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iSystems Journal

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  #1 (permalink)
 SMCJB 
Legendary Market Wizard
Houston, TX
 
Experience: Advanced
Platform: Trading Technologies
Broker: Primary Advantage Futures. Also ED&F and Tradestation
Trading: Primarily Energy but also a little GE, GC, SI & Bitcoin
 
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Greetings and welcome to my iSystems Journal.

While most people seem to create journals to help them with the psychological aspects of trading, the intent of this journal is to document my experiences with isystems.com in the hope that it may be helpful to others trying to do the same. Before reading this journal I would recommend you read the isystems thread here at futures.io, On pages 2, 3 and 4 I posted some preliminary analysis, which I will not be re-posting here.

It is my expectation that I will update results approximately once per month, with additional posts as needed.

While I plan to outline the methodology I use to select systems, I do not intend to identify specific parameters, or to identify the exact systems that I choose. I’m not trying to do all the work for you!

I would like to thank @mattz and @Stage5 Anthony for their input to the isystems thread and to @kevinkdog, who taught me the concept of incubating systems.

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  #3 (permalink)
 SMCJB 
Legendary Market Wizard
Houston, TX
 
Experience: Advanced
Platform: Trading Technologies
Broker: Primary Advantage Futures. Also ED&F and Tradestation
Trading: Primarily Energy but also a little GE, GC, SI & Bitcoin
 
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Saturday 5th August

In @kevinkdog’s Strategy Factory class, he teaches how to test and develop trading systems. Once you have developed a system, he teaches that the last thing you should do before going live is to ‘incubate’ the system. This basically means that you watch the system for a period of time to verify that it’s performance is what you expect to be. If the system performs significantly different during incubation than it did in backtest, that’s probably the best warning you could get that something is probably wrong, without risking and losing real money.

I’m not going to go into detail about what iSystems is because I assume that if you are reading this then you probably already know. Something that I do want to mention though is how the iSystems timeline works. Each system has a “Start Date”, a “Tracked Since Date” and a “Live Since Date”. The way I interpret this is that the “Start Date” is the date that the backtest starts. The “Tracked Since Date” is the date that isystems started tracking or following the system, and is such outside of the backtest. Finally the “Live Since Date” is the date that somebody first started trading the system.

While I am interested in how systems have performed in there backtest, what I am really interested in is how they have performed outside the backtest, aka since being tracked. The main “Explore Systems” table has lots of good information on systems including Drawdowns, Sharpe Ratio’s etc but nearly all of this information includes the backtest. While it is possible to see the statistics only since tracked on the individual system pages, it is not possible to see this data for all systems on the “Explore Systems” page.

At the time of writing, iSystems has 869 systems that have an average start date of June’06 (11.1 years) and an average tracked since date of May’15 (2.2 years). The systems have an average backtest PnL of just over $100K (almost $9k/year) but an average PnL since being tracked that is negative!!! Obviously it is important to separate the wheat from the chaff – assuming there is some wheat to be found.

In line with Kevin’s ‘incubation’ period the first thing that I did was eliminate every system that hadn’t been tracked for a minimum period of time and any system that didn’t have a positive PnL since being tracked. This reduced my system universe from 869 to 158. The systems have an average backtest PnL of over $105K and an average PnL since being tracked of almost $12k. This equates to over $11k/year and $3.5k/year respectively.



For these systems I calculated average yearly profit since their start date, and since the tracked date. The ratio of these two values, Since Tracked divided by Since Start, is one of my key indicators. Using this ratio along with Profit Factor and the three risk ratios, Sharpe Sortino & Sterling, I further reduced my system universe from 158 to 32. The 32 systems have an average start date of May’06 (11.2 years) and an average tracked since date of Mar’15 (2.4 years).

The systems have an average backtest PnL of over $120K and an average PnL since being tracked of almost $16k. This equates to almost $14k/year and $6.5k/year respectively. The 32 systems, are from 15 different developers, spanning 10 different symbols (although FDAX is 11 of the 32), with an approximate 2:1 intraday:swing ratio.

