Developing a System to Trade Live

[RodC]

Moderator's Note: This thread is for general discussions on systems development and testing. Please start a new thread if you have a specific system in mind or search for an existing thread on systems testing.


Im happy to work with you and all here in developing another method which we can test and trade live like we have been doing with T/T for the last 3 yrs.

A larger interest gives better feedback and more minds participating.
If there are also other Amibroker or Metastock/Tradesim users around that will also be a great help.



Hi tech/a

Are you still interested in developing a system to test and trade live?

I'd like to have a go at developing a system, but to be honest I don't know where to start. I do however, have Amibroker so I guess I'll need to learn how to drive it properly.

regards,

Rod.

[tech/a]

Sure.

[mit]

If there's a vote, given that TT is out already out there as a working model of a Long Term System I would suggest a short term EOD system. With the possibility of a more volatile market a ST System may have a smoother equity curve.

However, a note for beginners a ST system is harder psychologically to trade. With a long term system if you are a bit wobbly with your entries and exits it doesn't matter as much.

MIT

[cabbie]

G'day All,

If you don't mind, you can count me in, I've been tinkering around with AB & would be interested in trying to develop a structured system.

I've read a bit of Van Tharp & some of Tech/a's threads (who hasn't! :D ), so I've got any idea of the concepts of expectancy, MM & risk management etc so I'm keen to put it all into some code.

I'm finding the hardest part is trying to develop a testing methology without being sidetracked on testing different combination of indicators various stops etc by using AB's optimiser & trying to interpret the results. Despite all the warnings of over optimising etc.....must be the programmer in me getting carried away!

What I tend to get is multi MB report files, making meaningful analyse difficult. So I think the problem is trying to most releant parameters for indicators to test etc.


I wrote a bit of code that will looks up the base index (or any index) of a stock & buys only if the index is trending (could be modified for any trend indicator). I'll tidy it up sometime & post it any one is interested, ( although there's probably other stuff around that does the same).


Also can anyone tell me how relevant the book "The Trading Game" is to shares, Guppy's review on Moneybags says it's only for futures is that correct? as the contents seems generally relevant.



Regards

[cabbie]

I forgot to ask, what are you calling ST? 1-5 days or < 30 days?

Regards

[mit]

I did follow one for awhile and it tended to be 1-5 days (longer if the trend is good).

MIT

[tech/a]

Well.

In the 12 yrs Ive been doing this I'm yet to find a short term system for stocks that is longterm profitable.
I've had a go at many but in the end they all tank.

Now I have seen good short term futures systems,what have you all got in mind.

MIT like to kick off with any suggestions.
What sort of system testing software do you have?

Do we have any proficient Amibroker users here?
I have Metastock and Tradesim enterprise.

Are people here trading anything short term profitably that we could tinker around with so that we arent using the exact method but have perhaps a starting template?

[mit]

Tech,

I'm an Amibroker user. I was using for awhile some systems that zipzap had mentioned on reefcap back in 2003. I thought shares as I thought it might be more accessible to more people (me included). You are right as it is tougher and started to become less worthwhile when CMC started charging commission and I started to get interested in your techtrader.

But I am happy with Futures. I have EOD spi data going back to '83.

MIT

[mit]

Tech,

I have finally read Larry Williams book on short term systems. This is probably what has got me fired up about short term systems. Although stuff from this book has been tried on forums before, I feel that people have only taken a single example and tried to make a system out of it rather than the book in total.

I am just throwing up some ideas but am happy even if it is longer term systems which is easier for beginners. Should we have a vote?

MIT

[tech/a]

How about we approach this a little differently than most.

Lets start with.

Trading universe/s.---What are we going to trade.Can be a future/s or a universe of stocks.---or both--(Think there would need to be different systems for stocks and futures.).

I presume for stocks we are trading LONG---Futures both Long and Short.

From here portfolio and Initial capital.

Suggestions?

[RodC]

I was thinking stocks, but that's probably mainly because that's what I'm most familiar with, never really thought about futures - maybe I should.

For stocks I was thinking of a medium/long term system, mainly because I like the idea of letting profits run. I also imagine transaction costs and sudden adverse movements would eat into the profits of a short term system.

What does everyone else think, do we have any futures traders here who are willing to participate, if that's the path we choose?

Rod.

[tech/a]

Just quickly I'm with Rod purely because I think that most here and many 'lurkers" are share traders.

As for timespan why dont we let the results tell us what timeframe its in.
The system will have an average length of trade determined in the testing.

Running profits maybe 20 ticks in a 4 tick risk---thats a good run---but to have a postive expectancy of 5:1 would require much larger wins every now and again.---this ofcourse is linked to strings of losses and number of winning trades to losers----But I'm getting ahead of this!!

Back to universe----I think we should do some tests on best perfroming universes.
IE
Go back 5 yrs or more(I use 8)Filter stocks with particular characteristics and then work forward to see howmany have out performed--the index--the ASX 200 or whatever.Have in our pool of candidates those that are going to be likely out performers.

Like any Margin list this list should be pruned and honed and added to each 6 mths or so according to our criteria to be in the universe of tradable stocks.

[RodC]

I agree, I think most are certainly share traders as shares are seen as more accessible (especially to those starting out) than derivatives. Many will never go further (or wish to) than shares.

Letting the system determine the timeframe is a good idea, that way we aren't compromising the returns by imposing an arbitrary timeframe onto the trades.

