Which strategies work, and which don't

I get the exact same results as well implementing profit targets. I have attempted numerous types of combinations of profit target / stop-loss and these are not as effective as letting the winners run.

I have found that profit-targets may help smooth the pnl equity curve, but it does not produce higher profits in the long run.

As for tight vs. loose stop-losses, this depends. I have found that large stop-losses often cause larger draw-downs, but then again it really depends on a few factors.

I always test implementing a strategy that would exit a position if the risk is less than my initial risk if a high / low is broken on the day. This typically takes the cake in both reducing draw-downs as well as generating higher profits.

I will add, that I do not use typical technical analysis as the methodology that I created using a top-down scientific approach was developed around measured moves.

I test time-framed based entries and exits as well and most strategies if they work trading in the first hour are generally more profitable if held until the close of the day. However, this also comes along with a slightly larger draw-down. It's really about risk vs. reward. While the profits are there in the morning, the trader must ask himself this - would the additional profits be 'worth your while' to hold the position to take the extra risk.

 

what is sharpe ratio? I don't know and I don't care. i only care about making money and sharpe ratio is the worst! you are much better of with profit factor. My profit factor is 5!!!

 

DISCRETIONARY TRADERS LOSE BECAUSE THEY USED MANUAL BACKTESTING, WHICH IS BEATEN BY AUTOMATED BACKTESTING.

a guy i know printed out markets since 2005, each intraday was one A4. He then manually looked for his setups. After 2 weeks he has tested his strategy. LMAO. he traded discretionary.

 

If I had a profit factor 5, I would probably also not care about the Sharpe ratio. My best profit factor is 2. With which method do you get 5?

 

wait, do you daytrade?:eek:

 

Not sure what a simple frequency filter trading strategy is ... would you mind elaborating on this?

 

It likely refers to simple moving average based strategies (i.e. if ma1 cross ma2 then buy, etc...).

Incidentally, in my experience, SR increases at higher frequencies ...
unfortunately, so do commissions and slippage.

 

Highpass, lowpass, and bandpass filters. This is the lite-C code for a simple second degree lowpass filter:

Code:

var smoothF(int period) { return 2./(period+1); }

var LowPass(var *Data, int Period)
{
	var *LP = series(*Data,3);
	var a = smoothF(Period);
	var a2 = a*a;
	return LP[0] = (a-a2/4)*Data[0]
		+ 0.5*a2*Data[1]
		- (a-0.75*a2)*Data[2]
		+ 2*(1.-a)*LP[1]
		- (1.-a)*(1.-a)*LP[2];
}

This is no moving average. MA crossing strategies are normally not profitable because of lag.

Using such filters in trade strategies is described on a website to which I can't post a link here out of consideration for the sponsors of this forum. I already got chastised by a moderator for posting too much info.

 

Just a little follow-up note as to different tendencies in different types of markets:

This method for reducing risk is applied only to trend-following methods and not reversion to the mean methods. When you compare the results trading individual stocks vs. market-based ETF's it's obvious that they do not have similar tendencies as this is not a very effective stop-loss on the SPY, DIA, or Q's.

However, it is effective on many momentum stocks.

 

Is Kahneman pronounced like Con Man?