Now that I have a manageable amount of systems I download all the monthly data for each system and calculated average PnL, Profit Factor, Sharpe Ratio and Sortino Ratio* for each system, both since start and since tracked, and the ratio of the two. The average ratios where
Monthly Average PnL 69%
Sharpe Ratio 69%
Sortino Ratio 67%

My goal is to find the portfolio of systems that has the best risk to reward, while at the same time having a since tracked performance as close to possible to the backtest. As such we are not looking at outright PnL numbers, but are only interested in profit scaled by risk. There was actually one system, whose performance has been so much better since tracked than the backtest that I eliminated it (at least for now).

I have recently spent a lot of time looking at portfolio optimization and have written a Monte Carlo program in excel, to optimize portfolio building. Unfortunately with most of these systems, the backtests look so good, that when combined into portfolio’s the portfolio show’s unrealistic results, in many cases resulting in zero drawdowns. I could repeat the process only using ‘since tracked’ data but the data set would be so small I don’t think it would be statistically significant. I wish I could perform this type of analysis on a better granularity than monthly, but unfortunately that’s not possible. While I can drill down to the per trade data for individual systems, since trades don’t line up day to day, there’s no way to model portfolio performance without day by day, rather than trade by trade, PnL.

Looking predominantly at since tracked Profit Factor, Sharpe Ratio and Sortino Ratio, but also taking into consideration the ‘since tracked/since start’ ratio’s I selected 6 systems which ranked 1, 2, 3, 5, 6 & 9 in my rankings. The #4 ranked system was the already mentioned system whose since tracked results are significantly higher than the back test. The #7 system was a swing system but I wanted another day trading system. The #8 system was a day trading system but it trades the same symbol as my only other day trading system.

So I have 6 systems, from 5 different developers, trading 5 different symbols, 4 swing and 2 intra day. The average start date is Apr’09 (8.3 years), tracked date is Apr’16 (1.3 years), backtest profit of just over $100k ($14.5k/year) and since tracked profit of almost $14k ($10.4k/year).



*When calculating the Sortino Ratio I have found that dividing the square of the negative returns by the number of negative returns rather than the total number of returns, yields a ratio that has a lower correlation to the Sharpe Ratio, which I prefer.

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 mattz   is a Vendor
 
 
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I wish you well on your automated systems journey.

Thanks,
Matt Z
Optimus Futures

There is a substantial risk of loss in futures trading. Past performance is not indicative of future results.

Trading futures and options involves substantial risk of loss and is not suitable for all investors. Past performance is not necessarily indicative of future results. You may lose more than your initial investment. All posts are opinions and do not claim to be facts. Please conduct your own due diligence. Use only Risk capital when trading Futures.
1 800 771 6748 local 561 367 8686 email support@OptimusFutures.com
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  #5 (permalink)
 SMCJB 
Legendary Market Wizard
Houston, TX
 
Experience: Advanced
Platform: Trading Technologies
Broker: Primary Advantage Futures. Also ED&F and Tradestation
Trading: Primarily Energy but also a little GE, GC, SI & Bitcoin
 
Posts: 4,040 since Dec 2013
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Monday 7th August

So over the weekend I activated 6 systems in my iSystems account. All 4 of my swing systems have open positions, two in the money and two out of the money. One of the positions has been open for over a month.

On Monday, the first trading day after activation, one of the two systems that is out of the money, entered a trade, at a price significantly better than the original signal. The two systems that have open in the money positions both say that they will activate on the next entry. The other system that has a current position out of the money did nothing and I'm not sure why - would have expected it to enter at the better price as well - have emailed the broker.

My first brokerage statement shows the first trade outlined above. As of yet it does not show any of the system license fees.

While 2 of my 6 systems are Euro denominated, my first position is USD so not sure how the Euro margining will work yet.

Happy Trading

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suit
Columbus, OH
 
 
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Great stuff! I'll be paying close attention to this thread. I too am wanting to go live with a few of these systems, but the P&L just seems too good to be true. I look forward to seeing how the incubation progresses. Thanks for doing the leg work for us!

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 tpredictor 
North Carolina
 
Experience: Beginner
Platform: NinjaTrader, Tradestation
Trading: es
 
Posts: 644 since Nov 2011

Good luck! I offered 2 C2 futures system in 2011, one discretionary and the other systematic, both were top ranked. I had about 20 systems on my watch list from other developers that I felt were strong based on metrics. Today, none of the original systems are offered, including my own. I took my system private near equity highs because I wasn't making enough from the subs to make it worthwhile. It has continued to perform more or less in-line with the historical performance except in 2015 when it suffered a partial breakdown. Not offering any systems currently but may try it again in the future.