Do we want this to be a margin loan system? If so then obviously any stocks in the "universe" must also be on a margin list.

Rod.

[GreatPig]

I have AmiBroker and am reasonably proficient at programming it - plus I'm a programmer by profession. However, I only chart stocks, not futures or derivates (although I do have options and warrants data), and don't have a huge amount of spare time.

Still, I'm happy to help where I can.

Cheers,
GP

[tech/a]

Thanks GP you will be able to do things M/S and Tradesim cant. Will be very handy.

Rod.
Other than stock selection dont think it matters wether margin or not.
You can trade 100K or 30K on margin.
Better leverage for money invested when profitable.
But that can be upto the trader.

I maybe wrong but people may well adopt some of those idea we come up with into their own model and produce something not exactly like the one we come up with.
After all what we come up with will be only "AN" idea not "THE IDEA of IDEAS".

Even a margin list can be further filtered.

[mit]

As for timespan why dont we let the results tell us what timeframe its in.
The system will have an average length of trade determined in the testing.

While this would be true for medium to long term systems short term systems are markedly different to longer term systems. So it probably depends on how we determine the initial candidates for a system.


MIT

[Milk Man]

A couple of thoughts-

Would the smaller stocks out of the asx300 or margin lists be a good idea- I know techtrader kind of does this but maybe theres a better way of sorting out the least volatile. Maybe via market cap rather than a dollar value or does this not make much difference.

I also thought a short and long system could be a good idea. You mentioned, Tech, that you had a signal to exit all positions that tested well. Maybe a signal on the XJO/XAO to short would be good too.

A little askew: Is there an uptick law for shorting in Oz?

Anyway, I thought since stocks tend to move down faster than up maybe this would be a good idea.

Has Techtrader been tested in reverse: new low then cross above 180 day EMA?

Hope this gets the wheels turning- probably won't be any new ideas but.....

[tech/a]

While this would be true for medium to long term systems short term systems are markedly different to longer term systems. So it probably depends on how we determine the initial candidates for a system.


MIT


Hmm I'm interested in your explaination of "markedly different"

The only things I find different are
(1) length of trade governed by tightness of exit.
(2) Generally more trades---cause your in a trade less time.
(3) With winning systems (I've only seen winning futures short term methods) More winners.
(4) Less Reward to Risk.
(5) Less runs of consecutive losers.

Loakglen
Some ideas here.
Personally I'd be looking for stocks which have the potential to outperform---how do we govern this.----technically we can set parameters--Fundamentally we can choose those seen as best value.Margin lenders sort of do this for you when only allowing certain stocks to trade.We can combine all of the above and anything else.

Personally I dont think trading short is practical on a portfolio basis.If trading futures then its a must---but we arent going to trade futures this time round.

Techtrader---dont want this to be anything like T/T.We can learn from lessons found during its developement though.

[Milk Man]

Tech, do you still like the buy high sell higher approach?

If so a Darvus style entry might be good.

I still think a short/long system would be worth testing- potentially riskier and harder to implement but the numbers would show if its viable. Definitely for some kind of portfolio exit indicator or similar though.

Spose we should put the horse before the cart though: I reckon the smaller caps out of the best performing margin list for the 'universe'. Might seem like deja vu to you Tech but it seems sound logic.

[tech/a]

Entry I'm not fussed---as long as the numbers add up then to me thats all that matters---how we get to those numbers is only important as to how good those numbers can be.

Yes I dont mind the lower valued Margin stocks but if someone would like to give me the list rated by market cap then that would make some purists happy.

I think the list could be further honed.
Id even thought a while ago eyeballing EVERY stock in the margin list I use 278 stocks---I might just do that---but those I keep and those I discard would be my calls and some may not agree with what I look for or see.

But its easy enough to test different universes---infact its preferable.

Ill get back with the BT list all stocks under $10 and all filtered by eyeball to those in an obvious uptrend OR Not making new lows.(I'll post examples,infact the whole list).
This can be but one list.The Full list can be another.

I'll leave it to you to play with a short side to a portfolio---I've spent many hrs without success (My definition) so please excuse me for not wanting to invest anymore time.Short and long sides dance to different drums.
Its not a matter of simply reversing an exit and going short---Pure disaster.
Hint---Youll be short in trades where youll still be long.(Well should be).

Have we agreed on Daily? Rather than Weekly?

[mit]

Hmm I'm interested in your explaination of "markedly different"

The only things I find different are
(1) length of trade governed by tightness of exit.
(2) Generally more trades---cause your in a trade less time.
(3) With winning systems (I've only seen winning futures short term methods) More winners.
(4) Less Reward to Risk.
(5) Less runs of consecutive losers.


Short term systems tend to look at price action over the last couple of days, for reversal or continuation patterns etc. The reaction to these short term patterns tends to peter out after a few days. They don't all readily expand to a long term system merely by expanding the period.

Also visa-versa. The Alan Hull system does nicely as a weekly system looking back around six months. It stinks as a daily system looking back a couple of months and I would suppose even worse as a short term system. This makes sense as it is a system that is trying to get you into an established trend. I think you would look at that kind of system and it would say longer term system even without optimizing etc.

MIT

[tech/a]

I do find this interesting MIT.

I dont think the premiss that the reason for entry peters out in the short term is restricted to short term trades is valid.
I'd go as far as to say that ALL entry criteria peter out and become inconsequential at some point.

Do you mean that a short term system should have an exit at the point where the entry is no longer valid---if so how do you judge this?
Do you also see this point as being the First sign of reversal of the entry condition--IE price goes against the direction of the entry signal.

