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Oscillator Offset Trading model

Discussion in 'Trading Strategies/Systems' started by Oscoff, Sep 8, 2015.

  1. Oscoff

    Oscoff

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    Hi Guys, I have been enjoying the strategy discussions for the last few months while I have been working on a trading model that has been giving some pleasing results in the trades I have done and over longer periods in back testing. So maybe I should discuss the results now. The average return over the last 220 or so days has been above 50%.

    I call it Oscillator Offset because it turns price movements into a wave that reminds me of a sine wave and the distance it gets from the centre (the offset) can be used to generate buy and sell signals. It's not perfect but I would argue that it's reliable which is quite an achievement in itself. I only run it once a day at midday so it suits me as I have a day job as an Engineer and looking at charts all day isn't good for keeping the boss happy.
    I actually don't even look at charts or even the market. I have used it with Options (hence the Calls and Puts) but found the decay is a bit harsh for them given the average position duration is about 5.5 days. I am moving over to Mini Warrants which have no time decay and much smaller spreads, albeit with more modest returns.

    I have been uploading a trading diary on FB with screen shots and a daily report. If there is any interest I will be happy to answer questions. The days' results are there each day between 12 to 1pm. Go to:
    (or look for Oscillator Offset Trading)

    Today's report can be seen at:

    https://www.facebook.com/profile.php?id=100010129870649

    https://drive.google.com/file/d/0B2nTYcmmQkPLZ0twbW9MbG51clU/view?usp=sharing

    This should not be seen as financial advice, just an indication of what one system was doing on a given day. Like all indicators you need to consider them with your own circumstances in mind and other market information.

    Cheers Oscoff
     
  2. tech/a

    tech/a No Ordinary Duck

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    Don't know about anyone else but I cant read it.
    Far too small
    Can't follow it at all
    Just a bunch of really small typing and charts with
    No meaning.
     
  3. Oscoff

    Oscoff

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    It's a large PDF so you'll need to download it. Yes the preview in Google Docs is far too small to read. The main details are in the screenshot if you don't want all the info in the report . Cheers Oscoff
     
  4. Oscoff

    Oscoff

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    Today's trading model result Oscillator Offset up 1.238%

    I have just uploaded today's positions and a P&L update for the Oscillator Offset trading model. Up 1.238%.

    CBA profit has passed 70% since Oct'14 while the share price is actually 1% lower over that period.

    https://www.facebook.com/profile.php?id=100010129870649

    The full PDF report for today's positions is here.

    https://drive.google.com/file/d/0B2nTYcmmQkPLNy1JSnJrUXBDUDQ/view?usp=sharing

    Regards Oscoff

    This should not be seen as financial advice, just an indication of what one system is doing on a given day. Like all indicators you need to consider them with your own circumstances in mind and other market information.
     
  5. Oscoff

    Oscoff

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    My positions and P&L. Trading system up 52.38%

    Hi Guys - The system is down 0.75% today but up more than 52% overall since it started. You can see the screen shot of today's results at:

    https://www.facebook.com/profile.php?id=100010129870649

    The full daily report in PDF with P&L for each share/index can be accessed via the link below.

    https://drive.google.com/file/d/0B2nTYcmmQkPLaklibmlsWlJYMG8/view?usp=sharing

    This should not be seen as financial advice, just an indication of what one system is doing on a given day. Like all indicators you need to consider them with your own circumstances in mind and other market information.

    Cheers Oscoff
     
  6. sinner

    sinner

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    On the top right hand side of your browser should be a small magnifying glass icon, click for initial zoom and then a slider will appear to the left of it to zoom in further.

    The contents of the PDF is essentially per name equity curve plus position runs (looks like long options) for the last while.

    Also at the top is a summary of the aggregate equity curve and some stats.

    To me, looks legit, looks good.