From my original list,

12 systems were closed nearer to their lows
15 systems were closed nearer to their highs

Majority of systems were closed within 1-2 years
It looks like on quick check only one system was traded up until 2016, a stock system, Topaz.

I haven't did any sort of extensive analysis but a quick check among systems that closed near highs or lows, it looks like that most systems that had short trade duration (minutes to hours) were more likely to close near lows while systems that held longer were more likely to close near highs (couple days). Both of my systems were technically day trading systems and again did close near highs. But my 2 second analysis suggest you may want to focus on systems with longer holding frequencies -- 1 to 3 days.

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 SMCJB 
Legendary Market Wizard
Houston, TX
 
Experience: Advanced
Platform: Trading Technologies
Broker: Primary Advantage Futures. Also ED&F and Tradestation
Trading: Primarily Energy but also a little GE, GC, SI & Bitcoin
 
Posts: 4,040 since Dec 2013
Thanks: 3,343 given, 7,983 received

Sunday 13th August - End of Week One

I'm travelling and this is only week one so I will keep this brief.

Four trades in the first week, 3 closed (1 swing, 2 intraday) and 1 still open.
Only 3 of the 6 systems have traded so far.
Week 1 PnL approximately +$1.5K

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suit
Columbus, OH
 
 
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That's awesome! I can't wait to hear more. Thank you!

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 SMCJB 
Legendary Market Wizard
Houston, TX
 
Experience: Advanced
Platform: Trading Technologies
Broker: Primary Advantage Futures. Also ED&F and Tradestation
Trading: Primarily Energy but also a little GE, GC, SI & Bitcoin
 
Posts: 4,040 since Dec 2013
Thanks: 3,343 given, 7,983 received


Back from the Vacation - now I need a week off to recover.

Miscellaneous Stuff

Added some links at the top under references. The Optimus Futures explanation of Sharpe, Sterling & MAR ratio's could be interesting for people not that familiar with them.

Also forgot to mention in my opening post, in case this isn't obvious this is Real Money, no Sim Trading here. Also ....

Correlations

Correlations of Monthly Absolute USD Returns between the 6 systems...

Since All Systems have been tracked
Average -0.09
Std Dev +0.38
Min -0.66
Max +0.49

Since All Systems have started
Average 0 (yes zero)
Std Dev +0.13
Min -0.20
Max +0.30


SMCJB View Post
The other system that has a current position out of the money did nothing and I'm not sure why - would have expected it to enter at the better price as well - have emailed the broker.

The next day we deactivated the system and reactivated it, but by then the system was flat. Hence not entirely sure what happened here but it's probably the way I activated the system. The system has entered trades since.

SMCJB View Post
My first brokerage statement shows the first trade outlined above. As of yet it does not show any of the system license fees.

Still have not been billed any license fees. I now assume that this is a month end process.

SMCJB View Post
While 2 of my 6 systems are Euro denominated, my first position is USD so not sure how the Euro margining will work yet.

One of my twp € systems has traded but it was a day trade that made money. As such still not seen how overnight margining works in €.

Now that I do have a positive € balance though it's interesting comparing the nightly statements, as opening balance doesn't equal the previous days closing balance, because of the currency fluctuation. At this point I plan to keep my € balance to finance any € margin requirements. When my profits in €'s exceed the margin requirements I will look to convert the excess back to $.

Saturday 29th - End of Week 2

High volatility in the equity markets this week. Had a strong start to the week but experienced small losses later in the week. 5 of the 6 systems have now traded and 4 of those 5 are profitable. This week the systems made approx €1k but lost $200, so about $1k net. So after two weeks that's approximately $2.5k in profit. Based upon the 'live results' of this portfolio this seems to be exactly in line with expectations. So far so good.

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suit
Columbus, OH
 
 
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Very nice. So what kind of a return is that $2.5k for you then? Wasn't sure what kind of buying power you have in your portfolio so I'm interested to hear what kind of profit percentage that is. Thanks!

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 SMCJB 
Legendary Market Wizard
Houston, TX
 
Experience: Advanced
Platform: Trading Technologies
Broker: Primary Advantage Futures. Also ED&F and Tradestation
Trading: Primarily Energy but also a little GE, GC, SI & Bitcoin
 
Posts: 4,040 since Dec 2013
Thanks: 3,343 given, 7,983 received


suit View Post
Very nice. So what kind of a return is that $2.5k for you then? Wasn't sure what kind of buying power you have in your portfolio so I'm interested to hear what kind of profit percentage that is. Thanks!

