Are there pullback systems that backtest well?

[lindq]

Quote from mind:

i asked myself if this thread will become specific. and it did. it depends on oneself's position on the learning curve whether to realise that or not.

from here as well: thanks lindq. anything more specific would almost spell: code.

peace

Mind, the general principal is a simple one. The point of maximum fear in a stock is OFTEN the best buying opportunity. And it is not unusual for that to occur when the overall market is also full of fear. Buying pullbacks successfully - and that is what this thread is about - means that the trader must overcome that fear when entering. This is not an easy thing to do, but successful backtesting and realtime trading can help overcome the fear.

Today's market response to the fearful oversold condition we've just experienced is a perfect example of this. If one had bought the SPY, or an oversold stock a couple days ago at the height of the VIX, a nice profit could have been made today. I don't personally reference the VIX in my trading, but I do find it interesting that when I feel fear in my own gut, a glance at the VIX will confirm that this is the point where I should probably be entering long positions, not avoiding them.

As is very often the case in successful trading, doing what is counter-intuitive is what wins the game.

 

[mind]

i do agree. i have a similar concept in place for index futures.
it is on my to do list within the next six weeks to test it on single stocks. i will start with bigger caps, since in games like this i am paranoic about survivorship bias in backtesting.


peace

 

[lindq]

Quote from mind:

i do agree. i have a similar concept in place for index futures.
it is on my to do list within the next six weeks to test it on single stocks. i will start with bigger caps, since in games like this i am paranoic about survivorship bias in backtesting.

peace

A tracking list of stocks with strong EPS (>2) will always outperform a general list of stocks in trading pullbacks. For the simple reason they they more readily attract buyers when they are strongly oversold.

 

[mind]

that will be oen of the filters, though i have data on earnings only back 18 months or so. pretty expensive thing.
another thing is to look at those who fell, but reduced their long term debt. this is usually a good sign as well, but it is by definition only quarterly information in the end.

 

[TheStudent]

FWIW,

I found your exchange to be more of what we need on ET.

Lindq,

I wonder what your experience buying pullbacks under bearish conditions - the profit opportunity for bull reactions are very limited in time.

Would you sell pullbacks with the general trend or would you do something else altogether?

 

[rickty]

Quote from lindq:

A tracking list of stocks with strong EPS (>2) will always outperform a general list of stocks in trading pullbacks. For the simple reason they they more readily attract buyers when they are strongly oversold.

lindq,
You have made this assertion a number of times but I have not been able to show that this is true in my backtesting. I believe you also prefer to trade NYSE stocks. Here again my backtesting has shown that Nasdaq stocks are better.

Richard

 

[lindq]

Quote from TheStudent:

FWIW,

I found your exchange to be more of what we need on ET.

Lindq,

I wonder what your experience buying pullbacks under bearish conditions - the profit opportunity for bull reactions are very limited in time.

Would you sell pullbacks with the general trend or would you do something else altogether?

I find that trading pullbacks in a downtrend is a lot like a ball bouncing down the stairs. The overall path may be down, but there are still significant bounces that can be traded.

So I still look to buy pullbacks, but they need to exhibit an even stronger and sharper pullback, and a rising CCI 2-4 days before the trade. This seriously cuts the number of trades that signal on my system, but those that do are of a much higher quality and I feel more confident jumping in. For example, a trade I entered two days ago was BBY. Severly oversold daily and intraday, but with a near term divergent (rising) CCI. I also cut back a bit on my profit expectations, as in any long trade you are obviously fighting an uphill battle in a downtrend.

There is always a temptation to stand aside during downtrends - there's that FEAR thing again - but often this is the worst thing to do. Sometimes the best profits are made when others are screaming in the streets and peeing their pants.

 

[lindq]

Quote from rickty:

lindq,
You have made this assertion a number of times but I have not been able to show that this is true in my backtesting. I believe you also prefer to trade NYSE stocks. Here again my backtesting has shown that Nasdaq stocks are better.

Richard

Then we obviously are using different parameters, and possibly even different timeframes, for how we define pullbacks. That's what makes a market! I don't limit myself to NYSE, and trade a number of Nasdaq stocks, so long as they are profitable.

And I do regret using the word "always" in my reply, as there always exceptions to everything in trading. But for me, it has been "always".

 

[mind]

this is the funny thing: a bear market does not behave too different when it comes to short term greed. i would like to clarify one thing: we are talking about going long here. at least i am. i do not find the same strucutres the other way round in a bear market. thus, it would be better to talk about pullbacks in a bull market and counter longs in a bear market.

going short is a very different story. i did ot find anything so far that comes near to risk/return figures for longs. which i regeret, since i love non correlated strategies.

 

[OddTrader]

Quote from mind:

this is the funny thing: a bear market does not behave too different when it comes to short term greed. i would like to clarify one thing: we are talking about going long here. at least i am. i do not find the same strucutres the other way round in a bear market. thus, it would be better to talk about pullbacks in a bull market and counter longs in a bear market.

going short is a very different story. i did ot find anything so far that comes near to risk/return figures for longs. which i regeret, since i love non correlated strategies.

Apparently Magee's TA books have a lot to say about both pullbacks and throwbacks.

Practically I when trading currencies wouldn't worry much about the difference.