NexusFi: Find Your Edge


Home Menu

 





Outside the Box and then some....


Discussion in Trading Journals

Updated
      Top Posters
    1. looks_one iantg with 66 posts (325 thanks)
    2. looks_two artemiso with 12 posts (34 thanks)
    3. looks_3 SMCJB with 12 posts (15 thanks)
    4. looks_4 pen15 with 10 posts (2 thanks)
      Best Posters
    1. looks_one iantg with 4.9 thanks per post
    2. looks_two wldman with 3.7 thanks per post
    3. looks_3 artemiso with 2.8 thanks per post
    4. looks_4 SMCJB with 1.3 thanks per post
    1. trending_up 31,303 views
    2. thumb_up 410 thanks given
    3. group 64 followers
    1. forum 137 posts
    2. attach_file 52 attachments




 
Search this Thread

Outside the Box and then some....

  #31 (permalink)
 iantg 
charlotte nc
 
Experience: Advanced
Platform: My Own System
Broker: Optimus
Trading: Emini (ES, YM, NQ, ect.)
Posts: 408 since Jan 2015
Thanks Given: 90
Thanks Received: 1,147

Even though these types of results will likely not be something easily repeatable for beginning traders, I do want to show this just as a lesson in managing the psychological side of the trading game.

Enclosed are screenshots of one of my various Algo systems: This was ran on NinjaTrader in Market Replay over a little more than a year. No cheating, no martingale, no checking the fill limit orders instantly box, and only using 1 contract.

If you look at the daily results, they are all over the place. It would be hard to even guess what this system netted out to since there is so much daily variability. But when you look at the weekly view, it cleans up a little bit. By the time you look at the monthly view and the hourly view, you realize the system is almost perfectly in the green. And out of 14 months tested all but 3 of the months would have carried a decent profit, (3 were basically break evens). The cumulative profit was around $80K and after commissions would have been around $50K-$60K.

And the Draw Downs never touched below $4k. But nearly every other day was a loser. Now I know most people aren't going to like the idea that every other day was a loser and every 4 or 5 days were big losers, but that is just part of trading. There is no way to avoid having outliers in your performance data both good and bad. You will need around 1,000 trades before they become statistically significant and hit your true performance statistics. Anything less that this will hold serious anomalies both good and bad.

The point is this: You are much more likely to have a successful system overall if you just stick with your system and do not deviate. A bad trade, or a bad day, will likely be followed by a good trade or a good day. But if you change your system and your rules for trading every 5 trades, then you really have no system and you are just getting emotional and pointing and clicking.

Empirical evidence enclosed.

Happy Trading!

Ian

Attached Thumbnails
Click image for larger version

Name:	SMPL2 2015 DD.jpg
Views:	295
Size:	61.7 KB
ID:	243079   Click image for larger version

Name:	SMPL2 Daily.jpg
Views:	302
Size:	73.9 KB
ID:	243080   Click image for larger version

Name:	SMPL2 2015 Weekly.jpg
Views:	300
Size:	75.8 KB
ID:	243081   Click image for larger version

Name:	SMPL2 2015 FY.jpg
Views:	328
Size:	66.5 KB
ID:	243082   Click image for larger version

Name:	SMPL2 Hourly.jpg
Views:	277
Size:	75.3 KB
ID:	243083   Click image for larger version

Name:	SMPL2 Net.jpg
Views:	327
Size:	61.7 KB
ID:	243084  
Visit my NexusFi Trade Journal Started this thread Reply With Quote

Can you help answer these questions
from other members on NexusFi?
Better Renko Gaps
The Elite Circle
Deepmoney LLM
Elite Quantitative GenAI/LLM
Build trailing stop for micro index(s)
Psychology and Money Management
The space time continuum and the dynamics of a financial …
Emini and Emicro Index
NexusFi Journal Challenge - April 2024
Feedback and Announcements
 
  #32 (permalink)
 iantg 
charlotte nc
 
Experience: Advanced
Platform: My Own System
Broker: Optimus
Trading: Emini (ES, YM, NQ, ect.)
Posts: 408 since Jan 2015
Thanks Given: 90
Thanks Received: 1,147

2017 has had historically low volatility levels. These have been some of the worst trading conditions possible for futures traders. The market stops moving, everything is a correction, there are little to no trends, most indicators are useless, etc. Sound familiar? Most of my friends that trade futures got killed this year and have since moved on to other professions because of it.

Anyway.... I built a system that beats low volatility markets fairly well. Enclosed are a few NinjaTrader Market Replay screen grabs I ran yesterday.