To date I've intentionally not addressed capital, but did plan to address it in the future. Since you've asked the question though I will try and address it now.

From iSystems...
REQUIRED CAPITAL.
Required Capital is the amount which must be in the account in order to activate the system for live trading, and is based on the contract's margin plus the worst historical session loss for the system.
SUGGESTED CAPITAL. Suggested Capital is a calculated value which uses the system's worse historical drawdown and volatility to target a future drawdown less than -33%.

Note that this numbers are all lower than exchange margin requirements, which is what your broker statement will show.

For this portfolio of 6 systems Required Capital is $27k and Suggested Capital is just under $200k.

Even then account ROI isn't necessarily your actual ROI. I was listening to a presentation recently when the presenter made the point that due to the recent Refco, PFG & MF Global failures he now only keeps 25% of his trading capital in his trading accounts and regularly sweeps from and to a bank account to maintain that percentage. A few minutes later he was claiming that a certain account he was trading was up X% percent. Question is what that based upon the amount in the account (it was) or was it based upon his dedicated trading capital. In reality this presenters claimed returns where X/4% and not X%.

Due to the way intra-day margining works, the Required Capital numbers are very low. The problem with the Suggested Capital numbers is that they are individual system based and not portfolio based.

To illustrate this let me use a simple example of 4 systems, that each make the same amount of money. In this example Sharpe is just Average/Std Dev,



Now let's combine these 4 systems into 6 different portfolio's that each contain 2 systems each.



Not surprisingly all portfolio's make the same amount of money. The portfolio with the best Sharpe ratio is the portfolio that combines systems 2 and 4 and almost goes straight up. That might seem obvious since the two individual systems with the best Sharpe ratio's were 2 and 4. But the 2nd best portfolio is the combination of 1 and 4, and system 1 has the worst Sharpe ratio. The worse portfolio is 1 and 2, which may surprise people given that 2 has one of the best Sharpe's and is also included in the best portfolio.

So why is this?

Correlation.

Positive correlated systems amplify movements, while negative correlated ones mute them. So as long as systems have positive expectations you want to have uncorrelated systems rather than correlated ones. (Which is why I mentioned the correlations of my 6 systems in one of my first posts!)



As you can see the portfolios with the highest Sharpes were the portfolios that combined uncorrelated systems, while the portfolio's with the worst Sharpes combined correlated systems! As such the $200k Suggested Capital mentioned above would only be correct if the 6 systems in my portfolio all had a correlation of 1. Since my portfolio has an average portfolio of 0, this is obviously not a good metric in anyway.

Another way to illustrate this is to look at the 'modeled' monthly drawdowns of my 6 systems, and compare that to the 'modeled' monthly drawdown of my portfolio. The individual systems have a max drawdown of between $2k and $8k each, and sum to over $30k. The max drawdown of my portfolio is less than $5k though, or 14.9% of the sum.

When I talked about Capital, I wanted to also talk about risk, and how instead of calculating an ROI, you can design a portfolio to a specific risk profile. Time is limited though so I will try and do that next time.

NOTE / WARNING :- iSystems in their Suggested Capital definition finish with "No guarantee is made that the system will not lose significantly more than 33% of the suggested capital amount'. The obvious flaw with any of this analysis is that it is looking at historical data and using it to imply performance/risk into the future. Not only is this dangerous for obvious reasons, but this is doubly dangerous in this case due to the limited nature of our historical data. Most of my analysis only goes back to 2010 and as such excludes the 2007/8 financial crises, the 1998 Russian Debt Crisis and implosion of LTCM and the 1987 Black Monday crash to name just a few. As such we have no idea how any of these systems would behave in situations like those, never mind potential disruptions in the future. Just like 'Out of Sample' or 'Since Tracked' average performance was below the backtest, you will probably find that 'Out of Sample' risk is higher.

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 SMCJB 
Legendary Market Wizard
Houston, TX
 
Experience: Advanced
Platform: Trading Technologies
Broker: Primary Advantage Futures. Also ED&F and Tradestation
Trading: Primarily Energy but also a little GE, GC, SI & Bitcoin
 
Posts: 4,040 since Dec 2013
Thanks: 3,343 given, 7,983 received

Saturday 26th August – End of Week 3.

