Need some advice

[Oadmani]

Hello,

My trading universe has 77 stocks. I am trading a derivative of the turtle system. The issue is that, because my rules are the same for each stock, I get a lot of trades in periods and then no trades in periods. There is no shorting of stocks where I trade, so I am incurring drawdowns and drawdown durations that are very long. Is my approach fundamentally incorrect?

When I backtest the system over the last 10 years, it is giving me a drawdown of 39 percent and a return of 108 percent annually if I am able to take all the trades. But, the trades are coming in clusters or are not coming at all.

I have a win ratio of 49 percent with a reward to risk of 3:1. The numbers are pretty good but there are no trades half the time and then they come in clusters, like 30 40 trades together.

Any advice would be appreciated.

 

[murray t turtle]

Hello,

My trading universe has 77 stocks. I am trading a derivative of the turtle system. The issue is that, because my rules are the same for each stock, I get a lot of trades in periods and then no trades in periods. There is no shorting of stocks where I trade, so I am incurring drawdowns and drawdown durations that are very long. Is my approach fundamentally incorrect?

When I backtest the system over the last 10 years, it is giving me a drawdown of 39 percent and a return of 108 percent annually if I am able to take all the trades. But, the trades are coming in clusters or are not coming at all.

I have a win ratio of 49 percent with a reward to risk of 3:1. The numbers are pretty good but there are no trades half the time and then they come in clusters, like 30 40 trades together.

Any advice would be appreciated.

%%
Generally speaking /looks OK; most drawdowns will exceed that for those gains perhaps.
Me i like longs + longs a lot\
but not so much in a bear downtrending market[Trends below200 day SPY moving average]
WHAT about inverse ETFs of SPY like SPXS, SPXU......\some bear markets last 2 -3 years????????
Most bears dont last 3 years\ not a prediction. I made profits on SPXL,UPRO...., but i had sell orders resting into Fed vol day
I like trends + profits, thus the inverse questions\comment????????

 

[Axon]

My trading universe has 77 stocks.

Do you have access to commodities ETFs i.e., energy (XLE, KOLD), precious metals (GLD, GLL), treasuries (TLT, TBT), stock indexes (SPY, SH), currencies (FXE), grains (WEAT), meat (COW), crypto (BITO), etc.? If so, there will be a trend happening somewhere so you should always have some kind trade and there will be long and short ETFs for most of these.

Watch some recent interviews with Jerry Parker, one of the original Turtles still trading. He talks a lot about his current strategies and it isn't much different from the beginning of his career with Richard Dennis except for the addition of single stocks, longer moving average periods and a few other minor details.

 

[Oadmani]

%%
Generally speaking /looks OK; most drawdowns will exceed that for those gains perhaps.
Me i like longs + longs a lot\
but not so much in a bear downtrending market[Trends below200 day SPY moving average]
WHAT about inverse ETFs of SPY like SPXS, SPXU......\some bear markets last 2 -3 years????????
Most bears dont last 3 years\ not a prediction. I made profits on SPXL,UPRO...., but i had sell orders resting into Fed vol day
I like trends + profits, thus the inverse questions\comment????????

There are no ETFs where I trade. No options, no derivatives, etc....and no shorting. Drawdown durations are painfully long as a result. There is no automated trading either, I enter trades manually.

 

[Oadmani]

Do you have access to commodities ETFs i.e., energy (XLE, KOLD), precious metals (GLD, GLL), treasuries (TLT, TBT), stock indexes (SPY, SH), currencies (FXE), grains (WEAT), meat (COW), crypto (BITO), etc.? If so, there will be a trend happening somewhere so you should always have some kind trade and there will be long and short ETFs for most of these.

Watch some recent interviews with Jerry Parker, one of the original Turtles still trading. He talks a lot about his current strategies and it isn't much different from the beginning of his career with Richard Dennis except for the addition of single stocks, longer moving average periods and a few other minor details.

