Custom Tailored System

Quote from ElectricSavant:


Here is my criteria:

1)SP E-Mini is the Instrument

...

4) purely mechanical without discretionary decisions....just mechanical...buy now...add to.....sell half.......sell....sell now...no skirming in the seat...just press buttons.
...

Michael B.
More...

The first thing I need to ask is why have you chosen trade the ES? I know it is very popular, but of all the mechanical systems that I have seen, the systems that produced the best performance is for stocks. Why wait for a set up to appear on one instrument, when you can trade the stocks of the NAS100, for example, with a greater probability of your setup occurring at any time amongst your 100 stocks.

Perhaps, considering the consistency of results that you are after, you probably have the idea of applying a money management scheme which could really boost the performance over that of stocks due to leverage (?)

Richard
 
Richard,

Your point is well taken. I used to daytrade a basket of stocks. I started when the online trading revolution began. I wish to trade the ES for its volatility, liquidity, leverage and ease of going long and short.

I find that after trading this one instrument for 2 years...That I really know it. I do not want to do the stock thing again.

So why is it that my criteria eludes me....I admit it...I need help.

I find your comment accurate however as the diversity and the ability to offset, or sorta hedge with counter moves would be fun.

But lets stick with my posted criteria for this thread. Richard your point is taken and understood.

Michael B.
 
It is possible to be fairly consistent, and what you are asking for is possible. There will always be some sort of a draw down somewhere along the line, because nothing works all the time on everything.

You will need to find things that occur regularly with a predictably high outcome rate, and be totally mechanical in the operation of the strategy.

Maybe if you had 4 or 5 setups that take a point or 2 with good hit rates, between them you would have enough to have a trade most days because the really good ones don't always occur every day.

Also, if you are going to be completely mechanical in that way, why not program your computer to trade it for you according to the rules and go and do something else while it does it. (Just make sure your system works properly first though :))

Natalie
 
Girlpower,

I have read about one of your systems (your form of a breakout system based on the first hour high and low) here in ET. It is one of my favorites.

If you have any ideas...let me know.

Michael B.
 
I have worked on 4 systems that have win rates above 70%. I have used ES data from e-sig (ES #F) from 12/3/03. I posted these to an excel spreadsheet and I can email upon your request with a PM here on Elite.

Now..... let me warn you. I am not claiming to be the author of these systems. I have collected the information over the years in bits and pieces and have put it together with my own tweaks. One of the systems I created myself, but others could have discovered it before me and by coincidence it could be the same.

Directional System #1 is an Ironman type of trade(buy at open and sell at moc) and merely just calls the direction for that day.

WINRATE.......................................70.37%
Avg. W/L Ratio.................................0.72
POINTS (from 12/3/03 to 3/28/03) 60.75
# of Trades....................................79

The trouble with just stating the above results is that there is no allowance for slippage and commissions.

This system requires that you wake up at 8:00cst (1/2 hour before the open of the ES) and bring up the 24 hour chart and get ready to enter at the opening bell of the RTH (regular trading hours) trading session. It is important to enter at the printed open price...as this is the price I used for the above stats.

Now the "actual entry" could be plus or minus by up to 2 ticks from the above stats. The same with the close, but the close is even worse as you need the last 30 seconds to exit. I used the last print/second of the close (15:15:00cst) for the above stats. Again.... these points can work "for you" or "against you" when comparing your results to the above stats.

My point is...... you can see that your actual trading can even out and you get the above reported stats or you can be unlucky and lose a tick per day, which if multiplied by 79 trades would be 19.75 points (19.75*$50.00=$987.50/4 calendar months). Also assuming you get $8.00 RT commish...that is $632.00 for the last 4 calendar months or an average of $632.00/4=$158.00 per month.

As a rule of thumb you should just cut the stats in half of every published system out there to be safe and if you are serious.

You can see in the above example that this above system is not very robust, but does not require multiple entries and exits either.

Back to the subject of this thread....This does not fulfill my requirements but comes close. In the month of February it lost 9.25 points for an entire month of trading. This would be disappointing for me. Ok, I am not a novice and can deal with it....but I am searching for more.

I have tried to implement a stop strategy...but it skews the above stats to equal out in a nonfulfillment of my criteria. For every implementation of a stop...there is an equal reaction in the win rate and w/l ratio.

Ok...we could do a longer term statistical study and may find a measurable benefit to implementing intraday stops to this above system...but one would need to trade multiple contracts to make it worth our while to do a statistical study. As I say... this is a thread/team effort.

Ok...enough BS...This directional system #1 measures the gap in percentage and trades in the same direction of the gap. I plot these percentages in columns to find how small to big the gap can be to give these above stats. It slides around and adapts to the changing ES environment. This... in a way is a simple statistical study...transferred to trading. No technical indicators are used and I am currently forward testing it. I was waiting for some response to this thread to get ideas to "actual trading and then posting my trades to a journal.

Perhaps some of you could apply a technical indicator to skew the results even more?

Perhaps some of you statisticians could contribute more?

Perhaps some probabilities experts could comment?

Really ET .....lets do this together.

If not lets move on to System #2...(I have 4 of them)

Michael B.
 
I calculated the Average Win to Loss Ratio the following way:

average out all the wins.......get 1 number
average out all the losses...get 1 number

Each day the system trades.....when it wins it achieves a 0.72 ratio. Which I interpret as nearly 3 ticks net compared to its risk of loss on every day it trades when averaged.

to break this down:

there were 19 winning trades totaling 146.50 (biggest win 21.50)

there were 8 losses totaling 85.75 points(one big loss of 32.75)

Michael B.
 
It does not trade everyday...I used the tweaked version stats....

Sorry


it traded 27 times out of 79 possible trading days.

I tweaked it to only take those trades that gap up by 53% to 109%

Please excuse me.

Michael B.
 
The reason for the tweaking is that when the gap is so big (past 109%) it does not continue in its direction but might tend to go against the gap direction.

When the gap is smaller than 53% it is usually not closing in its established gap direction.

Now this hints to system 2.....but the Average gap is measured daily and then stats are built around that to see the probabilty of the gap filling. System 2 uses an average difference to measure with not just the raw calcualtion of the opening gap.

Michael B.
 
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