One Contract only, the ES, Jan-Aug. (Very slow months). Somewhere around $20K after commissions, nothing to quit your day job over, but maybe with more contracts.... DD was almost nothing, so roll the dice?

The key: Base hits, not home runs....


Happy Trading

Ian

Attached Thumbnails
Click image for larger version

Name:	MatrixTFT17 Detals.png
Views:	344
Size:	46.2 KB
ID:	243152   Click image for larger version

Name:	MatrixTFT17 Monthly Graph.png
Views:	316
Size:	75.3 KB
ID:	243153   Click image for larger version

Name:	MatrixTFT17 Hourly Graph.png
Views:	299
Size:	78.9 KB
ID:	243154   Click image for larger version

Name:	MatrixTFT17 Weekly Graph.png
Views:	285
Size:	82.3 KB
ID:	243155   Click image for larger version

Name:	MatrixTFT17 DD Graph.png
Views:	311
Size:	107.9 KB
ID:	243156  
Visit my NexusFi Trade Journal Started this thread Reply With Quote
  #33 (permalink)
haras57
France
 
Posts: 1 since Aug 2013
Thanks Given: 3
Thanks Received: 0


Very interesting research

Thank you

Reply With Quote
  #34 (permalink)
 iantg 
charlotte nc
 
Experience: Advanced
Platform: My Own System
Broker: Optimus
Trading: Emini (ES, YM, NQ, ect.)
Posts: 408 since Jan 2015
Thanks Given: 90
Thanks Received: 1,147

Greetings fellow traders,

Today I wanted to cover some basic blocking and tackling that I believe will help quite a bit of traders out there.

When I first started designing my algorithmic trading systems I was always perplexed by the fact that every time I built a new system I always hit the same issue. I would take a given day to back-test and almost curve fit a system that could beat that particular day very well. Then as soon as I started testing it on other days it would immediately blow up. Sometimes I would make it 2 or 3 days, sometimes a week, but ultimately they would all fail. And it took me a while to figure out why?

You can typically break any market down into 3 categories. Every expert trader has a way that they would characterize the markets. Some may bifurcate this into 2 types, 5 types, etc, but for me I see 3. Here they are: (Below I have images to illustrate)

1. High Volatility: This is characterized as a wide range of movement. The Max - Min over N period of time is high. There are a number of ways to quantify it, but they all tell you the same thing. This type of market works for just about any trend following system. Anything to do with this line crossing that line, or the idea that if something is moving in a certain way it will likely continue. Pundits often say this type market behavior is often found during the first several normal business hours the market is open. But of course this can break out at any point in time.

2. Low Volatility: This is characterized by having a very low range of movement. The Max- Min over N period of time is often very low. Everything is a correction of a correction in this type of market with no clear major trend or direction. This can occur at any time, but it often occurs in the middle of the day, or overnight.

3. Medium Volatility: This can be thought of as the middle ground between the two prior extremes, in a lot of cases this is hit during a transition from high to low or low to high volatility. There is no real typical time this is observed as it can break out at any time. This is the most commonly observed type of market behavior where there are some small trends, some sideways corrections and no clear constant pattern as this is a hybrid of the two more consistent patterned market behaviors previously listed.

So once I realized that the market only had 3 types, then I started realizing that most of my strategies were only built to handle one of these three types, and there was no consideration for quantifying what type of market was in play in the first place. I started realizing that instead of back testing months and years with only one type of system, I needed to create several different strategies that worked well in each type of system. Here I will draw some parallels to the classic video game Mike Tyson Punch Out.

1. Glass Joe: (Trending System): In Mike Tyson's punch out this was the proverbial tomato can first fight. Virtually everything you throw will work on this guy. It's a super easy win no matter what. I equate a high volatility day paired with any trending strategy the same way. Very easy and anyone can win. Take the Simple MA Cross over strategy that comes with NinjaTrader. This will beat 30% of all days in the market, and these are all high volatility days.

2. Kind Hippo: (Low Volatility System): This morbidly obese dude comes out throwing heavy punches but he is slow and he gapes for like 5 seconds giving you plenty of time to sock it to his mouth. I will pair this guy with the low volatility market because he is slow. When you are in a low volatility market it is better to try to call tops and bottoms based off of former resistance and support. Everything will typically correct once a previous high or low has been hit. In these types or markets counter trend traders clean up nicely.