Would you not loosen the exit criteria as a trade matures and still rises?
Why limit your potential profit simply to satisfy "short term"?

These are points I have often pondered---I offer them not as critisisms but as open thoughts to someone who has veiws which may be helpful to my thinking.

On OPTIMISATION my veiw is that optimising anything other than a singularity is an exercise in futility---to expect NAB and or BHP to perform better to the optimised variables of say WOW just isnt practical.
Sure if your trading 1 stock or 1 future optimise your brains out!.

Im not presenting my veiws as gospel---they are my findings over many years,Like Hawkins Im happy to take on new findings.

Interested in what you have to say.

[mit]

Tech,

I don't think we are in fact disagreeing. I am more talking about when you get down to specifics systems. In the general tightening stops etc will make a system shorter term and loosening stops will make it longer term.

A short term system might be for example (not a real system of course)
buy on a gap up opening after two lower lows. Initial stop on the lowest low and trail by 1 atr. You could certainly turn it into a long term system if you wanted to by having a big sloppy 4Atr trailing stop or a cross of the 180MA. I think that loosening the stops would lower the expectancy. My feeling is that the power in this is as a short impulsive move. These kind of events are caused by news and the masses quickly jumping on board. You jump on and hang on until the first sign of weakness.

On the other hand you may have a system that buys when a stock is oversold and the 100MA crosses up over the 200MA. Here I would put a big sloppy trailing stop in as to me it reads like a long term system. Nothing would stop me putting in a 1ATR stop but I would expect to be whipped out due to market noise.

So all I am really saying that as soon as the group decides that we will look at such and such indicators/price action, it will be fairly obvious that it would be a medium/long or a short term system.

Anyway enough from me on this subject as I think I am distracting from the main thrust of this thread.

MIT

[RichKid]

I'm very interested in this testing discussion but don't have much to offer due to a lack of expertise but may I suggest a look at resources/energy stocks due to the current cyclical run up for that sector (long term commodities bull market). Maybe ensuring some diversity in the portfolio by picking a certain number of non-correlative markets too. You'll need some rules re reducing exposure to maintain diversity, unless the rule is to just let profits run until the stop is hit (rather than taking profits to re-balance exposure to a particular sector).

You could test Martin Roth's book 'Top Stocks 2005' and previous editions or just his new small co's edition (not enough editions to back test). Since he's vetted the co's already (and has a published track record via his books) you can back test it. Wonder if you've done that already Tech?

[tech/a]

MIT.

Indeed you are correct we are both holding similar veiws each expressing the same slightly differently.(I'm glad about that was beginning to question many hrs work!!).
This discussion I think will be important as the method is developed as we will see the points raised in testing---so we will have an idea what to expect.

Rich.
You are talking of a stock selection process and there is no reason why you cant use your suggestion.Im sure we will come up with many universes.

I personally dont see this as a problem as we will be able to apply the method to ANY universe of stocks offered by any member of the forum.

Please if you wish to select stocks please go ahead and submit your universe for testing..

I'm even thinking about testing the resultant method on NYSE,FTSE,HONG KONG and DAX stocks---as I have the data.

[Milk Man]

I think Rich's point about out-performing indices is a good idea. Maybe limiting buys to the best couple of indices (diversify but not diworsify)? We could even just buy the index itself. I'm assuming that were all talking shares though. Maybe we should have a vote to decide - or is everyone happy to go with shares?

[tech/a]

The Out Performing Index Arguement

Guy's Ive done a lot of work on this well touted theory.

Trade the stock which is the out performer in the out perfoming index.

While a great theory there is one thing that is missing.
Simply by the time you can identify the out performing Index and the stock or stocks within it the move has well and truely gone.--Youve missed it
Particularly if your talking shorter time frame.

If anyone has Metastock or would like the metastock code that determines these out performing Indexes and Stocks within the indexes just let me know and you can have them.Many have taken them in the past and I've asked that if you can find an edge please let me know.

In 5 yrs no takers!

Sorry but I think its untested out dated theory!---used to sell books of little practical use.

Now EMERGING Outperforming Stocks and Indexes--that is an entirly different proposition----this is our challenge when finding a universe and a portfolio.

[RodC]

I'm happy to go with shares, I also wouldn't mind seeing a weekly system, although I imagine most here would prefer daily.

Also as tech/a mentioned earlier This shouldn't be anything like techtrader, it's already out there and has been very well discussed in other forums.

What I'd really like to learn is the process of system development.
ie:

Step 1: choose vehicle stocks/futures etc.
Step 2: choose trading universe (test against index)
Step 3: choose daily/weekly etc.
Step 4: choose indicators
Step 5: test
Step 6: refine
Step 7: test.

and so on.

Rod.

[cabbie]

G'day

Here's a possible alternative to the outperforming sector idea, why not optimise the trend for each sector, then test for stocks that are breaking out in trending sectors, maybe modify the break out params depending on the sector. Or a similar varriation.

My two bobs worth anyway

Regards

[Artamon]

G'day all,

This is a great idea (as was the T/Trader experiment). I am glad i've found this at the start of the developmental process and hope to contribute what my limited knowledge allows and learn along the way. RodC summed it up pretty well for me.

As for the system, my vote is for shares on a daily timeframe.

Many thanks,
Andrew.

[RichKid]

Now EMERGING Outperforming Stocks and Indexes--that is an entirly different proposition----this is our challenge when finding a universe and a portfolio.

