Surprising new book suggests profitable rules-based strategies are plentiful

[Overnight]

...Lol, hopefully the algo do not start in drawdown, and the bend over pain is not too bad.



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What that says to me is that you will never start your algo, because you are afraid you will start at the one time in the life of the backtest where it will fail.

Take it from me. With the markets being as down as they are, and assuming you are a long-biased algo? The time to start with real money is NOW.

 

[maxinger]

Surprising new book suggests profitable rules-based strategies are plentiful.
But you have to top up your trading accounts numerous times.
Happy reading & good luck!

 

[KGTrader4]

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

200 day crossover is Something I have looked at many times over the years, as a tool. And haven’t figured out how to avoid the whipsaw. Maybe set a limit of crossover +/- 2%, and/or stays there for 3 days?
Or something like that. Haven’t back tested it. Plus I don’t have patience required. But that’s a whole ‘ other thread.

 

[AlbertMilan]

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.


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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
It's important to note that the caveat of most strategies generating less than 200 signals over the years they were tested, and the fact that most entries were performed by simply buying at the close of the candle that produced a signal, should be considered when evaluating the effectiveness of these strategies. However, it's promising that many of the combinations of chart indicators and candle patterns that were tested produced strong performance metrics. I'm also writing my own book but it's harder than I thought. I have enough financial knowledge but it's not enough for book writing, you need to know a lot about writing books in general. Fortunately, I found this site https://penfellow.com/ which helped me with all this stuff. Overall, it sounds like this book provides a valuable resource for traders looking to develop and test systematic methods to create strategies with positive expectancies.

While some of the strategies in the book had limited data, most of the combinations of chart indicators and candle patterns produced positive results. It's worth noting that the author included links to the codes used, which is a great resource for traders. Thanks for sharing.