Note:- last week should have read Saturday 19th not 29th. As much as I would like to, I can’t time travel yet.

The week started with an Eclipse and ended in a Hurricane.

Unfortunately for this account, the week started with losses, continued with losses, followed by more losses, with Friday being the only positive mark to market day. All 6 of the systems have now traded. Two are doing great, one well, one is breakeven and the last two are doing nearly as bad as the best two! Made almost another €1k but lost almost $2k, for a net loss of approximately $1k, meaning I gave back about 40% of my profit, and profits through 3 weeks are now approximately $1.5k.

With a monthly mean PnL of ~$4+k* and a standard deviation of ~$4k I would expect weekly PnL to average ~$1k with a standard deviation of <$2k**. So the majority of weeks PnL should be between <$1k> and $3k, so this loss still falls within expectations.

Plan to re-review everything in the next few days, and confirm system selection for next month. This has nothing to do with this week’s losses and will be an end month process every month. Not looking to chop and change every month so I doubt I will be removing any systems. I think I may be adding one or two more systems bringing me up to seven or eight. I know there’s at least one system that looks good that didn’t meet my minimum ‘since tracked‘ threshold last month, but will do this month. It also trades a contract not currently present in my portfolio.

* Since tracked numbers. Full backtest has slightly higher mean and significantly higher standard deviation.
**Assuming a 21 day month, so weekly mean is monthly * 5/21 and weekly Std Dev is monthly / square root (21/5)

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 SMCJB 
Legendary Market Wizard
Houston, TX
 
Experience: Advanced
Platform: Trading Technologies
Broker: Primary Advantage Futures. Also ED&F and Tradestation
Trading: Primarily Energy but also a little GE, GC, SI & Bitcoin
 
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SMCJB View Post
Plan to re-review everything in the next few days, and confirm system selection for next month. This has nothing to do with this week’s losses and will be an end month process every month. Not looking to chop and change every month so I doubt I will be removing any systems.

Of the two systems doing badly, one has had a great week and is now slightly positive, while the other hasn't done a trade. While I wasn't planning on dropping any systems upon further analysis I am going to. My one bad performing system this month experienced a loss
- equal to 1.5 times it's largest drawdown ever
- more than double it's worse month previously
- that is 3 standard deviations away from its average monthly PnL.

Also it turns out that this system is the one with the shortest 'Tracked Record' of the six I'm trading. Coincidence or lesson to learn?

So deactivating one of the systems today before month end. Leaves me with 5 systems right now.

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 SMCJB 
Legendary Market Wizard
Houston, TX
 
Experience: Advanced
Platform: Trading Technologies
Broker: Primary Advantage Futures. Also ED&F and Tradestation
Trading: Primarily Energy but also a little GE, GC, SI & Bitcoin
 
Posts: 4,040 since Dec 2013
Thanks: 3,343 given, 7,983 received

August Recap.

Posting as a picture since tables don't work very well.
Pretty good start.


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 SMCJB 
Legendary Market Wizard
Houston, TX
 
Experience: Advanced
Platform: Trading Technologies
Broker: Primary Advantage Futures. Also ED&F and Tradestation
Trading: Primarily Energy but also a little GE, GC, SI & Bitcoin
 
Posts: 4,040 since Dec 2013
Thanks: 3,343 given, 7,983 received

Sunday 17th September - Mid Month Update

Activated 3 systems at the beginning of the month, to bring the number of systems traded to 8. First two weeks of September don't look good. One of the newly added DAX systems in particular had a nasty -€2500 day trade which pretty much wiped out August's profit's. Since then it's been one step forward and one step back. 6 week trading PnL is now ever so slightly negative but when you add in system licence's I believe I'm down about $1k. While this might seem concerning, everything is still firmly within expectations, so while I'm obviously disappointed about the results, I'm not concerned.

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 SMCJB 
Legendary Market Wizard
Houston, TX
 
Experience: Advanced
Platform: Trading Technologies
Broker: Primary Advantage Futures. Also ED&F and Tradestation
Trading: Primarily Energy but also a little GE, GC, SI & Bitcoin
 
Posts: 4,040 since Dec 2013
Thanks: 3,343 given, 7,983 received

Saturday 23rd September

Unplanned update. I've been travelling for 3 days (actually at @kevinkdog's Strategy Factory Workshop) so I haven't been following the performance of individual systems, but I could see the PnL wasnt doing well though. Now down over $3k (so $6+k this month). Seems like 6 of the 8 systems had bad weeks! . Month end is next Saturday so if I wanted to switch off any systems I will have to do it by Friday.