Well, think of it via the stock analogy, a breakout may look specatacular at first and we may think we've missed it but as T/T has shown if you follow it long you can make big profits.

Now consider something like the commodities bull runs, they look real strong, then correct (as is happening this year) and then they run even stronger, it's all cyclical. So what exactly is an 'emerging' sector? If it's going to run even harder then wouldn't it currently be emerging? Maybe we need to look at longterm commodities charts/indices and then go from there. Oil for example is not going to go down anytime soon so the oil co's will be making money for some time. As I understand it all commodities run together so we need to have some diversification as well so we aren't too heavily in one sector.

As for time frames I reckon weekly is good (less time consuming compared to a daily system) and I'm happy to stick to Aussie shares, makes tax and other things easier as well since it's a familiar universe to start with. Also in terms of commodities we have some real gems on the ASX.

[tech/a]

Rich.
There is merit in what you say re indexes---Why dont you persue compilation of a universe based around that.(Or anyone else for that matter).

ON WEEKLY SYSTEMS
Firstly a daily system (even short term if we can find one that is profitable) wont take long at all to trade particularly when we have a full portfolio.

The one huge problem people have with weekly systems is a sell signal on Monday with an exit stratagy on the NEXT open---so you have to wait all week.In which time it can drop further,claimb back OR do little.
Once you understand that the system takes into account these 3 occurences and some will win some back and some lose some more----it isnt a problem.
But most cant handle this aspect--they feel a sell trigger should be acted upon immediately.Sure you can do intraday/or week exits but from a practicality veiw most dont see the days trading results until night so cant react till next day.
Hence the delay buy AND sell 1 day.

A weekly system will be longer term---Shortest would be 2 weeks--2 bars.

ON SHORT TERM SYSTEMS

I've thought for many years that the reason short term methods in stocks particularly portfolios tend to fail(I havent found one that retuns good profit in 12 yrs) is that unlike Futures which have many short term very profitable methods---we are trying to apply short term trading startagies over a GROUP of candidates---with Futures its ONE.

My theory is that if you have as little as 3-5 stocks and design the best "System" INDIVIDUALLY FOR THAT STOCK rather than a blanket universe---youll find a great way to trade.This would be pretty simple and you could optimise your brains out on each individual candidate.
.

What do you think of this idea??

[Milk Man]

Will that (short term theory) restrict use of capital? It sounds excellent for options trading where youre heavily geared but will it give enough oppurtunities for shares?

I think the use of a funny-mental approach to selecting a universe of stocks sounds interesting. If we want to be consistent though its a bit hard to back test unless theres a technical entry/exit signal for each idex were using in the universe at the time.

I reckon daily timeframe and don't want to see a too longer term method.
If I have to sit there for twelve months of ebbs and flows in a stock i'll most likely fiddle with the method and stuff it up. Something using eod data unless an automated stop can be used with the broker. I'd be stoked with a 6mth hold period.

what does everyone else think?

[mit]

ON SHORT TERM SYSTEMS

I've thought for many years that the reason short term methods in stocks particularly portfolios tend to fail(I havent found one that retuns good profit in 12 yrs) is that unlike Futures which have many short term very profitable methods---we are trying to apply short term trading startagies over a GROUP of candidates---with Futures its ONE.

My theory is that if you have as little as 3-5 stocks and design the best "System" INDIVIDUALLY FOR THAT STOCK rather than a blanket universe---youll find a great way to trade.This would be pretty simple and you could optimise your brains out on each individual candidate.
.

What do you think of this idea??

I agree. There is also the fact that you are in and out so often trying to physically manage more than 4-5 stock universe is difficult. The way I managed it before was to backtest a system using a universe of the asx200 stocks. If it showed some profit and find the best 4-5 stocks. The *BEST* does not neccessarily mean most profit for the period but things like
. Numbers of trades.
. Expectancy still high after the best trades taken out.
. smoothest equity curve.

I would then optimize over all 4-5 stocks. Check that the parameters are still robust. I would then optimize individually. But if the parameters moved too far I would get suspicious.

I hope that nobody blasts me for the word "optimize" I am well aware of the problems of curve fitting and the need to test parameters across years and to test sensitivity and so forth.

MIT

[tech/a]

Loakglen.

I'm thinking this method will target traders who ahve about $10,000 in capital.
They will trade unleveraged.
They will have a position size of $3333 for 3 stocks----$5000 for 2
I'm thinking any position size smaller would be less likely to succeed short term.
Universe of stocks will determine frequency of trading.
We could have say 10 or 20 which are continually rotated in and out Think 5-10 best less if sufficient trades.
Only 2 or 3 will be held at any one time.
Profits will be added to capital and position size increased with profit thus compounding wins.
Each stock will have its OWN optimised technical entry and exit (Fundamental can be used for universe but I feel that to find MOVERS a technical approach will suit the short time windows we wish to catch).
Setting of stops will also be governed by BEST performance parameters of each stock.


MIT we crossed---yes I certaintly agree regards comments in particular optimising it is important (and nice to work with people who understand) to understand that optimisation selection doesnt necesserily mean the very best result from optimised parameters.

This is just the basic model---thoughts?

[Milk Man]

$10000 unleveraged may leave it a bit thin short-term given all the brokerage. It does help out those low on capital though. It would be interesting to see if we could make it work. Maybe $10000 geared up to $20000 or even $20000 cash would be better- that way positions can be 4 X $5000.

