My trading system, Any thoughts?

M

MVR

Hello,
I am new to the list. With only three years of playing on the market I consider myself a beginner.
I am making the move into full time intraday trading. I have gone back to paper trading for the last month to fine tune my system.
Here is the very simple trading system which I would like fellow traders to critique.

I use data from mbtading.
quotetracker.com software with the alerts scanner.
I work on short momentum trades which come up on the scanner
- Breaking 52 week high
- 60 + prints
- over 1 000 000 average volume
- more than double volume
- priced $15 - 100
- has moved $1 already on the day

The scanner brings the symbols onto my list automatically as the conditions are met. So the scanner scans continuosly the moment you put it on.

The indicators I use are:
- regression channel, settings %change=1, #ticks=4, width=2.
- Volitility stop, settings, 3 periods with a multiplier of 1
- HMA(9 periods), dont know the maths on this one but it gives great exit and entry points.
- I also use a countown timer for the 1 minute candles.
- I also display the current bid and ask as a line chart over the candles.

Entry conditions

- I wait for a confirmation candle(1min) after the 52 week high is broken with well above average volume.
- I ensure it is in a upward regression channel with 5 green evenly shaped candles leading upto the breaking of the 52 week high. If it breaks the 52 week price on a really big candle it often falls back.
- I always buy at market, because it should be moving too fast to do otherwise.
- Must have strong volume well above the moving average volume line.

When I enter, I place a stop just below below the previous candle, as the price moves up I move the stop to break even and leave it there until I exit.

Exit conditions

- Volume drop off.
- red candle about to form in the last 5 seconds before the candle closes
- a doji is about to form on closing of the candle.
- HMA indicator gives sell signal
- or the volitity stop gives a sell signal

Thats the gist of it. Pretty simple really.
Just found I need patience for the set up.
My daily paper trading returns have been between 0.6% on my worst day to 10.1% on my best in the last month. No down days yet. (i must have luck on my side) I would be more happy with 100 days of paper trading, but I am getting too excited to wait.
Due to these results I just hit my bank manager up for $40,000. Should be online before christmas.

Any thoughts on how to improve this system?
Thanks for the feedback.
Mark
 
Quote from MVR:

Hello,
Any thoughts on how to improve this system?
Thanks for the feedback.
Mark
More...

Ouch. You borrowed money to trade?

Your returns could well be a direct result of the screaming bull market environment, especially as you are buying new highs and trading only the long side.

I would be very, very cautious going forward, especially if you are trading with borrowed money. You should give yourself more time to learn the ropes or they will hang you. And if you simply can't overtime the (foolish) temptation to put borrowed money into your system, you should begin with as little as possible and give yourself a big cushion to survive.
 
I would seriously urge you to get some backtesting software and run this system on a few years data. One month in a screaming bull market is not proof of anything, particularly when the strategy is buying 52 week high breakouts. On the other hand, you can probably make good money if the bull market continues, but at some point you will start getting runs of losers.
 
i'll let the systems experts consider the particulars of your strategy, but you wrote a couple of things that stood out to me:
Quote from MVR:

The indicators I use are:
...
- HMA(9 periods), dont know the maths on this one but it gives great exit and entry points.
More...

not that it should preclude you from using the indicator, but it may be useful to do some research on HMA. i don't know if it would influence how (or if) you traded with it, but i think it can be important to be familiar with the tools you use. google it.

http://www.ensignsoftware.com/tips/tradingtips72.htm

https://www.tradestation.com/Discussions/Topic.aspx?Topic_ID=40589

http://www.justdata.com.au/Journals/AlanHull/hull_ma.htm
I would be more happy with 100 days of paper trading, but I am getting too excited to wait.
More...

this may be a harmless quip, but it could also be indicative of a more serious eventuality. i read it as this:

i planned on paper trading this strategy for 100 trading days, but i became overanxious and jumped in anyway, thereby deviating from my plan.

if you already see that your excitement to do something is threatening your ability to stick with a plan, you should also be albe to see how this can carry over into your trading.

and please don't mistake my warning as advocating a passionless pursuit. be passionate - about trading your system, about being the best damned trader you can be.
Due to these results I just hit my bank manager up for $40,000. Should be online before christmas.
More...

i have no idea if you have borrowed money to trade with before, but this does add a new element to your circumstances. and it's not the same as OPM, because with OPM they understand there is a risk they can lose it all. in your case, you can lose it all, but are still responsible for repayment. plus, you are coming in during the holiday session. just make sure you really are in the right state of mind to do this, and not just giving yourself lip service so that you can hit Go.

hth and best of luck with your trading.
 
Two points come into consideration:

1) not coincidentally we have been in a roaring bull for 3+ yrs.

2) market orders at the onset of new 52-wk highs should give you plenty of slippage on your entries.
 
Crtiques are useless really. Only thing that matters is whether the system makes money or not. Since you admittedly are a beginner and borrowed money and are jumping into full-teim trading without seriously backtesting, I say there is no problem with the system at all.

The problem lies with the human being pushing the buttons and pulling the trigger. That is where the money hole is going to suck out the profits :D

Quote from MVR:


Here is the very simple trading system which I would like fellow traders to critique.
More...
 
Quote from MVR:

Any thoughts on how to improve this system?
More...

You might want to include an estimate of slippage in your calculations. My daytrading simulations suggest slippage might be equal to about 1/3 of profit. My short term position trading modeling suggests suggests slippage is significant, particularly at opening gaps.

Slippage is the difference between expected execution price and actual execution price.
 
Quote from lindq:

Ouch. You borrowed money to trade?


Your returns could well be a direct result of the screaming bull market environment, especially as you are buying new highs and trading only the long side.

I would be very, very cautious going forward, especially if you are trading with borrowed money. You should give yourself more time to learn the ropes or they will hang you. And if you simply can't overtime the (foolish) temptation to put borrowed money into your system, you should begin with as little as possible and give yourself a big cushion to survive.
More...


Yeah, borrowing money is a risk, unfortunately with a small account I can only do three trades in a 5 days period. They want a minimum of $25000.

I will take your advice by keeping the trades small until I get the hang of it with very tight stops. This should provide a nice cushion.

Your input is appreciated,
wishing you abundant trading,
Mark
 
Quote from AAAintheBeltway:

I would seriously urge you to get some backtesting software and run this system on a few years data. One month in a screaming bull market is not proof of anything, particularly when the strategy is buying 52 week high breakouts. On the other hand, you can probably make good money if the bull market continues, but at some point you will start getting runs of losers.
More...

Hello,
I dont know anything about backtesting software, but will starting reading up.
Interestingly, on the days that I papertraded with lowest returns the indices where down. So I did a scan for bearish stocks and it looked good for shortselling. But I have not worked out my entry and exit rules for short selling yet. Still in the reading lots of books phase. When the market turns I will hopefully have done my homework.

Input appreciated,
Wishing you abundant trading,
Mark
 
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