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Mechanical ES system
- Thread starter jboydston
- Start date
Quote from jboydston:
Good observation, this systems assumes no trade level risk management. Either you risk the money or you don't. I don't want to grow a portfolio, but rather generate income. I know that many will take issue with this, but 1% is just WAY to conservative for me. I'd rather stick to a day job.
$1000 stop on a $5000 account is 20%. That's ok by me. Also why I said 5-10K to start out, get you over the "hump."
Is this done on paper? You need to have a high winning percentage in order to trade a system that risks 20%. If you lose 3 times in a row you have to make over 100% to get back to your original capital.
Lack of capital and overtrading are some of the main reasons people wipe-out. You might lose your account before you make your first winning trade.
Good Trade!
Trend
lost connectivity
Can this not be solved via technology?
passing the wrong trading parameters
What do you mean by this?
bad feed
Does this happen often?
temp computer problems
Again, can't technology be used to reduce this?
news/rumors
Could this not move the market in our favor just as easily?
not getting filled at the price the system thinks it got filled at
This is why we calculate in slippage. Do you knew a reason why this calculation is not sufficient?
tweaking your system (changes everything)
The point of mechanical trading is not to have to tweak. Am I wrong?
Your nerves and quality of life
The second reason I want to trade mechanical. Shouldn't this reduce stress? Do any of you feel that mechanical trading was more stressful?
My intention is not to criticize but to understand this once and for all. Thank you for your time.
Can this not be solved via technology?
These problems are caused by technology. Suffer through such a glitch and anything can happen. Does the BT take that into consideration? No, it does not.
Bad feed happens from time to time, and if you've got stops in place, they may get hit during intraday. This isn't factored into any BT, is it?
"news/rumors
Could this not move the market in our favor just as easily?"
It could. Doesn't mean it "evens out" in the end as if no long term consequence to your real trading results. But the BT doesn't filter news up or down.
"This is why we calculate in slippage. Do you knew a reason why this calculation is not sufficient?"
At best, it's a guess. Doesn't getting filled also have to do with the liquidity available for the price you're seeking?
"passing the wrong trading parameters
What do you mean by this?"
In real life trading, there could be times you send in an errored orders, such as sell when you meant buy, 200 shares when you meant 2000, limit when you meant stop...
"tweaking your system (changes everything)
The point of mechanical trading is not to have to tweak. Am I wrong?"
Your system will never need to be tuned? You'll never incorporate a newer idea into it? You'll never see to boost its performance? Your system will be perfect from day one? There's also no possibility of human error inadvertantly built into the system's logic? Of course, you'll tweak it now and then. But when you do, it's like starting over with a new system again for all intents and purposes.
"Your nerves and quality of life
The second reason I want to trade mechanical. Shouldn't this reduce stress? "
My oven does my baking mechanically, you could say, I can still get stressed if I burn the roast. Your computer doesn't sweat if your system has put you into 6 losing trades in a row. Your BT says that, historically, you won't suffer more than 6 bad trades in a row and remains cool about that. Will you? How will you feel when the 7th trade turns south? How will you feel when the system doesn't produce in real life going forward as it did in its simulated results? Calm? Nervous?
I guess my point is that BT is not a panacea. There's always more (to anything) that meets the eye, and humans have an escape mechanism that makes it even more difficult to deal honestly with these problems.
Hey, if you want to see how pathetic people can be about relying on BT results... hoo, hoo, boy oh boy, get a load of the posts on the Motley Fool's "Mechanical Investing" board. Those folks are losing about 50% per year for the last 3 years and still thinking it's Value Line's fault (when you realize that their systems depend mostly on VL ratings on year-to-date performances you can quickly undertsand why a forward going system built on past performance of stocks might be precarious at best, but to those diehards, they're still believeing in their systems, despite the evidence of continued massive losses to their portfolios).
Quote from jboydston:
Since I am correcting my previous posts, let me make one more:
Take your time. There is no reason for you to express any readtion or stress here.
One of the things you are considering is being a full time trader. If you want to do that, you need to get into an orientation of making money.
One of your highest priorities, I'm sure, is getting all the tuition paid on your education. It will be neat to see when you change your end quote to something more fitting.
Quote from jboydston:
This is correct. different criteria for long/short positions.
Here you exhibit a preference for making money in one particular trade position.
The ratio of trend duration is 27:8. You are using 64:6.
With a signal lag of about 2 days plus 64 bars divided by 15 to see the number of days data you average (arith) puts the average about 1/2 the duration behind the current bar.
And the other factor is that you enter on bars that precede signals. Either you didn't write it down correctly or you need to syuggest to us how you take on a trade prior to the signal.
Quote from jboydston:
I'll start with this and elaborate as needed.
System:
es daily data (no after hours to throw off charts)
30 minute bars
Long = open of first bar preceding price breaking up through 63MA
Short = open of second bar preceding price breaking down through 6MA
Stop $1000, 20pts
Long / Short signals reverse each other. Always in the market.
$25 per side slippage
$2.80 per side commission
One thing that worries me are the parameters, which are highly suggestive of curve fitting. I would pose two questions: How much data did you backtest this on? Did you test the sensitivity of the MA lengths and entry bar parameters?