I like the optimisation idea. I'd like to see what everyone comes up with to pick the best potential movers.

[RichKid]

Rich.
There is merit in what you say re indexes---Why dont you persue compilation of a universe based around that.(Or anyone else for that matter).
..........


Tech,
I like the ideas. How about using 6-10 stock to ensure diversity across sectors, then if a sector gets hit we still have some runners from another one? I may cross reference with Roth's book too.
I'll look up some commodity/resouce stocks (my favourites) and maybe some cyclical stocks to mimic resources cycles. Getting to know a few stocks is a great idea, especially bluechips with longterm chart trends.

[mit]

For the under capitalized could try to use CFDs. The commissions are lower but you would have to account for the spreads, hold costs and the fact you cannot get involved in the opening and closing bids. If I had less than $10k I would use CFDs.

If it is for outright buying of shares. Select shares with the highest volatility (beta) could be part of the final universe, this would give greater bang for your buck.

MIT

[RichKid]

$10000 unleveraged may leave it a bit thin short-term given all the brokerage. It does help out those low on capital though. It would be interesting to see if we could make it work. Maybe $10000 geared up to $20000 or even $20000 cash would be better- that way positions can be 4 X $5000.

I like the optimisation idea. I'd like to see what everyone comes up with to pick the best potential movers.

Maybe $20,000 then? That's within reach for most and if they can't then they can just halve it. A small float isn't a problem if we get the numbers right imo, just smaller bets and smaller returns at the start. $40 round turn brokerage is common for discount brokers and is not a big percentage for a $2k or $3k position.

Can you trade CFD's with low margins? ie only borrow the minimum? That'll reduce the downside risk and margin calls and make it closer to share trading.

[RodC]

$20,000 with 4 or 5 positions seems reasonable, I don't think smaller positions are worthwhile (there are of course exceptions!).

So it looks like we're heading down the path of short term system with a relatively small universe of stocks with a maximum of 4 to 5 positions at any one time? Sounds interesting!

tech/a, when you mentioned optimising individually for each stock, does that mean you effectively have a slightly different system (within the overall system) for each stock?

Rod.

[Milk Man]

Can we decide on start-up capital?

My vote is $10000 and a further $10000 on margin.
This keeps it in range of the common man but should still give enough lee-way
for decent stops and the effect of brokerage.

As for the universe discussion; if we use margin the lender will decide the initial candidates. I think a margin list is the go for starters anyway. Then we should narrow it a bit further.

This is where I hit the wall. I'm getting Amibroker soon so i'll be more help then.

[mit]

$20,000 with 4 or 5 positions seems reasonable, I don't think smaller positions are worthwhile (there are of course exceptions!).

So it looks like we're heading down the path of short term system with a relatively small universe of stocks with a maximum of 4 to 5 positions at any one time? Sounds interesting!

tech/a, when you mentioned optimising individually for each stock, does that mean you effectively have a slightly different system (within the overall system) for each stock?

Rod.

Rod,

This probably mainly me. I thought most people wanted to medium to long term system with a large universe of stocks. I was going to set up a vote but I am not sure how to do it. A vote would be good as some of the lurkers will feel more comfortable voting. My thoughts on choices are:

1 Medium-Long term portfolio based on Large Universe (Margin List) based on $100k funds (This can also be margined)
2 Medium-Long term portfolio with a smaller start $20k
3 Short Term Share System based on 4-5 stocks with $100k
4 Short Term Share System based on 4-5 stocks with $20k
5 Short Term Share System based on 4-5 stocks with $5k CFDs
6 Futures (SPI?) Short Term System

5 is what I think is an interesting one. You would start with a high risk and reduce the risk as the capital build. Sort of like Darryl Guppy's $2k to $20k on overdrive. The idea is that you can handle a lot of volatility when you capital is small rather than when your capital is large. That is losing $2k on $5k is easier than losing $40k on $100k.

Any other choices? Can anyone work the polls?


Also bad news Tech has left all Forums (Unless people can convince him to come back)

MIT

[Battman64]

Also bad news Tech has left all Forums (Unless people can convince him to come back)

Come back Tech/a

[RodC]

Rod,

This probably mainly me. I thought most people wanted to medium to long term system with a large universe of stocks.


You may well be right, my impression was the leaning was more towards a shorter (faster?) system. My initial idea was for a longer term system, but I didn't see any point in duplicating techtrader, as that's already out there.

A medium-long term portfolio with a $20K start is probably more accessible to most, can be margined if necessary. If we want to make a system which is reasonable for most then I would think that CFD's and Futures are probably outside the comfort zone. For the same reason a short term system may be too fast/volatile for many.

I think the important thing is learning the process of developing a system. I'm currently trading 2 different systems myself, both of which I've found from other sources then adapted/modified to suit my temperament/style. As everyone is slightly different I think this should be a "how do you build a system" exercise rather than a "this is the best system" exercise.

If this works, then we should all be in a better position to develop a system which suits our own style.

regards,

Rod.

[RodC]

Come back Tech/a

I too would like tech/a to come back, he can be confrontational and abrasive on occasion but I reckon I've personally learnt and gained a great deal from his postings.

Rod.

[dutchie]

Rod, as a beginner at this trading game I agree with both your last two posts.

[RodC]

thanks dutchie,

I've been playing with stocks for about 10 years now but when it comes to systems development I certainly consider myself a beginner.

Rod.

