Which strategies work, and which don't

J

jcl

While working on a couple different trade strategies, I found an interesting trend. The more time I spent with implementing an algorithm, the less profitable it turned out to be. Quite frustrating. The most profitable algorithms were also the simplest.

Have you made similar experiences?

BTW, these are the algos tested so far:

Simple frequency filters - Sharpe ratio ~ 2
Seasonal trading, AI based - Sharpe ratio ~ 1.5
Curve pattern detection, Frechet algorithm - Sharpe ratio 1.2 .. 1.5
Support/resistance, AI based - Sharpe ratio 1.0 .. 1.2
Price action, AI detected bar patterns - Sharpe ratio 0.9 .. 1.2
Conventional TA, f.i. RSI, MACD etc - Sharpe ratio below 1

For comparison, I've read that professional human traders achieve a Sharpe ratio in the 1.03 area.
 
Quote from jcl:

While working on a couple different trade strategies, I found an interesting trend. The more time I spent with implementing an algorithm, the less profitable it turned out to be. Quite frustrating. The most profitable algorithms were also the simplest.


For comparison, I've read that professional human traders achieve a Sharpe ratio in the 1.03 area.
More...

Very interesting that the most profitable were the simplest...but not surprising. However, I find it shocking that a human trader's Sharpe ratio is around ~1.03.

Not doubting, but is there a source available for the human trader's data quoted? I would like a more in-depth look at how that study was performed.
 
I got that from the book "Thinking, Fast and Slow" by Daniel Kahneman. According to his statistics, the profit difference between professional trading and throwing a coin is very small. For the traders that was also a shocking surprise.
 
Quote from jcl:

I got that from the book "Thinking, Fast and Slow" by Daniel Kahneman. According to his statistics, the profit difference between professional trading and throwing a coin is very small. For the traders that was also a shocking surprise.
More...

Lol.

How much does the book cost?

$100?

Does Mr. K trade?

Btw, how do you throw a coin?

I would wager that Mr. K's book is a validation on his ability to trade.

P.S. I don't like the title of the book. It will make you a bad trader.
 
Quote from trhudson:

Very interesting that the most profitable were the simplest...but not surprising. However, I find it shocking that a human trader's Sharpe ratio is around ~1.03.

Not doubting, but is there a source available for the human trader's data quoted? I would like a more in-depth look at how that study was performed.
More...

The book is probably a $1000 junk.
 
Quote from SteveNYC:

Does Mr. K trade?

I would wager that Mr. K's book is a validation on his ability to trade.
More...
Well, I don't think that Daniel Kahneman does trade. At least not since he won the Nobel prize of economics in 2002.

It might sound like a strange concept, but reading a book can sometimes be useful. Of course only when the author knows more than the reader. But for you this is certainly not a problem.
 
Quote from jcl:

While working on a couple different trade strategies, I found an interesting trend. The more time I spent with implementing an algorithm, the less profitable it turned out to be. Quite frustrating. The most profitable algorithms were also the simplest.

Have you made similar experiences?

BTW, these are the algos tested so far:

Simple frequency filters - Sharpe ratio ~ 2
Seasonal trading, AI based - Sharpe ratio ~ 1.5
Curve pattern detection, Frechet algorithm - Sharpe ratio 1.2 .. 1.5
Support/resistance, AI based - Sharpe ratio 1.0 .. 1.2
Price action, AI detected bar patterns - Sharpe ratio 0.9 .. 1.2
Conventional TA, f.i. RSI, MACD etc - Sharpe ratio below 1

For comparison, I've read that professional human traders achieve a Sharpe ratio in the 1.03 area.
More...

If you speak the truth about your tests' sofar performances, combine those and you have found the holy grail.
 
Kahneman (and is now-gone partner Taversky) is a legend in behavioural science and decision-making. Quite possibly knows more about why you do the things you do and make the choices you do than any human being alive - including you.

The book mentioned is an excellent intro to what we (meaning he and his buddies) have learned about how we actually tick.
 
Quote from jcl:

I got that from the book "Thinking, Fast and Slow" by Daniel Kahneman. According to his statistics, the profit difference between professional trading and throwing a coin is very small. For the traders that was also a shocking surprise.
More...

I wonder,what did he mean by 'a professional trading',the average ET or prop shop trading?
 
Quote from jcl:

While working on a couple different trade strategies, I found an interesting trend. The more time I spent with implementing an algorithm, the less profitable it turned out to be.
More...

The time it takes to implement it is directly correlated with your level of understanding it and with nothing else.

When I saw your post I did some research on you because it was clear that you are trying to push filters. This is what I found and you immediately lost credibility:

Joe
Administrator

Registered: Dec 2004
Posts: 1732

03-11-12 04:00 PM

Heads up guys, Rita & JCL are the same person. Also, JCL/Rita you can not advertise on this site, we've been doing this for over 10 years, just repost and do not link to your site. Last warning.

http://www.elitetrader.com/vb/showthread.php?s=&threadid=238236&perpage=6&pagenumber=5
 
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