I am going to check this with a commodity broker.

With stocks, however, the maximum leverage is 3:1, so I cannot take all the trades when they occur together. As a result, my actual returns (and drawdown) would be significantly lower.

 

[Axon]

There are no ETFs where I trade. No options, no derivatives, etc....and no shorting. Drawdown durations are painfully long as a result. There is no automated trading either, I enter trades manually.

Yeah that's gonna be rough. Here's a website https://betagainst.fun/ where you can find the 10 highest and 10 lowest correlations of many stocks. Maybe plug some of the 77 stocks you're trading into that, see what the lowest correlating stocks are then backtest those for trends which hopefully will happen at different times than your current universe. The screenshot is an example using JPM so you get the idea.

 

[murray t turtle]

There are no ETFs where I trade. No options, no derivatives, etc....and no shorting. Drawdown durations are painfully long as a result. There is no automated trading either, I enter trades manually.

%%
Sorry about that.
William O Neil Books are a wise read/stocks only. Good battle tested plan ;with max loss of 7-8% on single stocks.
ME, i dont mind uptrend[above 200dma] drawdowns, for some of my ETFs.
But single stocks can go down to zero/ you maybe be ok/fine with top quality 77 stocks.

UNless you are adding money every month; i would take some profits + losses for sure. Even though some profit targets will limit trends. Some stock or ETFs drawdowns will make new 52 week highs, some will never get there.

 

[Oadmani]

%%
Sorry about that.
William O Neil Books are a wise read/stocks only. Good battle tested plan ;with max loss of 7-8% on single stocks.
ME, i dont mind uptrend[above 200dma] drawdowns, for some of my ETFs.
But single stocks can go down to zero/ you maybe be ok/fine with top quality 77 stocks.

UNless you are adding money every month; i would take some profits + losses for sure. Even though some profit targets will limit trends. Some stock or ETFs drawdowns will make new 52 week highs, some will never get there.

I have a filter for stocks such that if the stock's price is less than a certain threshold the system wouldn't trade that stock. I am hoping that the stock with a price above that filter would not go to zero. Also, where I trade, there are locks, meaning that the stock's price cannot move more than 7.5 percent in a day (up or down), so I am hoping if a stock is going to zero, I can sell it along the way and accept some loss on it. I have never experienced a stock going to zero, has it happened to you?

 

[Oadmani]

Yeah that's gonna be rough. Here's a website https://betagainst.fun/ where you can find the 10 highest and 10 lowest correlations of many stocks. Maybe plug some of the 77 stocks you're trading into that, see what the lowest correlating stocks are then backtest those for trends which hopefully will happen at different times than your current universe. The screenshot is an example using JPM so you get the idea.

View attachment 283923

Unfortunately, that website doesn't have the stocks from my region.

The other issue I have with this approach is that, I am relying on a few winners, and I may stop those trades by limiting my universe.

If I can take a leverage of 3:1, should I reduce positions in my existing trades in order to take more trades or not take trades more than a number, say 15, and let the other trades go?

 

[murray t turtle]

I have a filter for stocks such that if the stock's price is less than a certain threshold the system wouldn't trade that stock. I am hoping that the stock with a price above that filter would not go to zero. Also, where I trade, there are locks, meaning that the stock's price cannot move more than 7.5 percent in a day (up or down), so I am hoping if a stock is going to zero, I can sell it along the way and accept some loss on it. I have never experienced a stock going to zero, has it happened to you?

%%
YES, i bought a Columbia bank stock about $5,years ago i thought it strange, later Fidelity offered to sell it for zero comissions/LOL.
General Motors, Bear Stearns+ plenty of airlines..... have gone to\or near zero, but not on me/LOL.Make sure you have a figure or area planned for selling or 200day moving average sell , to easy to miss big if no plan is planned.
WHEN i traded/invested single stocks, i allowed for a 50% overnite gap against me; even though that did not happen. I knew it could, in USA.