Seeking feedback on my rules-based system

Discussion in 'Automated Trading' started by morganpbrown, Apr 12, 2019.

  1. So I implemented an exit strategy whereby I sell the security if the signal that caused me to buy the security is no longer active. It seems to work well. For most of the securities I'm trading, it adds a couple percentage points to annualized ROR.

    For securities like TVIX, it works like gangbusters! Not a lot of people are buying and holding VIX for 30 days, so the new exit strategy is more attuned to the characteristic price action of TVIX.

    New profit curve for XOP:


    Old profit curve for XOP:


    Quite similar, but the new strategy has lower volatility and a higher ROR.
    #31     Apr 16, 2019
    cruisecontrol and HobbyTrading like this.
  2. Code:
    as plot title. Sounds about right for the F90 programmer :)
    #32     Apr 16, 2019
  3. Ha, yeah, this is not an interface for the masses. At least I have a color screen. And it's not a CRT!!!
    #33     Apr 16, 2019
  4. Nice little toolbox you’ve built. I love crude shit like this. Looks like you’ve caught on to some form of multi-variable analysis. IMO, this could yield some pay dirt if you can filter and optimize the states properly. Good luck young fellow:thumbsup:
    #34     Apr 18, 2019
    morganpbrown likes this.
  5. The strategy seems making sense. It uses MA, past return to discover macro relationships between securities.
    How did you use 30-day past return ?
    Last edited: Apr 22, 2019
    #35     Apr 22, 2019
  6. The 30-day past return is one of many indicators that I use. I have 14 indicator securities. For each indicator security, I compute 30/10/5-day past return, 200/50/10-day MA, and 200/50/10-day MA crossover. That's a total of 126 indicators. I backtest each indicator to find the "sweet spots", for instance 30-day past return of -5% to -2%. I trade the sweet spots.
    #36     Apr 22, 2019
    dreamer2019 likes this.
  7. The problem is these kinds of approaches have the "sweet" spots change over time. Find out how/why/when they change (this is my biggest blocker).
    #37     Apr 22, 2019
  8. That's a good point. I guess you could run the backtesting and remove a year (or more, or less) of historical quotes, and see how "stable" the sweet spots are.

    One problem I have is that the profit curves for many of the sweet spots are very similar, implying that the indicators are obviously highly correlated! I need to figure out a way to cull redundant strategies and only trade the uncorrelated strategies.
    #38     Apr 22, 2019
  9. This is kind of what I'm leaning towards:

    1. Identify intellectually where a sweet spot could exist
    2. Research sweet spot (oh look it exists)
    3. ??? figure out how to predict the parameters for the sweet spot
    4. Profit

    Stuck on step 3. Last N days is a good approximation but it's weak.
    #39     Apr 22, 2019
  10. That being said, I think certain sweet spots can persist. You probably found one.
    #40     Apr 22, 2019
    murray t turtle likes this.