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 kevinkdog   is a Vendor
 
 
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SMCJB View Post
Saturday 23rd September

Unplanned update. I've been travelling for 3 days (actually at @kevinkdog's Strategy Factory Workshop) so I haven't been following the performance of individual systems, but I could see the PnL wasnt doing well though. Now down over $3k (so $6+k this month). Seems like 6 of the 8 systems had bad weeks! . Month end is next Saturday so if I wanted to switch off any systems I will have to do it by Friday.

FYI to @Big Mike - apparently the popularity of futures.io runs deep, and worldwide. At least 9 of us this weekend (from 4 different countries) in Cleveland are futures.io members!

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 Mabi 
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SMCJB View Post
Saturday 23rd September

Unplanned update. I've been travelling for 3 days (actually at @kevinkdog's Strategy Factory Workshop) so I haven't been following the performance of individual systems, but I could see the PnL wasnt doing well though. Now down over $3k (so $6+k this month). Seems like 6 of the 8 systems had bad weeks! . Month end is next Saturday so if I wanted to switch off any systems I will have to do it by Friday.

I am working on another approach to actually switch on systems first when they are loosing .Since all systems will have loosing perdiods no matter how good they are. I am trying to use consecutive winners and loosers and standard deviation using the equity curve from the strategy to determain when to start trading it. I always launched strategies when they are doing good and then they go in to drawdown almost immediately. But since it is not the strategy that changes it is the market so it depends on the type of strategy and Kevin D got it nailed by using WFO do adapt them which You cant do if You rent a system.

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TRD9
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Attached is a quick and dirty Analysis I did of the iSystems programs:



It's easy to do, you just export the data from their site into excel and add it up. Takes minutes and will save you $.

From the Total P&L and Tracked P&L's, you can see that, over time, profit diminishes, a lot.

And from the Live P&L's you get a total return of only 1.7% for letting these boys put your investment at risk for over 3 years with some incredible volatility and draw downs.

You really have to be a wizard to determine which of these systems are working and which are not as it appears that you have to find a system out of the 950+ systems that happen to be working at the moment and over time the chance seems to become less and less.

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 SMCJB 
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Friday 29th September - Understanding what went wrong this Month ☹

This month has - to be blunt - been almost disastrous. After the nice $4k profit in August I somehow managed to lose about $10k in September, meaning I'm now down about $6k. Given that this portfolio of 8 systems largest drawdown ever, which was also a single month, was approximately $4.7 that's rather eye opening.

Looking at each system individually none of them are performing terrible, but 7 of the 8 eight had really bad months. Profit in terms of standard deviations away from expected were +0.51, -0.84, -0.97, -1.07, -1.2, -1.23, -1.36, -1.71 which isn't pretty. Since in average month we would expect about 5 systems to win, and 3 to lose, the summed up results are magnified and the portfolio performed 2.48 SD's below expectation!

So we had a bad month, and the killer was correlation. I think this chart sums up the problem in September. While the blue/89 months/all data does include a lot of backtest data, for the orange/12 months all 8 systems were live. As might be expected the live data distribution is shifted to the left, but still a result of 1 is a significant outlier.



For what it's worth I deactivated 1 system today because after two months it's Tracked/Backtest ratio has dropped to a level that it no longer would qualify for the short list.

Probably post more this weekend on exact month end results and some analysis on thoughts on when to quit.

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 SMCJB 
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SMCJB View Post
Profit in terms of standard deviations away from expected were +0.51, -0.84, -0.97, -1.07, -1.2, -1.23, -1.36, -1.71 which isn't pretty.

I should have probably mentioned that for the average system I can be 0.478 SD's below expectation and still be breakeven which probably makes those numbers look slightly less horrific. The portfolio can be 1.14 SD's below expectation and still be breakeven.

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 jokertrader 
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Sorry quick side question: these systems do u know a) what the logic is b) can u tweak the logic c) give u entries and exit stats live I.e u can actually manually go look at the trades yourself for the last month etc and d) does it tell u what timeframe charts are being used in the calculation like 5 min, 60 min etc- point is can u take these and actually go to a chart and plot trades to visualize/analyze?


