Should a trading system work in many different markets ?

[OddTrader]

2 cents: Perhaps as long as we can make profits consistently (together with proper control of risks) there would be no absolute answers to this issue, imo.

I'm wondering our concept of how to constantly understand each market's characteristics (and changes) and our mindset of how to effectively capture reasonably expected profits, in order to design any viable trading systems, would be more important issues.

 

[MorganSys]

Hello,

Differences in the profitability of strategies have been documented in several academic journals. Many especially note that several strategies are profitable on the NASDAQ but not on the NYSE.

The most popular explanation is probably coverage/liquidity - the higher the coverage or liquidity, the less or the smaller the number of innefficiencies.

 

[Baruch]

Quote from jrkob:

I haven't been posting for quite a while.

I have read so many times here that for a trading system to be good, it must work on as many different markets as possible, to prove its robustness, unless there is a very good reason why it should work on one market only.

I have developped a trading system for my local stock index (not in the US). After what I think has been very diligent testing, test of robustness, etc etc etc... I have traded it for the past five months. Results in live trading have been perfectly in line with expectations, and even better because volatility has been higher so far this year and my system is supposed to capture that kind of market conditions. Don't get me wrong: I am NOT rich, because I trade small for the time being. But results are in line.

I ain't no computer genius, I use Excel as my unique tool, and my system is what most of you guys would consider as indecently simple.

I cannot explain WHY I can't make that system work on other markets though. But for the time being I don't plan to stop trading it. Let's see...

Anybody else here trading a system that SEEMS to work on one market only ?

A good systems works in all markets.

 

[tntneo]

bs
each market has its own profile.
based on acceleration, deepness of corrections, choppiness, gappiness, candle overlap range, etc...

so no system can work in all markets.
systems prefer some profile(s) and won't work with others.

the wisdom we refer to is to make sure you did not optimize a system for a market. but you can optimize for a profile ! that's not the same thing.
and yes, it's much better if you can confirm you did not over optimize. a very good way to know is when your trading works on several markets you did not test or saw before. that's very good indeed. that shows robustness.

however, I agree with a previous poster, the goal of trading is to make money. it's not a hobby. so if your system makes money in real life, that's all you want from it.
if you know your system does not work with any other market, it only means you have to be more careful. good thing is live trading matches very closely your expected results. so as soon as live trading shows ratio out of sync with your expected ratios (win, avg profit, drawdown etc..) then you should pull the plug fast imho.
but that's all..

an edge is an edge.
some will last longer than others. some are more robust. but the goal is not to find a perfect edge, the holy grail or whatever : it is to make money.

so don't worry..
in your shoes, I would increase size though while you do have your edge in your market. milk it to the extreme possible. maybe next month it's over.
also, keep looking for another system for other markets, diversification is not only for retiree and mutual funds

take care
tntneo

 

[murray t turtle]

Quote from MorganSys:

Hello,

Differences in the profitability of strategies have been documented in several academic journals. Many especially note that several strategies are profitable on the NASDAQ but not on the NYSE.

The most popular explanation is probably coverage/liquidity - the higher the coverage or liquidity, the less or the smaller the number of innefficiencies.

%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%

Morgan Sys;

Good points so to speak;
differences in past % measure show some important differences for many years also, reguardless of what it ''should '' do .

May ''work '' in different markets;
but dont be suprised if notable , helpful % differences are recorded over many years

Important practical differences are observed & recorded;
especially comparing indexes to stocks;

especially even noting diffreences between stock and sector personalities on a % measure over many years

 

[PoundTheRock]

Quote from tntneo:

bs
each market has its own profile.
based on acceleration, deepness of corrections, choppiness, gappiness, candle overlap range, etc...

so no system can work in all markets.
systems prefer some profile(s) and won't work with others.

...

take care
tntneo

Wrong. All markets share the same characteristics at one time or another -- one needs the ability within the system to recognize when to go into trend mode or counter-trend mode.

Is there a universal system for trading the markets?

Yes, there are several.

Do they make money every month?

No, but I'll take 9 months out of 12 every year.

Where are these systems?

They are publicly available. Go to the Trading Systems area.

http://www.traderclub.com/discus/board.html

 

[TriPack]

Quote from Baruch:

A good systems works in all markets.

I would say that is the definition of a "great" system, not a good one, depending on what the definition of "works" is.

The logical fallacy is that some people read this and then say, oh then a system that doesn't work in all markets must be a "bad" system.

My definition of a good system is one that makes money in the market you are trading, and one that you are able to execute.

And to steve46 (from the system selling thread), the profitable system that you aren't able to execute is the one that conflicts with your internal wiring/beliefs. (Or a system developer may simply lack the necessary discipline to profitably trade ANY system.) It is possible that such a system will make money if strictly executed according to the rules, but may not have a large enough edge to make money if you have to trade it through a broker assist program. It is also likely that such a system is impossible to execute profitably as the advantage is a mirage created by backtesting software and unrealistic fill assumptions. IMO, that is the most likely reason to sell a system that appears to be profitable on paper.

 

[OddTrader]

Quote from PoundTheRock:

Wrong. All markets share the same characteristics at one time or another -- one needs the ability within the system to recognize when to go into trend mode or counter-trend mode.

Is there a universal system for trading the markets?

Yes, there are several.

Do they make money every month?

No, but I'll take 9 months out of 12 every year.

Where are these systems?

They are publicly available. Go to the Trading Systems area.

http://www.traderclub.com/discus/board.html

Couldn't find where (Any pointers?) are the publicly available systems you mentioned.

However, this page http://traderclub.com/systems_currencies.htm
sells several different systems for different curencies.

 

[AC3]

On the systems that I have developed and traded I have found 1 thing in particular that seems to hold (I'll add this caveat that this one element may be due to the style of system that I am comfortable with) that when u have a sys the core attributes of the system may keep static throughout the different markets and maybe what needs to be "Tweaked" across different marts is the input into those core tenants ..... say for instance u use a bollinger band system maybe its the number of deviations that you tweak etc..... just my 2 cents

 

[TheStudent]

I've encountered this issue as well - systems designed to capture a phenomenon in one market sometimes doesn't work in another (and I don't mean trend following).

I think it is legitimate - a lot has to do with the behaviour of market participants. when do mutual fund pms usually call in orders in the US? In Europe? In Japan?

What is the mentality of the people there?

etc ....

the rules of the exchange might also be a factor - such as circuit breakers ... behaviour of the central bank ... whether they have a currency board or not ... if you use interest rates and equities together in your system.