[Artamon]

Also bad news Tech has left all Forums (Unless people can convince him to come back)

Did he give a reason for leaving? Not that one needs to, of course. But, if it's to do with the goings-on in the forums then it's a shame.

On here and other forums, I found Tech/a's posts to be, above all else, informative.

Andrew.

[RichKid]

I think the important thing is learning the process of developing a system. I'm currently trading 2 different systems myself, both of which I've found from other sources then adapted/modified to suit my temperament/style. As everyone is slightly different I think this should be a "how do you build a system" exercise rather than a "this is the best system" exercise.

If this works, then we should all be in a better position to develop a system which suits our own style.

regards,

Rod.

Rod,
Agree there, although we could use this thread as a starter to create a new thread with a specific system to trade live if required.

So I think that 10k float to trade stocks (no margin/leverage) direct seems a good start. For those who have 20k they can trade double the position size. Does that sound okay for starters? Just to get things going.

[mit]

Rod,
Agree there, although we could use this thread as a starter to create a new thread with a specific system to trade live if required.

So I think that 10k float to trade stocks (no margin/leverage) direct seems a good start. For those who have 20k they can trade double the position size. Does that sound okay for starters? Just to get things going.

Sounds fine to me. I might to the ST system myself and post if I get anywhere. Don't hold your breath it has taken me on average 9months to develop a system I am happy to trade.

MIT

[Joe Blow]

Did he give a reason for leaving? Not that one needs to, of course. But, if it's to do with the goings-on in the forums then it's a shame.

On here and other forums, I found Tech/a's posts to be, above all else, informative.

Tech/a has made a significant contribution to the forums and his posts are appreciated by many here.

If he has decided to take a break from posting, then I hope it's a short one.

[RichKid]

Sounds fine to me. I might to the ST system myself and post if I get anywhere. Don't hold your breath it has taken me on average 9months to develop a system I am happy to trade.

MIT

So an EOD daily system (hope that sounds correct) that allows us to act on signals the next day? So next step is the universe?

As for tech, I hope he comes back too but he may just be taking a well deserved breather. There have been some heated debates here and elsewhere recently and Tech may have thought it wasn't worth the flak he was copping.

Let's keep this on topic, anyone can pm tech if they have further queries. I really hope he comes back as he has certainly become more restrained over the last few months imo and is a valued contributor.

[DTM]

Rod,

5 Short Term Share System based on 4-5 stocks with $5k CFDs
6 Futures (SPI?) Short Term System

5 is what I think is an interesting one. You would start with a high risk and reduce the risk as the capital build. Sort of like Darryl Guppy's $2k to $20k on overdrive. The idea is that you can handle a lot of volatility when you capital is small rather than when your capital is large. That is losing $2k on $5k is easier than losing $40k on $100k.

Any other choices? Can anyone work the polls?


Also bad news Tech has left all Forums (Unless people can convince him to come back)


I like 5 and 6, mostly because I'm a short term trader but also because I'm beginning to notice that once I make a profit, I leave the stock and look else where, not noticing that the stock will make a bigger move. I'm reassessing my strategy because I think that once you become familiar with a stock, it becomes easier to read its movements.

PS Come back Tech. Your knowledge and input is invaluable to beginners like me... :)

[RichKid]

I'm reassessing my strategy because I think that once you become familiar with a stock, it becomes easier to read its movements.

DTM,
Agree completely there, in line with tech's comments as well. So maybe 6 is good to start with? So at least 3 non-correlative markets then? What do people think about that last suggestion? It also goes to the next point which is the stock universe and how to trim it down.

[mit]

So an EOD daily system (hope that sounds correct) that allows us to act on signals the next day? So next step is the universe?


ASX200 as a start?

Reasons are that all of these shares would be available for margin and as CFDs. I know that the system will be set-up as a $10k non margin system but I think our notional beginner may want to move to other pastures once he gets the hang of trading.


MIT

[RichKid]

ASX200 as a start?
Reasons are that all of these shares would be available for margin and as CFDs. I know that the system will be set-up as a $10k non margin system but I think our notional beginner may want to move to other pastures once he gets the hang of trading.
MIT

Sounds fine to me, also means they are more likely to be liquid and people can even use options to take synthetic positions (hope that's the right word).

So ASX200 is the first step, still a huge number to cull.

[Milk Man]

So in a nutshell weve decided (have we?):

Aussie shares as a vehicle
$10000 startup capital (unleveraged)
Daily charts for signals
EOD data for buy/sell on open next day
ASX 200 for the Universe of stocks (to begin with)

Is everyone happy with this?

[GreatPig]

I'm unclear on how the ultimate live-trading part of this will work.

Is the intention that individuals will each trade their own version using their own capital? If so, will each individual be using different parameters and thus selecting different stocks so that everyone's not trying to make the same trades in the same stocks at the same time?

GP

[RichKid]

I'm unclear on how the ultimate live-trading part of this will work.

Is the intention that individuals will each trade their own version using their own capital? If so, will each individual be using different parameters and thus selecting different stocks so that everyone's not trying to make the same trades in the same stocks at the same time?

GP

Although it was mentioned earlier that this is a good exercise for those who would like to start their own system later on we should really concentrate on starting one system now. Once all is in place we can start a new thread to show the system being traded live. I think it defeats the purpose of us putting our heads together if we go off on our own at the first opportunity. I assume we will be just testing one system for the first few months of operation before starting with real money.
So basically GP I think we are looking to create one system which we can start with and later people can modify it if required.

