Surprising new book suggests profitable rules-based strategies are plentiful

Slope Trader

Slope Trader

A common refrain of traders is that profitable strategies are hard to find. I have read a lot of trading-related books, over 300 of them I think, and the most recent one has challenged that assertion and really surprised me.

The book is called "Simple techniques that beat the market: a practical guide to beating the market using technical analysis" by Brandon Kioseff. A link to the Amazon description is pasted below.

The author discusses and backtests several combinations of chart indicators and candle patterns using defined entry and exit rules and many of them produced strong performance metrics.

A possible caveat is that most strategies generated less than 200 signals over the years that they were tested. Also, although many different exit rules were tested, most entries were performed by simply buying at the close of the candle that produced a signal. A plus is that he includes links to the codes that were used.

The book is filled with backtest results and equity curves like the one in the picture below.

I know it's a bit of a cliche, but I really do wish I'd seen this book when I was starting out. It took me a few years to figure out how to develop and test systematic methods to create strategies with positive expectancies. The book suggests that there are a lot of them to be found if one is imaginative and persistent.


Kioseff backtest 3 BEST1.png



Book link:


Disclaimer: I don't know or have any connection with the author and have recommended and discussed books on this forum several times previously (e.g., see below).

https://www.elitetrader.com/et/threads/can-anyone-teach-me-trading.361331/page-4#post-5451517

https://www.elitetrader.com/et/threads/what-are-you-presently-reading.365143/#post-5547322


 
Slope Trader said:
A common refrain of traders is that profitable strategies are hard to find. I have read a lot of trading-related books, over 300 of them I think, and the most recent one has challenged that assertion and really surprised me.

The book is called "Simple techniques that beat the market: a practical guide to beating the market using technical analysis" by Brandon Kioseff. A link to the Amazon description is pasted below.

The author discusses and backtests several combinations of chart indicators and candle patterns using defined entry and exit rules and many of them produced strong performance metrics.

A possible caveat is that most strategies generated less than 200 signals over the years that they were tested. Also, although many different exit rules were tested, most entries were performed by simply buying at the close of the candle that produced a signal. A plus is that he includes links to the codes that were used.

The book is filled with backtest results and equity curves like the one in the picture below.

I know it's a bit of a cliche, but I really do wish I'd seen this book when I was starting out. It took me a few years to figure out how to develop and test systematic methods to create strategies with positive expectancies. The book suggests that there are a lot of them to be found if one is imaginative and persistent.


View attachment 284637


Book link:


Disclaimer: I don't know or have any connection with the author and have recommended and discussed books on this forum several times previously (e.g., see below).

https://www.elitetrader.com/et/threads/can-anyone-teach-me-trading.361331/page-4#post-5451517

https://www.elitetrader.com/et/threads/what-are-you-presently-reading.365143/#post-5547322
More...

The sample size might not be enough when actually used in trading. I once, backtested a trading system and used like 118 trades. Very profitable, win/loss ratio 4/1, looked like a cannot lose trading system. I used real monies trading it but, risking only small amounts and was a big net user in the end. The slippage in prices was enough to render the trading system useless. I have no doubt there are a lot of trading systems out there that any trader can use and make it his own. That assumes you have proper risk management, proper position size, risk no more than 2% per trade. Tweak the trading system to enhance profitability and remove bad trades if possible by adding some filters to your trades. This, of course will further reduce the trades you take in that trading system. On the flip side, your risk is reduced further including, drawdowns and profitability increased.
 
Slope Trader said:
A common refrain of traders is that profitable strategies are hard to find. I have read a lot of trading-related books, over 300 of them I think, and the most recent one has challenged that assertion and really surprised me.

The book is called "Simple techniques that beat the market: a practical guide to beating the market using technical analysis" by Brandon Kioseff. A link to the Amazon description is pasted below.

The author discusses and backtests several combinations of chart indicators and candle patterns using defined entry and exit rules and many of them produced strong performance metrics.

A possible caveat is that most strategies generated less than 200 signals over the years that they were tested. Also, although many different exit rules were tested, most entries were performed by simply buying at the close of the candle that produced a signal. A plus is that he includes links to the codes that were used.

The book is filled with backtest results and equity curves like the one in the picture below.

I know it's a bit of a cliche, but I really do wish I'd seen this book when I was starting out. It took me a few years to figure out how to develop and test systematic methods to create strategies with positive expectancies. The book suggests that there are a lot of them to be found if one is imaginative and persistent.


View attachment 284637


Book link:


Disclaimer: I don't know or have any connection with the author and have recommended and discussed books on this forum several times previously (e.g., see below).

https://www.elitetrader.com/et/threads/can-anyone-teach-me-trading.361331/page-4#post-5451517

https://www.elitetrader.com/et/threads/what-are-you-presently-reading.365143/#post-5547322
More...
Hello Slope Trader,

4 words.

Lying Curve Fitted Backtest.
 
The book suggests that there are a lot of them to be found if one is imaginative and persistent.
More...

The author is correct on both points. I appreciate
anyone who takes the time to add value.
Those that have none are usually inclined to
laugh and ridicule those that do.

The author's statement concerning imagination and
persistent gives me the impression he understands the
utility of maintaining the right mindset when
it comes to trading.

Half glass empty mindset vs half glass full.

#1 Spends most their time focused on the positive, presenting
ideas, articles, personalities and strategies where
people have earned profit or are in a present position
to possibly earn profit.

#2 Spends most their time focused on the negative, presenting
articles, personalities and strategies where people
have lost money or are in a present position to possibly
lose money.

The author is clearly a #1.
 
The problem and reality of any written trading strategy is if it really works everyone would know and adopt it in no time. The downfall comes quickly to render it useless again.

There is actually a good logic in this phenomenon. Just think about it and you’ll understand. That’s how the market gets more and more efficient.
 
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One of the most common trading systems is the 200 sma crossover system. Buy when the price closes above the 200 sma and sell when when price closes below the 200 sma. They say it is profitable although, I have not backtested it myself. This is a long term trend following system so, entries and exits are probably, very few and far between. Still, this could be a viable way to trade the stockmarket if you have the patience to wait for the signals, no matter how few and far between they are. Worth noting, moving average trading systems inherent weakness is when the stock prices are moving sideways, there are a lot of whipsaws. If you were to totally disregard the times the stock prices are moving sideways and only take trade signals when the stock is clearly trending, you can enhance the accuracy and probably, reduced the amount of drawdowns.

https://stockcharts.com/articles/ar...flirting-with-the-200-day-moving-average.html
 
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