3. Bald Bull: (Medium Volatility System): This dude was a pretty even fighter. He was big powerful and mixed things up. I would characterize the medium volatility similar to this. It is a mixed bag. There are some small trends, and some small to medium corrections. There is no real silver bullet. So your trend following system will win half the time and lose half the time and your mean reversal system will win half the time and lose half the time. For inexperienced traders my advice is to sit this out! For more seasoned traders that have some more experience, I think you can split this type of market into 2. More trending or more ranging. From here you can likely work a conversation system on either, but you won't make the same type of consistent profit you would with either the High or Low volatility systems.


Finally we have the ultimate challenge: Kid Dynamite, Mike Tyson himself. This dude was a straight up killer. The first round he just threw upper cuts a million times and any one of those would knock you out. The second round he mixed it up and the third round he mixed it up again. He was always changing and his transitions were unpredictable. But you could beat him, if you learned to read all the signals. The real market is exactly the same way. Most people are looking at the market from the lenses of a single trading style or system that beats only one type of market, and Kid Dynamite (AKA the real market) will straight up murk you!


So while I won't give too much away about my own personal system, I will offer this small bit of advice.

The conservative trader that picks his shots and is always careful will win. You need to know that no amount of past market data can 100% accurately predict the future. At best you can count on the immediate past predicting the immediate future in terms of only the type of market you are in. (High, Medium, or Low Volatility). Once you enter one of these you will typically have a small window where a certain tool box will apply. But the biggest challenge is when these switch from one extreme to the other. To this end, do the following:

1. High Volatility Markets: Use whatever signals you prefer to confirm you just recently entered into a high volatility market. From here place 1-2 trades using your most conservation type of profit target / stop loss. (I.E don't stay in the trade for ever, take profits and run.). Don't count on the trend to stay in tack for ever, get in take one or two trades and get out. A shift is certainly coming and you don't want to be on the wrong side of it.

2. Medium Volatility Markets: When the market shifts down to medium volatility from high you will be glad you were on the side lines. And you should remain on the sidelines. Don't trade this market at all. Just wait.

3. Low Volatility Market: When the market moves from Medium to Low volatility, put a few indicators to use to confirm, look both ways first, then place 1 -2 counter trend type of trades. Maybe go with a mean reversal, or or run some support / resistance type of system. After 1-2 trades just stop. This will likely ramp back up to Medium Volatility again shortly and you will get hit on the wrong side of it.

So that's it, just get in for a short 1-2 trades on High and Low Volatility markets, and wait for the rest. The good opportunities only typically come at the begging, and if you get too greedy and stay in for two long with the wrong type of system the market will change before you knew what hit you.

Happy Trading!


Ian

Attached Thumbnails
Click image for larger version

Name:	HighV.png
Views:	393
Size:	64.5 KB
ID:	243219   Click image for larger version

Name:	MediumV.png
Views:	359
Size:	68.1 KB
ID:	243220   Click image for larger version

Name:	LowV.png
Views:	348
Size:	96.6 KB
ID:	243221   Click image for larger version

Name:	MT1.jpg
Views:	287
Size:	13.3 KB
ID:	243224  
Attached Images
  
Visit my NexusFi Trade Journal Started this thread Reply With Quote
  #35 (permalink)
 
jackbravo's Avatar
 jackbravo 
SF, CA/USA
 
Experience: Beginner
Platform: SC
Broker: Stage 5
Trading: NQ...uh..ES actually
Posts: 1,337 since Jun 2014
Thanks Given: 4,362
Thanks Received: 2,400

Excellent post!

"It does not matter how slowly you go, as long as you do not stop." Confucius
Reply With Quote
  #36 (permalink)
 
Rrrracer's Avatar
 Rrrracer 
On the road
Webinar Host
Trading Nomad
 
Experience: Intermediate
Platform: TradingView
Broker: Oanda
Trading: FX
Posts: 2,512 since Feb 2017
Thanks Given: 17,582
Thanks Received: 9,752

Fascinating thread with great information. And I loved playing that game back in the day

Follow me on Twitter Visit my NexusFi Trade Journal Reply With Quote
  #37 (permalink)
 
DavidHP's Avatar
 DavidHP 
Isla Mujeres, MX
Legendary Market Wizard
 
Experience: Advanced
Platform: NinjaTrader
Broker: Ninjatrader / Optimus Futures / AmpFutures
Trading: ES / 6E / 6B / CL
Frequency: Every few days
Duration: Minutes
Posts: 1,609 since Aug 2009
Thanks Given: 11,328
Thanks Received: 2,743

I'm not sure how I missed seeing this thread but I've just added it to my follow list.

