Question for Grob/Hershey...

[makosgu]

Quote from Trader666:

I tested "rockets" because specific criteria for them were posted and because the concept seems to make a lot of sense... trade stocks with good earnings (EPS) that are leading the pack (RS) and showing recent momentum (Stoch). But the results were unimpressive, perhaps because stocks meeting the criteria were also petering out.

This was my methodology. Choose up, down, and sideways market test periods. Rank stocks based on EPS and RS percentiles (80 & 90) just prior to the start of each test period, in other words use the EPS and RS rankings that were available at the time. For the stocks that meet the EPS and RS cut in each test period, look for stochastic crossings (above 80). When there is a stochastic crossing, record how the stock does 1, 2, 3, 4, and 5 days afterwards. Then, for each test period, make "rocket" trade distributions and compare them to distributions of random entry trades of the same duration.

I also tested variations -- lots of variations -- on the EPS and RS percentiles (80 & 80, 90 & 90, 80 & 90, 90 & 80, etc.). And stocks whose EPS and RS percentiles met the criteria for the last quarter only, combinations of past quarters and for the whole year. I also added float, price and volume screens, and even tested > 25% inside ownership. Bottom line: no significant edge.

I understand time exits are not how one is supposed to exit a "rocket" but the way I look at it, if a "rocket" entry alone doesn't give more of an edge than a random entry, why not just throw darts? Had the entries by themselves shown a significant edge, I would have tested them with other exits.

Not saying nobody's making money trading rockets. But in my opinion if they are, they're either lucky or their discretion is doing the heavy lifting. Or both.

A couple of problems which you may have not considered. The EPS and RS are with respect to ALL STOCKS.

1) You would need to have historical EPS and RS figures since STOCKS continually rotate through the target high quality arena. In other words, these stocks continually rotate in and out of phase for the EPS & RS criteria.

2) The use of these figures biases the analysis to longs only. You would need to remove all SHORTS off the table since high quality stocks are biased long. In other words, you don't find high quality stocks rocketing in a short tranlation.

3) There are float and institutional measures that are go/no go at the point that a rocket is in place.

4) VOLUME is of significant value which is also coupled with float and institutional values.

The point is that with stocks, there is the criteria for flawless execution. When you read easy and note his comments, he looks for all flaws to be removed in his rocket. In other words, once he's in, he is on alert for any flaw that takes him out. The stochastic flaw is well after other flaws would have taken you out...

Backtesting all of the above for all of the flaws at the point at which a given stock qualifies is tough. It is odd but I can look at a stock chart draw in the channels (this is key for me), check the indicators and know exactly where I am and how things will unravel for the next few days sequence wise. It is a few second annotation...

Unfortunately, it is not easy programming wise so instead, I just moved into state spaces where things just flash as criteria is gated.

TO get what you want, you would need to program the recognition of a tape using just sequential bars and identifying dominat V's along the dominant direction of the tape. Thursday on the 5M ES, there is a perfect example starting at about 2:05PM. There is a 2:00 PM RED DECReasing V bar followed by a second DECReasing RED V bar followed by an INCReasing RED V bar (R2R). From there out the DOMINANTS of the TAPE were RED. On the TAPE you see the flaw on the ROCKET (-20 XO) but it is only the point 2 on the TAPE... It is a matter of where you are as far as what you know vs not knowing what's happening. If you weren't annotating the channel, you didn't know that the XO was a POINT 2 so you got out because your stoch knowledge said the party is over. If you taped, you knew that it was just a short break and tha the party would soon continue...

I'm sure you get my drift grape or no grape. Our computer between our lobes is alot better at recognizing these things and gating all of the above...

Regards,
MAK

 

[easyrider]

Becoming enamored with historical charts is one of the biggest reasons traders fail, imo. You build a chart, put a couple of indicators on it and then become infatuated with how accurately the indicators predict the turning points. You then begin the quest for the perfect system and are confused when, for some reason, it does not work in real time. Backtesting is the exact same thing. It has been the greatest boon to trading to come along in a long time. The brokers love it. They are all in a mad rush to make this stuff available to the public. That should tell you something. Jack teaches tape reading, pure and simple. (Well, maybe not simple)

 

[Trader666]

Quote from cnms2:

If you want to be helped you have to keep an open mind and have the right attitude. Re-read my post and reply wisely.

Excuse me but why do you think I'm asking you for help? Do you even have the capability to conduct a backtest with historical fundamental and technical data?

 

[Trader666]

Quote from makosgu:

A couple of problems which you may have not considered. The EPS and RS are with respect to ALL STOCKS.

1) You would need to have historical EPS and RS figures since STOCKS continually rotate through the target high quality arena. In other words, these stocks continually rotate in and out of phase for the EPS & RS criteria.

2) The use of these figures biases the analysis to longs only. You would need to remove all SHORTS off the table since high quality stocks are biased long. In other words, you don't find high quality stocks rocketing in a short tranlation.

3) There are float and institutional measures that are go/no go at the point that a rocket is in place.

4) VOLUME is of significant value which is also coupled with float and institutional values.

