You're under capitalized (for this style), trading heavily correlated instruments, with no historical and walk forward statistics to back you up? It doesn't have to be like this for those who haven't jumped yet. Let this be an example of a much too well beaten path to destruction...
I am shutting down. Going on vacation for a week. Then returning and back testing. Here are the positions I closed. ARGN +53 EGHT +456 EGLE +1763 EJ +618 FRO +249 HNSN +172 LAVA +177 MMI +130 ONTY -159 OWW +237 RPTP +81 XRA -160 I bought Amibroker for backtesting. Anyone have any advice for what to avoid? Like over-optimizing, curve fitting, and survivorship bias. Speaking of survivorship bias, does anyone have any suggestions on where to get data with delisted stocks? Thanks guys. I hope to be back trading in August and will continue this thread.
I hope you came out with your method a net winner. Did you? As to backtesting, or paper trading. They are only guides to learn the ins and outs. No amount of research on past history, or charts, will replace finally REAL CASH TRADING. You cannot learn from historical data. As the future is UNKNOWN and always adjusting. Some patterns do re-occur which you can use. The only way to do any forecasting is with a OUIJA BOARD Trend following to be successful relies on letting a trend get started. Once it is started you jump in and take a piece out of the middle. Not to the end. Stops, mental or otherwise will work to exit. If you predict the beginning of a trend, you will get burned. Let the trend complete the first beginning. Usually 3 bars in whatever time scale you are using, or more. Just my opinion.
I ended up down around 3%. Not really much of anything happened, I didn't trade for long enough to draw any real conclusions. I understand back testing is susceptible to many errors, but I would like some semblance of statistical backing. I just bought a ouija board off ebay, thank for you the suggestion. I got a spot for it next to my magic eight ball.
Hi AT. You had a lot of positions open. Maybe it would be better to try one or two positions at a time, really focus on getting the right scenarios and cherry picking the best ones to get in and out. Then build up over time.
Trend following is directional trading. Moving averages are good. The problem with a trend is you cannot forecast the length of time it is going to work. Trends are variable and you often get shaken out. I have traded options trends and still do occasionally and I use the DMI indicator, as the fast indicator, shoots up with volatility, which in options is a necessity to get maximum profit in the shortest possible time. The most it would do in stocks is just show you have a trend in play and when it ends. Not sure if stocks respond to premium changes as fast from volatility. But there is no sense in holding a trade in a trend, in options, if the volatility part of the trend is shrinking the premiums. You get out early that way with maximum profit in the shortest time, so the money can be circulated.
Ugh, please don't play with a ouija board. It's a gateway to demonic forces. Serious. Seen the "Exorcist"?
If you are trend following stocks, you should weigh the time spent in trade versus the profit take on the time. You will find shorter trends return the same profit faster, than longer trends. While you use mental stops, I like trendlines myself. The secret with trendlines for exiting a trend is to never bother trading stock trends, with less than 45 degree slope. This shortens your time in the trend, to the most profitable part. You can recycle your money to some other stock and do better in the same time frame when your money is locked up otherwise in a shallow trend. This is the accumulation phase of the next bull cycle and can take a few years. This means a lot of stocks in good companies will be in shallow trends, a waste of time. As a trend steepens, you are maximizing profit, vs time spent in trend. On a 70 degree trendline it is time to get out, as you may only have an hour or two, before it collapses and goes the other way. These are emotional blowouts.
Are you serious about using the angle of the slope as a trading tool? Funniest nut job trading method I've heard in a long time ha ha
Yup! Take a clear see through protractor from a kids geometry set and work with it. Of course Free Stock Charts have indicators that do these fan volicity trend lines now you can use easier. Same thing though.