[Artamon]

So in a nutshell weve decided (have we?):

Aussie shares as a vehicle
$10000 startup capital (unleveraged)
Daily charts for signals
EOD data for buy/sell on open next day
ASX 200 for the Universe of stocks (to begin with)

Is everyone happy with this?

Yep, sounds like a plan to me.

Andrew.

[RodC]

Although it was mentioned earlier that this is a good exercise for those who would like to start their own system later on we should really concentrate on starting one system now. Once all is in place we can start a new thread to show the system being traded live. I think it defeats the purpose of us putting our heads together if we go off on our own at the first opportunity. I assume we will be just testing one system for the first few months of operation before starting with real money.
So basically GP I think we are looking to create one system which we can start with and later people can modify it if required.

Yep, that's how I see it as well.

There's a couple of aims to this exercise:

1. To develop and trade one system live,
2. To learn the process of system development for those that wish to take it further themselves later.

Rod.

[cabbie]

With the main goal to maximize Expectancy & Opportunity and avoid Risk of Ruin etc as presented by Tech/A, Van Tharp & others.. ?

How to get there is what I'd like to know.

[RichKid]

With the main goal to maximize Expectancy & Opportunity and avoid Risk of Ruin etc as presented by Tech/A, Van Tharp & others.. ?

How to get there is what I'd like to know.

I guess all that will be in the numbers once we get these preliminary issues sorted out. Do a search on those topics you mentioned using the ASF search tool and you'll find weeks of reading!

We'll be coming to those topics eventually so you'll have time to read up. I don't know much about it all myself but I'm learning.

[mit]

I'm unclear on how the ultimate live-trading part of this will work.

Is the intention that individuals will each trade their own version using their own capital? If so, will each individual be using different parameters and thus selecting different stocks so that everyone's not trying to make the same trades in the same stocks at the same time?

GP

On Reefcap it basically worked as a thread where it was synthetically traded by a volunteer. Some people did trade. But we must stress that it is an educational exercise and not a set of recommendations. Depending on the system. If it is a medium term system we may still have 100 possibilities to pick from and a number may come up simultaneously. I trade two systems that basically have the asx200 as their universe and I get out of step with the backtest so I think it would be okay.

If we pick a smaller number, they would probably be the more liquid stocks anyway and I think our combined might would not shift it. Although we might keep that in mind and make sure that the liquidity is greater than say $500k per day.



So ASX200 is the first step, still a huge number to cull.

Not with Amibroker and and Excel :D . I think the problem is getting a system that looks like working.

MIT

[Milk Man]

Just got Amibroker!

$149us ($205 aus)

Bring on the pain! :banghead:

Formula's are not my cup of tea but i'm sure my love of money will soon change that. :D

I'm quite willing to try help with culling back the universe of stocks but I may
need some help taming this new Amibroker beast of mine.

If there's enough of us with AB maybe we could start a thread on it.

[mit]

Now where to next? Looking at the development of T/T, it was more of a monologue with some ideas thrown into the side. Tech was a couple of steps ahead and would reveal his thoughts as he went. Tech is not here anymore unfortunately.

Again I think we have a number of choices. Either we throw up a few systems to discuss and vote on one of those and that gets slowly developed
OR
those of us who have developed systems can "think aloud" and develop their systems in parallel culling out the ones that don't seem to make it.

Personally I think the second way might be better. Its hard to know what will work and I think that getting agreement on every step will take forever. I have developed three systems that I trade successfully and although I have a couple of ideas for systems 95 percent of my ideas don't work. My last system, a forex system, came from misreading Larry Williams. So I am happy to start developing live and for other experienced people to develop live.

Another good part is that I use Amibroker which seems pretty popular here.

MIT

[RichKid]

Just got Amibroker!
$149us ($205 aus)
Bring on the pain! :banghead:

Formula's are not my cup of tea but i'm sure my love of money will soon change that. :D
I'm quite willing to try help with culling back the universe of stocks but I may
need some help taming this new Amibroker beast of mine.
If there's enough of us with AB maybe we could start a thread on it.

I've started an Amibroker thread as I have a feeling we'll need one soon. There has been some general discussion of Amibroker in various threads so you could start with a keyword search.

Here's the new thread: http://www.aussiestockforums.com/forums/showthread.php?p=15657#post15657

[Milk Man]

I've started an Amibroker thread as I have a feeling we'll need one soon. There has been some general discussion of Amibroker in various threads so you could start with a keyword search.

Here's the new thread: http://www.aussiestockforums.com/forums/showthread.php?p=15657#post15657

Thanks mate,

I do try to look for what I want to know as long as ive got the patience.
I'd rather use this site for forum chat however as theres a great sense of teamwork (99% of the time anyways). If no-one here knows ill go somewhere else and try to find some answers.

[Milk Man]

I've come up with a couple of ideas of culling back our universe,
these seem to have a good effect:

Close above/below a certain price-
I was to lazy to manually put in the asx200 so I just included everything that traded over $500000 a day average for the previous year. This may be worth tweaking. I have been testing below certain dollar amounts aswell with some success.

Integration of a bang for buck requirment-

care of one of Tech/a's posts:

"Divide a $10,000 account by the closing price on any given day. This number is then multiplied by the average range of the stock for the last 200 days. Dividing this number by 100 converts the result to dollars and cents which inturn indicates the possible dollar return on any given day."