The point is that with stocks, there is the criteria for flawless execution. When you read easy and note his comments, he looks for all flaws to be removed in his rocket. In other words, once he's in, he is on alert for any flaw that takes him out. The stochastic flaw is well after other flaws would have taken you out...

Backtesting all of the above for all of the flaws at the point at which a given stock qualifies is tough. It is odd but I can look at a stock chart draw in the channels (this is key for me), check the indicators and know exactly where I am and how things will unravel for the next few days sequence wise. It is a few second annotation...

Unfortunately, it is not easy programming wise so instead, I just moved into state spaces where things just flash as criteria is gated.

TO get what you want, you would need to program the recognition of a tape using just sequential bars and identifying dominat V's along the dominant direction of the tape. Thursday on the 5M ES, there is a perfect example starting at about 2:05PM. There is a 2:00 PM RED DECReasing V bar followed by a second DECReasing RED V bar followed by an INCReasing RED V bar (R2R). From there out the DOMINANTS of the TAPE were RED. On the TAPE you see the flaw on the ROCKET (-20 XO) but it is only the point 2 on the TAPE... It is a matter of where you are as far as what you know vs not knowing what's happening. If you weren't annotating the channel, you didn't know that the XO was a POINT 2 so you got out because your stoch knowledge said the party is over. If you taped, you knew that it was just a short break and tha the party would soon continue...

I'm sure you get my drift grape or no grape. Our computer between our lobes is alot better at recognizing these things and gating all of the above...

Regards,
MAK

Hi MAK,

Of course I used historical fundamental data! Thought I explained that but must not have been clear. I used only data that was available at the time of each test period -- historical technical and historical fundamental -- and tested longs only. First (per the criteria Jack originally listed, see below) without the float and other stuff and then later with it. As for the intraday example you gave, Jack's description of rockets that I tested was for daily charts:

"To find a rocket you only have to have your quality universe (they are very high quality stocks with EPS and RS at 80 to 90 percentiles each. The only indicator that is significant is the Stochastic (5,3,3). What you look for on your daily charts are the stochastic rising deliberately to the 80% line and overshooting it and then critically damping on the line; perturbations will cause it to look entwined on the line. There you have it."

I think you're way more of a discretionary trader than I am. I prefer to apply the minimal discretion that I do use to stuff that does backtest well. Please see my reply to easyrider...

Trader666

 

[Trader666]

Quote from easyrider:

Becoming enamored with historical charts is one of the biggest reasons traders fail, imo. You build a chart, put a couple of indicators on it and then become infatuated with how accurately the indicators predict the turning points. You then begin the quest for the perfect system and are confused when, for some reason, it does not work in real time. Backtesting is the exact same thing. It has been the greatest boon to trading to come along in a long time. The brokers love it. They are all in a mad rush to make this stuff available to the public. That should tell you something. Jack teaches tape reading, pure and simple. (Well, maybe not simple)

Backtesting is a tool and depending on how it's used, can produce garbage or insight. It may be difficult or even impossible to backtest "rockets" with stocktables.com and wealthlab but having the capability to correctly backtest fundamental and technical criteria together will improve productivity by several orders of magnitude. One can waste a lifetime testing concepts in real time that would take minutes with the right tools.

I see backtesting being dismissed here not out of expertise but out of cognitive dissonance. But that's OK because I need you guys in the market!

 

[cnms2]

Stay cool honney-bunny!

There are people who know more than you and that have better capabilities than you. I may be or I may not be one of those. Don't start from the assumption that you know best.

It seems that you're stuck and are asking on this thread for help. Watch your attitude if you want to get help and to progress!

Quote from Trader666:

Excuse me but why do you think I'm asking you for help? Do you even have the capability to conduct a backtest with historical fundamental and technical data?

 

[Trader666]

Quote from cnms2:

Stay cool honney-bunny!

There are people who know more than you and that have better capabilities than you. I may be or I may not be one of those. Don't start from the assumption that you know best.

It seems that you're stuck and are asking on this thread for help. Watch your attitude if you want to get help and to progress!

I didn't think you did (have the capability to conduct a backtest with historical fundamental and technical data).

From what you've written it wasn't an assumption, it was a conclusion.

 

[easyrider]

I have yet to meet one backtester who is making any money in the market. If you are or someone else is and can back it up I might have to change my opinions.

 

[Trader666]

Quote from easyrider:

I have yet to meet one backtester who is making any money in the market. If you are or someone else is and can back it up I might have to change my opinions.

Can do, easy! Let's start with a name that should be familiar. Remember William Eckhardt of the Turtles?

Go to:
http://www.iasg.com/mainframe.asp?

Select the "Manager Database" tab near the top of the page on the left. Scroll down to and select Eckhardt Trading-Standard, where you'll see his equity curve since 1987. Read the program description and you'll see his approach is mechanical. As are tons of others on this site. And the funds there are only the tip of the iceberg.

Where's Jack's hedge fund track record BTW? I'm sure he must have one!

 

[cnms2]

This goes nowhere. I'm getting out with a wash ...

Quote from Trader666:

I didn't think you did (have the capability to conduct a backtest with historical fundamental and technical data).

From what you've written it wasn't an assumption, it was a conclusion.