Very good observation and the reason over the years that I have learned that automating the trades is great but blindly letting the system trade without my input is not.

Looking forward to further insights from you.

Thanks


iantg View Post
When I first started designing my algorithmic trading systems I was always perplexed by the fact that every time I built a new system I always hit the same issue. I would take a given day to back-test and almost curve fit a system that could beat that particular day very well. Then as soon as I started testing it on other days it would immediately blow up. Sometimes I would make it 2 or 3 days, sometimes a week, but ultimately they would all fail. And it took me a while to figure out why?

So while I won't give too much away about my own personal system, I will offer this small bit of advice.

1. High Volatility Markets: Use whatever signals you prefer to confirm you just recently entered into a high volatility market. From here place 1-2 trades using your most conservation type of profit target / stop loss. (I.E don't stay in the trade for ever, take profits and run.). Don't count on the trend to stay in tack for ever, get in take one or two trades and get out. A shift is certainly coming and you don't want to be on the wrong side of it.

2. Medium Volatility Markets: When the market shifts down to medium volatility from high you will be glad you were on the side lines. And you should remain on the sidelines. Don't trade this market at all. Just wait.

3. Low Volatility Market: When the market moves from Medium to Low volatility, put a few indicators to use to confirm, look both ways first, then place 1 -2 counter trend type of trades. Maybe go with a mean reversal, or or run some support / resistance type of system. After 1-2 trades just stop. This will likely ramp back up to Medium Volatility again shortly and you will get hit on the wrong side of it.

So that's it, just get in for a short 1-2 trades on High and Low Volatility markets, and wait for the rest. The good opportunities only typically come at the begging, and if you get too greedy and stay in for two long with the wrong type of system the market will change before you knew what hit you.


Rejoice in the Thunderstorms of Life . . .
Knowing it's not about Clouds or Wind. . .
But Learning to Dance in the Rain ! ! !
Follow me on Twitter Reply With Quote
Thanked by:
  #38 (permalink)
 iantg 
charlotte nc
 
Experience: Advanced
Platform: My Own System
Broker: Optimus
Trading: Emini (ES, YM, NQ, ect.)
Posts: 408 since Jan 2015
Thanks Given: 90
Thanks Received: 1,147

Thanks for all the interest from the Futures IO community. I am going to keep posting my random observations, some trading stats from different systems i have built, and a few out there ideas that I am working on. But if there are any topics that anyone would like me to cover relating to programming, algorithm trading, statistics, or anything else, let me know and I may post some more of those topics specifically.

Mostly I am just trying offer some insights that I have picked up on that may help other traders.

Ian

Visit my NexusFi Trade Journal Started this thread Reply With Quote
Thanked by:
  #39 (permalink)
 iantg 
charlotte nc
 
Experience: Advanced
Platform: My Own System
Broker: Optimus
Trading: Emini (ES, YM, NQ, ect.)
Posts: 408 since Jan 2015
Thanks Given: 90
Thanks Received: 1,147

One of the first concepts that I can point to that helped me become an effective trader was incorporating metadata into my research. By that I mean understanding why something worked or failed not based on intuition or a guess but raw statistics. In NinjaTrader programmers have the ability to print output for just about anything relating to their trades.

For example if I wanted to print out data around a set of indicators or highs and lows 10 bars before I entered a trade, and then the same data while I was in the trade I could. From this you can correlate your winners and losers back to the data associated with each. When I started doing this I found some incredible things. In trading there is one key concept that is often overlooked but it basically what every trader is trying to do.... and that is predict something. Discretionary traders are at a huge disadvantage in analyzing their prediction accuracy because they will not have a program that can provide them with all the relevant statistics, they would have to arrive at this manually. Even most algo traders are likely not taking advantage of this concept fully. But here is the general idea:


Trading Idea: I believe that when factors X,Y,Z are in place the market will be ripe for my trade and I can expect ...... to occur. This is called a hypothesis. It may be right or it may be wrong, but for sure we can test it and quantify it. So what you should do is build a test simulation to test exclusively this condition and this alone. This is the critical part, you need to isolate all other variables as much as possible so you just test the one variable in your prediction independently.