    By going through some of the recent positions, I'd be guessing that Oscoffs strategy is essentially short term mean reversion.

    i.e. buy (long calls) when the offset is large and negative, short (long puts) when the offset is large and positive. Better results could probably achieved by simply trading the underlying on leverage instead of options.
     
  7. tech/a

    tech/a No Ordinary Duck

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    CFD's
    And you'd have a wider range.

    Thanks for the Zoom hint.
     
  8. sinner

    sinner

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    Actually I think that sticking with the optionable names is a good idea even if not trading the options, these names are more likely to display mean reversion behaviour than smaller stocks, which generally tend to have a bit more momentum to them.

    I don't have a link handy but one large study I read did seem to indicate that derivatives generally reduce momentum in equities, for example:
    * Sector indices have more momentum than broad market indices (e.g. utilities stocks vs ES futs)
    * Sectors and single names which track a related derivative tracked market (e.g. think oil and oil drillers or bonds and banks) have less momentum than sectors and single names with no derivative tracked market (think consumer staples or consumer discretionary)

    and so on...

    Broad momentum is generally made up of structural short term momentum because for breakouts to succeed they really need followthrough.
     
  9. Oscoff

    Oscoff

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    Thanks Sinner for the compliments. I am happy to keep doing this each day, let's see what happens. It is legit, you could work your way through the numbers and they should all add up. If not, tell me first!

    The effect of the maths is that it acts somewhat like a mean reversion but it isn't driven by any reference to a mean. I guess there is nothing truly new under the sun but maybe I'm just attacking the problem in a different manner. I haven't written a trading model before but just like any engineering problem I do at work, the answer to most things is within the information you already have and often it's less complex than we think it ought to be. This isn't simple, there is a mix of linear and non-linear algebra but the application is IMO elegant and the maths is robust.

    Another point about the P&L is that I haven't introduced any kind of Stop Loss in the model so it could be a bit higher.

    The decision time is nominally around midday. The prices for some have a midday value going back some time and others not far. In that case it is the closing price for the day which is potentially misleading. However I did a comparison of P&L for midday data and end of day and there is no advantage on average between the two. Obviously the intention of a midday signal is to give time for the market to stabilise (perhaps) and time to effect the suggested trades.

    Regards Oscoff
     
  10. sinner

    sinner

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    Apologies for miscommunicating. Mean reversion is just my lazy short-hand for a basket of strategies which bet that downs will lead to ups (rather than momentum which bets that ups leads to more ups). The return profiles for these strategies tends to be the same regardless of the specific algorithm used, although obviously some algorithms will generate a better Sharpe ratio than others.

    If you're trading long options then there is a built-in stoploss ;)

    I think you will find hard stops are generally going to burn this strategy pretty hard, best to keep it technical. For example, one simple but effective filter I have noted for mean reversion is to be on the right side of intermediate momentum (e.g. 10/30 SMA cross or MACD signal line <> 0).

    Just for clarity, have you actually been trading this strategy or are the PDF reports you're producing based on theoretical backtest? Because I think you will find that in real life, obtaining the "midday value" might be more difficult than you imagine, unlikely your backtests represent an actual tradeable outcome if so.
     
  11. Oscoff

    Oscoff

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    Hi Sinner - Thanks for the thoughts, I have been trading it on and off over the last few months. It was profitable in terms of buy low sell higher but in the case of options, my positions were too small to cover the brokerage and decay so I am looking at other instruments. It needs to be trading about three or four at the same time to smooth out losses on one with the gains of others.

    In my experience of trading it, there is a potential for slippage but it can work both ways, the price can retract a little while I open my brokers website and log in, it could of course get away from me if I stuff around but given the average duration of positions is many days I don't think it's a deal breaker. I'm certainly attracted to the idea of systems where instant execution isn't critical such as it is in some models.

    I'll make a note of what I actually manage to get positions at and get back to you in the near term with some kind of analysis of the slippage issue.

    Cheers Oscoff
     
  12. Oscoff

    Oscoff

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