Seeking feedback on my rules-based system

[murray t turtle]

Are you calling me a dinosaur? Why thank you, thank you very much. ;-)

I'm just waiting for the next guy to mock me for choosing perl over python!

In grad school I would have undoubtedly overcomplicated this with lots of theory that probably didn't make any money. Time will tell if I've gotten any smarter with the years...

%% NOT all reptiles are extinct. LOL

Initial impressions looks good;
what you have to watch out for with UPRO+ you may have noticed it?? When the cash market goes sideways slop chop, say up a SMALL %, for time; UPRO+ related will lose. Cash SPY will make a bit+ dividends.
UPR0, plenty liquid ,does pay a very small dividend; great YTD gain, on UPRO + related . Not luck; its called a good uptrend; above 200 dma.

 

[eurusdzn]

I have to say that I'm humbled that you guys would take the time to read what I wrote and provide this thoughtful feedback. I'm just a middle-aged guy fumbling in the dark through a sea of bad/disinformation. It's good to see that I'm not totally lost, but I'm still waiting for the other shoe to drop. As my wife said, "a lot of smart people are trying to solve this problem, why are you better?"

I wonder if what you are doing is similar to a retail traders package called Stratasearch?
It is an indicator , interval optimizer where gazillion combos can be tested and best will float to the top. This is just FYI and in no way critical, as I am not qualified to do so.

 

[dreamer2019]

The 30-day past return is one of many indicators that I use. I have 14 indicator securities. For each indicator security, I compute 30/10/5-day past return, 200/50/10-day MA, and 200/50/10-day MA crossover. That's a total of 126 indicators. I backtest each indicator to find the "sweet spots", for instance 30-day past return of -5% to -2%. I trade the sweet spots.

Thanks . Here is some of my experience which maybe useful or harmful.
RSI with 2 day period maybe useful.

note: RSI(i) means the 2 day period RSI value on the i day.
Here is a intraday strategy based 2 day period RSI I have tested :
RSI(i) < 1, get long position ;
Stop loss -1%;
RSI(i) > 95, close long position;

RSI(i-1) > RSI(i-2) && RSI(i-1) > RSI(i) && RSI(i-1) > 97 , let's call point i high point A , A = i;
RSI(i-1) > RSI(i-2) && RSI(i-1) > RSI(i) && RSI(i-1) > 80 && RSI(i-1) < RSI(A), get short position;
RSI(i) < 90, close short position.

I backtested it with AMZN 1 min bars data which is from 2018/1/1 to 2019/4/5 .
The result is as follows, without considering transaction spread or commission :
2531 winning trades, 536 losing trades, 600% around profit, turning 1 dollar into 7 dollars.
With considering transaction spread (0.05% for buying and 0.05% for selling ) and commission, well, the result is around -100% , losing all.

Here is the result:
(long / short)entry time -> closure time, entry price -> close price, profit, funds(initial 10000)
v20180102 09:59:00 -> 20180102 10:05:00, 1181.310 -> 1183.360, -16.399, 9983.601
v20180102 11:16:00 -> 20180102 11:19:00, 1184.455 -> 1183.590, 6.920, 9990.521
v20180102 12:08:00 -> 20180102 12:10:00, 1187.670 -> 1187.660, 0.080, 9990.601
^20180102 12:39:00 -> 20180102 12:46:00, 1185.315 -> 1186.990, 13.400, 10004.001
......
v20190405 13:25:00 -> 20190405 13:28:00, 1832.300 -> 1831.980, 11.843, 69357.602
v20190405 13:57:00 -> 20190405 14:00:00, 1834.780 -> 1834.785, -0.185, 69357.414
^20190405 14:16:00 -> 20190405 14:32:00, 1833.170 -> 1833.625, 16.833, 69374.250
v20190405 14:53:00 -> 20190405 14:56:00, 1834.885 -> 1834.895, -0.370, 69373.883

 

[morganpbrown]

1. Identify intellectually where a sweet spot could exist
2. Research sweet spot (oh look it exists)
3. ??? figure out how to predict the parameters for the sweet spot
4. Profit

I'm afraid my logic is inverted relative to yours! I mine data, fine the sweet spots, then intellectually justify them after the fact. Pure "machine learning" people don't have any problem with this whatsoever, but I'm more of a deterministic guy at heart.

That said, the strategies that my "black box" comes up with DO usually seem to make sense. Below is a profit curve for a particular VIX trade. The indicator is the 10-day past return of the VIX itself. When the indicator declines between 6 and 30% in the past 10 days, I make the trade.

That makes sense to me - on a 10-day timescale, VIX is inversely correlated with itself. I never would have picked those particular edges for the trade, though.

 

[morganpbrown]

I wonder if what you are doing is similar to a retail traders package called Stratasearch?
It is an indicator , interval optimizer where gazillion combos can be tested and best will float to the top. This is just FYI and in no way critical, as I am not qualified to do so.

Dunno, but thanks for the heads-up! I'm probably way less experienced than you, so I don't have a good idea of the trading packages out there. I'll take a look. Though it's hard to beat FREE ;-)

 

[morganpbrown]

what you have to watch out for with UPRO+ you may have noticed it?? When the cash market goes sideways slop chop, say up a SMALL %, for time; UPRO+ related will lose. Cash SPY will make a bit+ dividends.
UPR0, plenty liquid ,does pay a very small dividend; great YTD gain, on UPRO + related . Not luck; its called a good uptrend; above 200 dma.

Thanks for pointing this out. Whenever I can, I'm trading the leveraged ETF's (UPRO vs SPY, TVIX vs VIXY, TMF vs IEF, TECL vs QQQ), but I keep hearing the horror stories of these ETF's flash crashing. It makes me very nervous. Could actually be safer to just trade the lower-leverage underlying security on margin!

 

[morganpbrown]

Thanks . Here is some of my experience which maybe useful or harmful.
RSI with 2 day period maybe useful.

Thanks for this, I will dig in deeper to your post later today. RSI is one attribute that I've been too lazy to incorporate into my models, but it's very high on the list. For one, I have a hard time getting a firm definition of RSI itself!

 

[HobbyTrading]

Thanks for pointing this out. Whenever I can, I'm trading the leveraged ETF's (UPRO vs SPY, TVIX vs VIXY, TMF vs IEF, TECL vs QQQ), but I keep hearing the horror stories of these ETF's flash crashing. It makes me very nervous. Could actually be safer to just trade the lower-leverage underlying security on margin!

If you like the leverage than you could also consider to use futures instead of leveraged ETFs.

 

[nooby_mcnoob]

I'm afraid my logic is inverted relative to yours! I mine data, fine the sweet spots, then intellectually justify them after the fact. Pure "machine learning" people don't have any problem with this whatsoever, but I'm more of a deterministic guy at heart.

That said, the strategies that my "black box" comes up with DO usually seem to make sense. Below is a profit curve for a particular VIX trade. The indicator is the 10-day past return of the VIX itself. When the indicator declines between 6 and 30% in the past 10 days, I make the trade.

That makes sense to me - on a 10-day timescale, VIX is inversely correlated with itself. I never would have picked those particular edges for the trade, though.

View attachment 201302

Intellectually I understand what you're doing. But my brain screams overfit. I assume you are doing cross-validation but I haven't heard anything about that in this thread yet though my apologies if I missed it.

 

[morganpbrown]

If you like the leverage than you could also consider to use futures instead of leveraged ETFs.

The contract size has been off-putting. I started with a whopping $4K in my test account. The lower share prices of the ETFs make it much easier to ramp a position up or down.