Quote from Mike805:
SM,
My wife has mentioned that I sometimes sound a bit harsh with my writing style - I apologize if I came across that way. My intention was not to be harsh, but rather present an opinion that you can take however you wish. I've been in this business a while and seen quite a few edges, some good and some bad and everything else in between. I don't copy other people's work and I certainly didn't want to discourage you - I simply lost interest in the concept because I've seen 100's of permutations of the same exact thing. I'm at a point in my career where I need new and different intellectual challenges to keep me interested, otherwise I prefer to spend my limited free time doing things I find more enjoyable.
The technical assistance I offered was a recommendation to doing quick and easy backtests - it was not meant to offer/develop the strategy details, that takes a lot of work. I ran your ideas once in an attempt to show you how easy it was to do. The serious development is up to you - test, evaluate, test again, possibly trade live, retest, again again until you see exactly what you're looking for, the process is highly personal, takes a lot of time and its something everyone should do for a few years IMO. I just don't have the inclination to start that process with any indicator based model. I probably come across as pompous or set in my ways... well, that's ok by me.
The reason I said what I said in a public forum is that ego - i.e. thinking that one is ahead of the curve is one of the (seven? - there are likely 100's) deadly sins of trading. You are never ahead of the curve. Thinking the way you are thinking per the first few posts of this thread sounds to me like you're not quite grounded in reality. One unproven model does not a successful trader make. 1000's of trades + years of real money track record *may* equate to future success. Again, how do you know the difference? Time and experience...
Let examine some of your statements:
1. The Random Walk idea was meant to point out the fact that given your sample space, you do not know whether or not your model is seeing a "lucky" streak or not. That said, what is your sample space and how many trades? For a swing trading model, with a relatively low trade frequency anything under 10 years is a blip on the radar.
2. YES of course it needs to work over all of time - you need to test bear cycles, bull cycles, expanding vola, contracting vola... what if the next 10 years are contracting vola? Can your model deal with that? Can your committment and personal finances deal with that? Do you know what it will behave like under contracting vola - what if it fails? If there are periods that the model is not working, then why not? Figure it out and change your method. Swing methods with fewer trades are inherently less robust and more susceptible to fundamental changes in market behavior. Having it work "long enough" is playing russian roulette IMO.
3. Being an engineer and an MBA doesn't mean anything when you place a trade. You think the market cares abuot how much effort you put in or how good your model is supposed to behave? Nope. What you can control is that you did all the homework, extra credit assignments, read every bit of material and made a valid assessment of your worst case potential risk. Making the leap from a initial model to quiting your day job is a bit premature. From the sound of it you've just started your homework.
Would you like me to post a model backtest or a real live trading record? A few of my models aren't backtestable, but here is one that is, its a simple index vola setup. going ten years back. I've been trading this model live for about 6 years now. It took about 1.5 years to get right...
Mike
Mike,
You did come off sounding a little harsh and I responded to that. Maybe I was a little over the top. A couple of points for you to consider. I started this thread because I knew that I was getting carried away in my own mind on flights of fancy. I'm aware this may not work.
Forgot to say...Books? All I have is the internet and MASTER SWING TRADER. I've got a few other crappy books that can't hold a candle the Master Swing Trader book.
I think we are coming from opposite ends of the spectrum regarding what we're looking for in a model. I mean no disrespect, but honestly, I don't want a model that works for 6 years. I'm looking for something that works right now, and works so well, that I can chuck it all in a year or so. I get that your perspective is different, but perhaps there are two classes of models.
1. A model that works all the time, and gives you returns commiserate with an "all weather" model.
2. A model that works only part of the time, but kicks butt in the right environment.
I'm looking for "Type 2". And when it stops working, then hopefully I'll come up with another Type 2 until the first one starts working again. So I disagree that a model needs to work all the time...it doesn't. Ever see an amphibious car? They work in the water and on the road. But they excel at neither. We're in a trending market...I need something for that. Later, I'll worry about chop. No offense, but I don't want to be here in 6 years talking about my model except to say Hello to friends and read the economics. My intention is to find something that makes money now, and move that into more conservative holdings. If I see a window of opportunity, I don't avoid it because it won't always be there...I just jump through it.
FWIW, I did backtest it over few decades. Since I'm trading indexes, that wasn't hard to do. My method doesn't work well in a sideways market at all, but I kind of expected that since it's designed to anticipate trends. It was also reiterating buy orders but you have to know that the results from a reiterated buy order shouldn't be quantified when you evaluate performance...otherwise you get double-counting errors and the average "trend ride" gets shorter, skewing results.
FWIW, since I use ETFs without leveraging my account beyond the inherent leverage in the ETFs, I'm not too worried about my account blowing out. If I was doing options or even shorting, I'd worry, but I'm finding that just buying leveraged ETFs give me good enough returns without taking on risk. Oh, and its worth saying that this isn't budgeted money...I live off a paycheck.
Yes, I'm fully aware that the market doesn't know I'm an engineer and an MBA. Heh, most people don't even know I'm an MBA, because it really only helps me in my day job when I'm marketing (sad to say). But I'm trying to point out that some people can try to "crack the code" their whole life (DECADES OF EXPERIENCE) and never figure it out. Some can figure it out right away. I've been actively swing trading for almost a year, but I've followed stocks and market behavior for 30 years. I'm willing to bet that success in this field is most likely correlated more to intelligence than years of trading and it probably helps if you have a lot of both, but a lot of either will probably do it. I don't believe that I have to put in another 2 or 3 years before I can even hope to find something that works...honestly, it doesn't seem all complex...just find the right combination, backtest it, tweak it, rinse and repeat until you find something that works.
In summary, yes...there are thousands of ways to do it. I think a noob can come in here, put some ideas together, and come up with something that makes money fast enough to achieve his life goals before it stops working. If thats never happened before, who knows...maybe I'll be the first one.
SM
