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How to research and verify trading ideas
- Thread starter talontrading
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Question for the forum:
I had a thought. I could develop a rough system around the technical pullback idea, post some of the backtest, talk about how to optimize it properly, and then track it going forward in this thread on a handful of stocks. Obviously, this sounds interesting, right? The rub is that I there would likely be a tool or two that I would include in the system that is proprietary so I would not disclose full system rules... the point of the discussion would be to see the process, not necessarily to see the system.
Would that be interesting or frustrating? I don't want it to seem like I'm holding back some great secret, but it would be much easier to have this discussion if we were looking at an actual system. Thoughts?
I had a thought. I could develop a rough system around the technical pullback idea, post some of the backtest, talk about how to optimize it properly, and then track it going forward in this thread on a handful of stocks. Obviously, this sounds interesting, right? The rub is that I there would likely be a tool or two that I would include in the system that is proprietary so I would not disclose full system rules... the point of the discussion would be to see the process, not necessarily to see the system.
Would that be interesting or frustrating? I don't want it to seem like I'm holding back some great secret, but it would be much easier to have this discussion if we were looking at an actual system. Thoughts?
Yeah the more I think about it the more I think that's not fair though. Let's stick with the system as I posted it. Only issue there is that we may not actually trade it here so we won't have actual fills to compare. That's ok too though I suppose and if it's a choice between having some piece of the system that is grey box or not executing with real money, I suppose the better choice for this thread is to not execute the trades and just use closing prices for tracking purposes.
Doesn't that make more sense?
Doesn't that make more sense?
Quote from Craig66:
I think it would be interesting, it's the process which is important.
I think either way would be helpful. Even though you have already posted the rules, would you be willing to go through the development from the beginning (e.g. basic hypothesis, histogram slices, statistical tests, backtest, optimize, risk mgmt, etc..), so that we could see an example of the process in its entirety? I know you said that its fluid, but having a rough road map through a real example would be great.
Ok... cool... but how about this deal? You guys do the work. I'll give ideas and lay out each step, but it's up to the readers of this thread to actually crunch the numbers and come up with answers to each step. As long as we get good answers or good attempts at answers I'll go through the evaluation of each step so you can see the thought process. If the answers we get are wrong I'll correct them as long as there's interest.
This can be done in Excel or whatever people have available? (btw, what do the readers here use? Tradestation? Matlab? R? Excel? VBA? WealthLab?)
First step: Buying pullbacks.
1. Look at this portfolio of stocks. (more or less randomly selected big stocks from different industries)
MSFT
COH
MON
OXY
DE
2. Going back to 1/1/2004, what would have been the results of applying this rule set:
Buy when today's close is equal to or less than the 50th percentile of the past 10 days' range.
Sell that position when the close is equal to or above the 50th percentile of the past 5 days' range.
Rules for shorts are opposite.
This is just a starting point, but start here. Someone post some answers and we'll go from here.
This can be done in Excel or whatever people have available? (btw, what do the readers here use? Tradestation? Matlab? R? Excel? VBA? WealthLab?)
First step: Buying pullbacks.
1. Look at this portfolio of stocks. (more or less randomly selected big stocks from different industries)
MSFT
COH
MON
OXY
DE
2. Going back to 1/1/2004, what would have been the results of applying this rule set:
Buy when today's close is equal to or less than the 50th percentile of the past 10 days' range.
Sell that position when the close is equal to or above the 50th percentile of the past 5 days' range.
Rules for shorts are opposite.
This is just a starting point, but start here. Someone post some answers and we'll go from here.
Quote from bjs211:
I think either way would be helpful. Even though you have already posted the rules, would you be willing to go through the development from the beginning (e.g. basic hypothesis, histogram slices, statistical tests, backtest, optimize, risk mgmt, etc..), so that we could see an example of the process in its entirety? I know you said that its fluid, but having a rough road map through a real example would be great.
hmm - was curious,and typed in your ID as a website - someone registered it but never did anything with it...
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