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 SMCJB 
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Switching Systems Off

Mabi View Post
I am working on another approach to actually switch on systems first when they are loosing .Since all systems will have loosing perdiods no matter how good they are. I am trying to use consecutive winners and loosers and standard deviation using the equity curve from the strategy to determain when to start trading it. I always launched strategies when they are doing good and then they go in to drawdown almost immediately. But since it is not the strategy that changes it is the market so it depends on the type of strategy and Kevin D got it nailed by using WFO do adapt them which You cant do if You rent a system.

I think that's called "trading the equity curve" something I have no experience with at all. I didn't have a formal plan on switching systems off. I expected that as new systems became available I would switch them on, and switch off the worst performer, which is very different than what to do when a system goes wrong.

Last weekend at @kevinkdog's "Beyond the Strategy Club" the subject of when to switch off systems came up a lot. Performance vs history and % of max drawdown where the most discussed. In his book and his class, Kevin teaches a method where you plot trades (or weeks or months) and compare it to both of these metrics. The chart below shows this for the system that I switched off at the end of August. In this case I'm plotting monthly PnL since the system has been tracked. The red drawdown line shows the level at which the max drawdown would be exceeded and the upper and lower bounds show expected (from backtest) plus/minus 1 standard deviation. This clearly shows how the system surpassed it's previous max drawdown all in one month. The accompanying equity curve shows backtest PnL, the matching since tracked PnL and the drawdown.



The second chart shows the same information for the system I swicthed off a few days ago. Again it clearly shows how the system has dropped below 50% expected performance, which is the same as a 50% tracked/backtest ratio I use in my initial system screen. Another down month and it could also exceed it's max drawdown.



Finally, just to prove everything isn't negative, here's an example of one that is actually over performing.


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 SMCJB 
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jokertrader View Post
Sorry quick side question: these systems do u know a) what the logic is

No

jokertrader View Post
b) can u tweak the logic

No

jokertrader View Post
c) give u entries and exit stats live I.e u can actually manually go look at the trades yourself for the last month etc

Yes. There's available spreadsheets that show this. Unfortunately there's no way to download all these sheets automatically, and even if you could, theres a lot of work to do to convert this info into usable trade by trade analysis.

jokertrader View Post
and d) does it tell u what timeframe charts are being used in the calculation like 5 min, 60 min etc

No, although that info is available in some of the system names

jokertrader View Post
- point is can u take these and actually go to a chart and plot trades to visualize/analyze?

You would have to do that manually. There are no charts that show this automatically. In fact there are no charts other than equity curves.

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 SMCJB 
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Scraping & Analysis
Worked out a way to scrape the monthly PnL table using R. This could be a huge improvement in my analysis techniques.
Next step is automate/loop so that I download data for every system.
Then the question is do I dump it out of R into Excel, or try and do further calcs in R.

 
Code
> XYZ
  Year   Jan   Feb   Mar   Apr   May   Jun   Jul   Aug   Sep   Oct  Nov   Dec  Total
1 2017  5804 -4728  1671   -60   -60   -60  -874  2756  6499   -60   NA    NA  10888
2 2016 -2891 10984 15152 -2854   694 23598  2204   -60  6100 -4375  -60  5625  54117
3 2015  8496 15394  2377  3724  3777 24911 -1047 15951 11478  7996 4267 14795 112120
4 2014   -60  7462  2712  9796   -60   -60   -60  7321  2010 23937 1942 -4800  50142
5 2013   -60  2128   -60  1181  7151  4150 -8871   -60   -60   -60 2031 -5688   1782
6 2012 -2557   -60   -60  2060 11437  2867  9747   -60   -60   -60 6944   -60  30138
7 2011    NA    NA  9722   -60   -60  5374 13720  5099 17429 21594 8038  -975  79882

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 SMCJB 
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Ended up with this chart, not sure it's particularly insightful but thought since I have it I might as well post it.
  • Each cross represents a system, with its "Start Date" (aka back test start date) on the x-axis and its "Tracked Since Date" (aka out of sample - not backtest) on the y-axis.
  • The red lines are the border for systems that have been tracked for 1, 2 and 3 years.
  • The blue line is the border for systems whose "time since tracked" is equal to "back test time". Everything above the line has a smaller out of sample than in sample.
  • The faint diagonal black lines show the border for systems that have a backtest of 0, 1, 2 and 3 years.
I took a look at all the systems down there in the "low center", that have a very long "since tracked"/oos but <3 years backtest and over half have lost money. The ones that haven't, while profitable have some low return/DD or MAR ratio's, although at least one has clients!

