Trading Lessons/Insights From Coin Flipping

[masterjaz_99]

Quote from shortie:

i have tough time coding even simple scripts so i can't exclude the possibility of mistakes in my code. what i have right now seems to be working as expected. it would be good if i could match Mike's results so far so that we start with similar setups and could talk about the same thing as more conditions are added, etc.

I run data on 5-min bars of SPY. right now the testing period is 2008-present just to illustrate the difference in holding time. my script is essentially always ON. if it starts with a Buy it waits until Exit is generated, Sells Long Position AND Opens Short. is this the correct setup?

the hold time is essentially doubled. i think it is important to keep this in mind when figuring out the effect of the random#.

shortie,
Nice, our holding times match in each other's models, but I'm going to have to re-evalutate my model. It appears that holding until a new signal is generated is key.

As for the holding time arguement, it would intuitively seem that holding would not increase the edge as the second (third/fourth) day(s) could either be with or against the postion and COULD be a wash in the end. That appears not to be the case...so I'll have to update my model and re-evaluate.

To do:

1) have Mike test C2>C1 just to confirm it should be ~+80k
2) update my model to include holding until next signal

Nice work.

masterjaz

 

[tradingjournals]

Quote from shortie:

i have tough time coding even simple scripts so i can't exclude the possibility of mistakes in my code. what i have right now seems to be working as expected. it would be good if i could match Mike's results so far so that we start with similar setups and could talk about the same thing as more conditions are added, etc.

I run data on 5-min bars of SPY. right now the testing period is 2008-present just to illustrate the difference in holding time. my script is essentially always ON. if it starts with a Buy it waits until Exit is generated, Sells Long Position AND Opens Short (the same logic is for exiting Short and Opening next Long). is this the correct setup?

the hold time is essentially doubled. i think it is important to keep this in mind when figuring out the effect of the random#.

Shortie: good work! Some questions:

1. What platform are you using? Is it in excel.?If yes, could I ask for a copy.

2. What is the success rate of the trades?

 

[tradingjournals]

Quote from shortie:

.. my script is essentially always ON. if it starts with a Buy it waits until Exit is generated, Sells Long Position AND Opens Short (the same logic is for exiting Short and Opening next Long). is this the correct setup?

My understanding was that only one action is made.

If you switch to one action only what would happen to hold time, and success rate?

 

[tradingjournals]

Quote from masterjaz_99:

shortie,
Nice, our holding times match in each other's models, but I'm going to have to re-evalutate my model. It appears that holding until a new signal is generated is key.

As for the holding time arguement, it would intuitively seem that holding would not increase the edge as the second (third/fourth) day(s) could either be with or against the postion and COULD be a wash in the end. That appears not to be the case...so I'll have to update my model and re-evaluate.

To do:

1) have Mike test C2>C1 just to confirm it should be ~+80k
2) update my model to include holding until next signal

Nice work.

masterjaz

Master: If you can share your excel, I would be interested in a copy. If you cannot share, I would understand. Excellent work!

 

[tradingjournals]

To all: If you can generate a strategy that leads to trade outcome that form a normal distribution (holding time should be constant), I think I have the knowledge to turn it to a profitable strategy.

 

[masterjaz_99]

Quote from tradingjournals:

Master: If you can share your excel, I would be interested in a copy. If you cannot share, I would understand. Excellent work!

Current version is 12MB, so I'll have to find a host for the file. Be a few minutes...

or seconds: http://www.filedropper.com/spyrand

Please note I have no idea about this file sharing site. Be sure to anti-virus the file before opening.

 

[shortie]

Quote from tradingjournals:

Shortie: good work! Some questions:

1. What platform are you using? Is it in excel.?If yes, could I ask for a copy.

2. What is the success rate of the trades?

my script is in Wealth Lab.

win rate is 53.62% and 53.22% (without and with random, respectively)

i will run the other test later

 

[masterjaz_99]

Quote from tradingjournals:

To all: If you can generate a strategy that leads to trade outcome that form a normal distribution (holding time should be constant), I think I have the knowledge to turn it to a profitable strategy.

TJ, having had some fun with distributions over the last few weeks, a question or two. Do you mean the per trade pnl should be roughly normally distributed? (I would personally think the %pnl would be a better variable) or what statistic should be normally distributed?

Having played with data from open to close, I can definitely say the total distribution is NOT normally distributed. Kurtosis is the main issue with a slight skew...

I am beginning to see what you and Mike are thinking with regards to distributions upon distributions...

masterjaz

 

[Craig66]

Once again, just to clarify, the idea here is that the outcomes of some of the proposed problems that people are modeling here have certain a distribution, using this information there is a way of improving the given system. Is my understanding correct?

 

[masterjaz_99]

Quote from Craig66:

Once again, just to clarify, the idea here is that the outcomes of some of the proposed problems that people are modeling here have certain a distribution, using this information there is a way of improving the given system. Is my understanding correct?

Craig,
That's where my current understanding is as well. As I read Mike's statement, he is superimposing two distributions 1) the close-close distribution (what ever distribution it follows) and 2) the uniform random distribution (which is not normal!). Now, I am trying to visual what the super-position looks like, but need to get to my real job!

More to come,
masterjaz