Short only system for US Indices - Aussie Stock Forums

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  1. #1

    Default Short only system for US Indices


    I'm looking for a short only system for the US market stock indices that will work with amibroker.

    Does anyone have any suggestions for a tradable model that is available for purchase? or perhaps willing to share a working model of their own with me?

    Returns need not shoot the lights out, drawdowns need to be below 30%.

    Please let me know,


  2. #2

    Default Re: Short only system for US Indices

    Hi HedgePledge --

    Look into the systems described by Larry Connors -- In his book "High Probability ETF Trading" and some of the shorter booklets published by his company, Trading Markets. http://www.tradingmarkets.com/

    About the drawdown. Risk is determined by the distribution of the trades. Position size is determined by comparing the risk of the system with the risk tolerance of the trader. Position size is dynamic. As the performance of the system varies over time, position size must be adjusted.

    So, the technique is:
    1. Develop the system to determine the best rules and parameter values (or read the rules and parameters).
    2. Generate a set of trades that will be used as the baseline for ongoing performance monitoring and for establishment of initial position size. Call this the "best estimate" set. A good place to get it is from the out-of-sample trades of the walk forward runs.
    3. Write down you personal statement of risk tolerance. It will be something like this:
    "I am trading a $100,000 account and looking at a two year forecast.
    I will take all signals and hold all trades until the system causes the exit. (If you would exit early from a deep intra-trade drawdown, the technique also accommodates that.)
    I want no greater than a 10% probability of having a 20% (or 30%) drawdown, measured from highest equity-to-date."
    4. Determine maximum safe position size. Once you know the maximum safe position size, you can estimate future performance and decide whether the system is worth trading. See my book "Modeling Trading System Performance."
    5. Trade the system.
    6. After every trade, or at least periodically, adjust the best estimate set of trades, evaluate the health of the system, recalculate the now-current position size. When the system performance begins to deteriorate, this technique will automatically reduce your position size to keep the probability of a steep drawdown within your limits.


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