Test Simulation: (Here is an example you can use): When Volatility in the ES is high trading conditions are good for a specific type of system to work. How you do quantify this? Build two arrays like this to quantify volatility:

double[] DataArrayMax = {High[0],High[1],High[2],High[3],High[4],High[5],High[6],High[7],High[8],High[9]};
double[] DataArrayMin = {Low[0],Low[1],Low[2],Low[3],Low[4],Low[5],Low[6],Low[7],Low[8],Low[9],Low[10]};
// Finding max and min
RMax = DataArrayMax.Max();
RMin = DataArrayMin.Min();


Volatility =((RMax-RMin) *4);

This is measuring the total range of ticks over the last 10 bars. In a time-frame such as 50 ticks to 300 ticks, If the Volatility is > 15 I consider this high. If it is over 20 or 30 this is just stupid high. So now you can print the output of this variable along with each bar update, or each long or short position, or anything you want really. So now you can quantify what the exact market Volatility was during a given trade.

So let's say your criteria for entering a trade had nothing to do with volatility, but rather (this line crossing that line) or something simple. Now you can take your winners and losers and correlate them with the volatility experienced both right before the trade and through the trade, and from this gain knowledge of if different volatility levels helped or hurt your performance.

You can print it off as simple as this:

Print(tradennumber +"/"+
Time[0] +"/"+
Close[0] +"/"+
Open[0] +"/"+
High[0] +"/"+
Low[0] +"/"+
Volatility (At the entry of the trade) +"/"+
Volatility (N Bars ago) +"/"+
BarNO +"/"+
EntryPrice +"/"+
Position.AvgPrice+"/"+
Position.MarketPosition+"/"+
PT +"/"+
SL );

This type of output tells me a lot of things.

1. I can take the trade number here and match it to my overall P&L and correlate trades this way.
2. The time field will give me a measuring stick for all the bars printed from right before the trade to during the trade so I can see the whole picture.
3. You can print the volatility at the first bar of the actual trade, several bars prior to entering the trade where you likely got your signal to enter the trade, also throughout the trade you can check to see if there was a significant change.
4. Printing your Position will tell you when you went flat and when your in the trade (Long or Short). This will help you split your prediction logic from your actual trades.
5. I have a custom variable to hold my profit target and stop loss. This will let you know what your bet was on each trade. You may find that playing with these two settings will product different results


But overall, when you have this type of power at your fingertips you can start to correlate your losers and winners to different things and ultimately trace the root cause. I personally have built models similar to this to test 10-20 different types of variables independently over 4 years in the ES. From this I have learned how things are correlated and which variables are relevant and which are not. This type of scientific approach is real and does work. Once you have this type of a feedback loop, your likely hood of cracking the whole thing approaches a near certainty. But with out these types of tools and scientific method, you will likely be at a crippling disadvantage.

Hopefully sharing some of my process will help other traders follow the scientific approach.

Happy Trading

Ian

Visit my NexusFi Trade Journal Started this thread Reply With Quote
  #40 (permalink)
 LukePoga 
Sydney Australia
 
Experience: Intermediate
Platform: Rithmic API
Trading: ES CL
Posts: 63 since Jan 2014
Thanks Given: 11
Thanks Received: 24


iantg, your post on resting limit orders to get ahead of the queue is interesting.

With everything, testing is key. So how do you test the effect of placing limit orders earlier? Unless you have a complete order book recreation, the only way to know if your order is filled is if price goes past your order. Do you have some sort of approximation to avoid the seemingly impossible (astronomically expensive from what i can see) task of recreating the entire order book in simulations?

Or do we just assume that increasing fill rate is on the whole better? I have a soft opinion that a filled order can be good or bad depending on the circumstance. ie, missing an order you may have in fact dodged a bullet. So I am a bit hesitant to build this in to my algorithms with no way to test! Please enlighten us some more on the theory in this area.

Also, if you make the approximation of only filling your order if price goes past your limit, is this a pessimistic simulation of returns? In your posts you seem to say that these circumstances are usually a losing trade (because it continues past by a few pips at minimum). This may be true, but it can be mitigated by moving the limit forward slightly and take a slightly higher cost to still pick up those winning trades you would have otherwise missed.

Reply With Quote




Last Updated on June 23, 2018


© 2024 NexusFi™, s.a., All Rights Reserved.
Av Ricardo J. Alfaro, Century Tower, Panama City, Panama, Ph: +507 833-9432 (Panama and Intl), +1 888-312-3001 (USA and Canada)
All information is for educational use only and is not investment advice. There is a substantial risk of loss in trading commodity futures, stocks, options and foreign exchange products. Past performance is not indicative of future results.
About Us - Contact Us - Site Rules, Acceptable Use, and Terms and Conditions - Privacy Policy - Downloads - Top
no new posts