which is what is commonly referred to as slippage. The second, equally important component is that in pullback system that generate many (simulated) trades there is often a non trivial percentage of trades that appear in simulation, but that gets never executed. So, to take both into account and perform a realistic estimation of what is what, you need to run your system live, with real money for a period and then see which is the real average % per trade you get. Only then you can decide if 0.8% is enough or not. Personally, having done the above I found that in my simulations/backtests I have to use a slippage of 1.7% for both entry and exit, with a SD of about 1.70, if I have to come close to actual results. It's quite a big figure, but it helped me to discard systems that looked spectacular at first sight and made me lose money when tried live. Regards, -GS
Well, I've been lurking on this board for a couple of months, then started to like it, very informative. A good complement to WL. Have a nice day. Regards, -GS
Your max DD is over a quarter of a million dollars. Can you handle that. Also you have percent equity set to 15? Does that mean your risking 15% of our equity per trade, how do you have the trade size set. There should be something in there that tells you the avg or median size of the position both at the beg of the run at towards the end. Stuff that scales up as you accumulate profits, you have to be real careful with. Also just curious why do you think the equity curve goes vertical in 2003 most pullback stuff that is tested and includes 98-2000 kills it those years then gets hit hard in 01-02 then.....well you know, greatly out performs in the trendy mkts that lend themselves to pullback systems. Thanks for posting and taking questions. Cheers.
toe, no it's not WFO, I believe that past price action is no indication of future movement. it uses past year's data to make some assumptions for this year.(1998 data to trade 1999 and so on). To be more precise it primarily checks the volatility of the past year to help establish profit and stop levels for the year ahead. Because of that profit and stop levels vary from year to year and stock to stock. On several of my last trials to develop a good system I discovered late in the development process that the system peeks(checks future data) in some way or the other, which rocked my world and led to dumping of the system. I was especially careful this time not to make that mistake, I tested it and reviewed it a zillion times before deciding it is 100% OK.