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Taking a Trading System Live


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Updated January 6th 2016 by tturner86
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Taking a Trading System Live

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  #461 (permalink)
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GFIs1 View Post
I suggest to carefully consider volume - look at the moments when the system makes
positive gains and watch especially when the minus had occurred.
Every system has times that has phases of continued gains and others with many losers
in a row. Optimizing these days of taking the trade or to wait for a better setup may
give significantly better results.

If so - the system NEEDS to be continued

GFIs1

Interesting idea. How would you look at it? The volume (or average volume) on the bar before entry?

I'd probably do the same with volatility - avoid trades during low volatility, take them during high.


This all might be an exercise just to see if anything reveals itself, rather than changing the system. For example, if I go back through all trades and determine that when volume or volatility is below XXX, don't take those trades, I've really just optimized for that condition, and it may not hold up in the future...

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  #462 (permalink)
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kevinkdog View Post
Interesting idea. How would you look at it? The volume (or average volume) on the bar before entry?

I'd probably do the same with volatility - avoid trades during low volatility, take them during high.

Just for being more precise here (as I described several times in my journal) - I am only looking for daily
volume. The trigger if I will take a trade today in my case is the Initial Balance volume - means the first 30
minutes after opening. There are times (like summer holiday or before a major long weekend) that have
very low daily volume - so my system halts.
If the day has to little "power" to start - my system will not work properly thus I do NOT trade that day.
In the case of my traded Dax futures I need to see at least 5000 contracts, better 7500 or 10000 on IB.

Not confusing volume and volatility here...

GFIs1

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  #463 (permalink)
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GFIs1 View Post
Just for being more precise here (as I described several times in my journal) - I am only looking for daily
volume. The trigger if I will take a trade today in my case is the Initial Balance volume - means the first 30
minutes after opening. There are times (like summer holiday or before a major long weekend) that have
very low daily volume - so my system halts.
If the day has to little "power" to start - my system will not work properly thus I do NOT trade that day.
In the case of my traded Dax futures I need to see at least 5000 contracts, better 7500 or 10000 on IB.

Not confusing volume and volatility here...

GFIs1

Thanks for clarifying. I will look more into this.

Yes, you are talking about volume. I mentioned volatility because I might look at that in a similar manner...

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  #464 (permalink)
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kevinkdog View Post
Thanks for clarifying. I will look more into this.

Yes, you are talking about volume. I mentioned volatility because I might look at that in a similar manner...

There are many moments where high volatilty goes with VERY little volume (like the Dax yesterday made a rally
to the end of day with nearly no volume).
And there are moments with high volume but only sideways moves without big vola.

So I am ONLY concentrating for the entry of a trade on the volume (I do only one trade per day and my trade
is exactly time oriented - means entry and exit times are fixed BEFORE taking the trade).

GFIs1

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  #465 (permalink)
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To compare it here in a same chart:
Dax Future (June contract), 30 minute bars, 2 days (Wednesday and Thursday this week)
Volume bars at the bottom



Shows precisely what I meant...
GFIs1

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  #466 (permalink)
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Trading During Low Volume, High Volume Times

At the suggestion of @GFIs1 , I decided to run some studies on the impact volume may play in the performance of the daytime Euro strategy I am trading.

Specifically, I wondered if it was best to avoid low volume periods and/or high volume periods.

I played around with a few ideas, careful to leave 2013-14 out of the analysis (which is roughly 20% of the trades).

What I found is if the volume is exceedingly low, or exceedingly high, on the bar where the system decides to place an order for the next bar, it is better to skip those trades. This cuts out about 20% of the trades.

The average per trade profit increases from $82 to $101, roughly 23% increase in average trade. But since the number of trades fell by about the same amount, the overall impact on net profit is just about zero. This is shown in the equity curve at the bottom.


When I ran results through a simulator, the volume filtered system was a better choice - drawdowns were less, and therefore the return/drawdown ratio was better (there was little change in overall return).


There are all sorts of variations you could run with volume analysis (for example, the volume has to be greater/less than the average volume over last x bars). I only ran this one analysis, just to see how much better/worse things could be...



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  #467 (permalink)
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Just to Clarify

"What I found is if the volume is exceedingly low, or exceedingly high , on the bar where the system decides to place an order for the next bar, it is better to skip those trades. This cuts out about 20% of the trades."


A little more detail on this:

I recorded the volume on the bar prior to the order bar (vol01). I also recorded the average volume for the previous 11 bars prior to the order bar (roughly 1/2 a trading day, based on 23 hour sessions) (vol11).

If the difference vol01-vol11 is in the upper 10% or lower 10% of its historical range when other trades occurred, I removed those trades. This is because low and high volume differences lead to worse trades.

I kept the 80% of "normal" volume trades.

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kevinkdog View Post

If the difference vol01-vol11 is in the upper 10% or lower 10% of its historical range when other trades occurred, I removed those trades. This is because low and high volume differences lead to worse trades.

I kept the 80% of "normal" volume trades.

Well done - we see another good example of Pareto optimum 80/20 rule.

Good trades
GFIs1

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  #469 (permalink)
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GFIs1 View Post
Well done - we see another good example of Pareto optimum 80/20 rule.

Good trades
GFIs1

I might have been able to get better results with a different percentage, but I figured 10-80-10 was a good place to be.

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Down, down , down


Quite a few losing trades these past few weeks...








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