What would be a good filter for a Mean-Reverting system?

Discussion in 'Strategy Building' started by Oadmani, Sep 10, 2021.

  1. Oadmani

    Oadmani

    I don't have profit targets or stop losses.
     
    #21     Sep 11, 2021
  2. Fonz

    Fonz

    You could try the most simple filter for a mean reversion system: 200 MA.
    It works well, at least for US stock market, with these systems.
     
    #22     Sep 11, 2021
  3. That's fine, but from your trade record you must be able to tell your average win and your average loss, what is that ratio?

    TDUK
     
    #23     Sep 11, 2021
  4. Oadmani

    Oadmani

    The average win/loss ratio is around 1:1.

    The strategy is fine the way it is, it is just that losses come in clusters. I am also running a trend-following system, so I don't mind if I get lesser trades in this system so that losses don't come in clusters.
     
    #24     Sep 11, 2021
  5. Ok, surprising, a 67% win/loss ratio at 1:1? Over what number of trades is your 67% win rate observed?

    TDUK
     
    #25     Sep 11, 2021
  6. Oadmani

    Oadmani

    Backtested. Last twenty years of data.

    I am not trading markets in the US. The problem with becoming a billionaire is that, if I get 12 consecutive losses, I would blow my account at some point in time.

    I tested on around 2500 trades.
     
    #26     Sep 11, 2021
  7. I don't quite get it. If 12 consecutive losses wipes out the account, on a system that has a 67% win rate at 1:1, then you are trading too large. Maybe I'm missing something.
     
    #27     Sep 11, 2021
    tomorton likes this.
  8. Oadmani

    Oadmani

    Absolutely. Stock universe is not huge. Stocks are fewer in this part of the world.
     
    #28     Sep 11, 2021
  9. If by 'absolutely' then you mean 'yes I am trading too large', then your issue is not one of filtering entries, it's an issue of risk management. If you don't see that, then this is perhaps not the game for you. Page one, paragraph one of the handbook: manage your downside.
     
    #29     Sep 11, 2021
    tomorton likes this.
  10. Oadmani

    Oadmani

    What would be a good percentage to risk per trade?
     
    #30     Sep 11, 2021