I modified the formula to fit into Amibroker then put a > condition on the end.
(please see Amibroker thread to check- never programmed anything before!)
therefore if a stock moves $10 average a day then in a year on a $10000 position it will move $3650 a year = moving at 36.5%

The only downside to this is that it can move down faster than up (generally) so that has to be taken into acct. Therefore if we want stocks that can move at 35% a year we may have to enter 50% to actually get that. Theoretically that is.

My problem now is what to benchmark it on. I've just been using techtrader but we don't seem to want that. Any ideas?

What do you guys think?

[mit]

We can let Amibroker do it for us. We can add these things as filters and find good values. Actually for the bang for buck you can set Amibroker up to once it has a number of candidates it will pick the shares in order of volatility.

Interesting comment about the going down faster than going up. The simple way to measure volatility is to use ATR. Bang for Buck is usually ATR/C. In the forex system I trade I found that directional volatility gave some interesting results ie EMA(H-O, period) and EMA(O-L, period).

Basically, the aim is to capture stocks likely to go up or stocks already in an uptrend "Buy High Sell Higher". I've found that GMMA discussed elsewhere is good for this. NOT as a trigger. I used the formula below:

AND BarsSince( Cross(MA(C,50), MA(C,45) ) ) > period
AND BarsSince( Cross(MA(C,45), MA(C,40) ) ) > period
AND BarsSince( Cross(MA(C,40), MA(C,35) ) ) > period
AND BarsSince( Cross(MA(C,35), MA(C,30) ) ) > period
AND BarsSince( Cross(MA(C,35), MA(C,5) ) ) > period
AND MA(C,50) < MA(C,45)
AND MA(C,45) < MA(C,40)
AND MA(C,40) < MA(C,35)
AND MA(C,35) < MA(C,30)
AND MA(C,35) < MA(C,5)

Notice I am only interested in the long term lines. This shows me that for the last "period" days the MAs haven't crossed so the trend is well and truly established. GMMA on the other thread was being used as a trigger and it doesn't work as well. We want the lines to already be established.
Also the lines are in the order we want. If you really want to get picky you can test that all of the lines are sloping upward. There are other indicators of trend

So we filter on
1. liquidity
2. volatility
3. In a nice trend

Another thing to look at is stocks reaching a 52 week high. Once they pass this the skys the limit as there is little overhead resistance. However, the 52 week high itself is a resitance and stocks hitting this may subsequently dive. We would need some confirmation such as the stock has kept going up once it has hit the 52 week high or we can look at a 1-2-3 formation as this increases the probability of success and gives us an initial hard stop at the 2 point.

MIT

[mit]

I created a new thread for the longer term system: http://www.aussiestockforums.com/forums/showthread.php?t=1709

MIT

[tech/a]

I seem to be working on the short term method like MIT, I've moved the discussion to a thread dedicated to a Short Term System (http://www.aussiestockforums.com/forums/showthread.php?t=1710).

Perhaps general conversation and questions relating to systems developement and testing not specific to either thread could remain here.

[RichKid]

I seem to be working on the short term method like MIT, I've moved the discussion to a thread dedicated to a Short Term System (http://www.aussiestockforums.com/forums/showthread.php?t=1710).

Perhaps general conversation and questions relating to systems developement and testing not specific to either thread could remain here.

Great idea. And thanks guys for the suggestions re splitting the thread. I've done it now. Please browse the Trading Tips forum and checkout the threads on testing- let me know if I still need to move or edit any posts or threads. Should be okay now as I've provided cross-references. So we now have a general systems testing thread (this one) and a med/long term thread and a short term thread. I'll add nicknames to the threads once that's sorted, I think tech already has a name for his.

[tech/a]

Rich..
Are you available for general tidy ups!! Man I'm gonna nick name you "Hoover".

Good Job!

[tech/a]

Master Keys
Secondary Keys
Minor Keys

These are the essence of systems construction. Defining these keys in order and applying them to your system design will help you in BUILDING a good system.

MASTER KEYS.

These are conditions or variables which when applied can make the difference between a system failing or being profitable.
(I have found one of these in the Short term systems developement we are currently working on).

SECONDARY KEYS

These are conditions or variables which when applied can dramatically alter a systems performance----IE Key systems aspects like---% profit,% winners/losers,Risk Reward Ratio's,Consecutive winners/losers---are DRAMATICALLY altered.
(I have also found one of these in the short term method)

MINOR KEYS

These are conditions or variables which are often found when TWEEKING a method.Optimisation could fit into this area of systems design for singular entities like futures or indexes.

I mention these here as I will be using this terminology in the threads on systems design and I want people to know what it means.

[RichKid]

Rich..
Are you available for general tidy ups!! Man I'm gonna nick name you "Hoover".

Good Job!

Thanks, I prefer tidy discussions. And yes, I may have to do odd jobs cleaning-up for people if my trading doesn't improve, so I might as well get the practise while I can!

[mit]

Great idea. And thanks guys for the suggestions re splitting the thread. I've done it now. Please browse the Trading Tips forum and checkout the threads on testing- let me know if I still need to move or edit any posts or threads. Should be okay now as I've provided cross-references. So we now have a general systems testing thread (this one) and a med/long term thread and a short term thread. I'll add nicknames to the threads once that's sorted, I think tech already has a name for his.

Thanks, you even cleaned up my mistake in naming the medium/long term thread. Although for nicknames I have been writing programs for 27 years and still can never think of catchy names for systems. I have lefts a trail of systems with unpronouncable acronyms.

MIT