EDIT: Just ran the correlation of "Years Tracked / Years in Backtest" vs "USD Year Tracked / USD Year Backtest" and over the almost 1000 systems it was 0.016 so that isn't a good indicator!


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SMCJB View Post
Friday 29th September - Understanding what went wrong this Month ☹

This month has - to be blunt - been almost disastrous. After the nice $4k profit in August I somehow managed to lose about $10k in September, meaning I'm now down about $6k. Given that this portfolio of 8 systems largest drawdown ever, which was also a single month, was approximately $4.7 that's rather eye opening.

Thank you SMCJB for sharing all this, very useful info especially for starters like me. However, all parameters you use are somewhat historic, standard deviation etc. - all work until there are issues like you had in August. Would it be better to just select, say, 2 systems with the opposite strategies to minimize/offset losses and keep it that simple. Also, two months are not representative and you've done soo much analysis already based on 2 months only.

And one side quick question, they offer 5 clearing companies on their website, i'm trying to choose one, have heard a lot good and bad about AMP, but will likely use them. To be honest, I do not see fundamental differences between these 5 for isystem (yes, capital is different, but the higher the capital the higher the fees, plus i only invest a few thousand). So if I need to know something very important about selecting clearing please guide me... Thank you!

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 SMCJB 
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tradeday View Post
Thank you SMCJB for sharing all this, very useful info especially for starters like me. However, all parameters you use are somewhat historic, standard deviation etc. - all work until there are issues like you had in August. Would it be better to just select, say, 2 systems with the opposite strategies to minimize/offset losses and keep it that simple.

Thanks for the comments. I'm just curious how would you choose those two systems if most math calculations are 'somewhat historic'?

tradeday View Post
Also, two months are not representative and you've done soo much analysis already based on 2 months only.

I've been trading the systems for 2 months, but the analysis is based upon the entire history of these systems which in some cases is over 15 years. I would agree though that 2 months of results isn't enough to draw a final conclusion.
tradeday View Post
And one side quick question, they offer 5 clearing companies on their website, i'm trying to choose one, have heard a lot good and bad about AMP, but will likely use them. To be honest, I do not see fundamental differences between these 5 for isystem (yes, capital is different, but the higher the capital the higher the fees, plus i only invest a few thousand). So if I need to know something very important about selecting clearing please guide me... Thank you!

As far as I know everything (Capital, Commissions, License Fees) is the same no matter what FCM or Introducing Broker you use (at least in the US).

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 mattz   is a Vendor
 
 
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SMCJB View Post
As far as I know everything (Capital, Commissions, License Fees) is the same no matter what FCM or Introducing Broker you use (at least in the US).

That is correct. The FCM/Broker must adhere to the fees as advertised by iSystems.

Thanks,
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Trading futures and options involves substantial risk of loss and is not suitable for all investors. Past performance is not necessarily indicative of future results. You may lose more than your initial investment. All posts are opinions and do not claim to be facts. Please conduct your own due diligence. Use only Risk capital when trading Futures.
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SMCJB View Post
I'm just curious how would you choose those two systems if most math calculations are 'somewhat historic'?

My thought is essentially we're dealing with the algorithms. Ratios and analysis that usually work for equities might not be relevant here. Say, you day trade futures, set you daily target, and turn off your platform after 3 p.m. Would you calculate a standard deviation for that? Diversification also does not work quite well with these systems as your results for Aug show. Few things we know for sure are: 1) this service is in business for many years and they have real customers, so it is possible they add some value to trading; 2) some systems do work well as you showed us. The rest is at our own risk, as they say. I'm not very technical and may be too theoretical in this post and if so I apologize. Please keep posting your observations, the topic seems very popular..

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 tpredictor 
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I'm curious to learn more about portfolio analysis. I haven't used that to any extent. However, I will provide a few questions/suggestions:

1. It looks like the portfolio analysis is not working on these systems. Do you agree ?

2. You might try capturing the entries/exits of your systems and increasing the holding time by either adding time to the exit. This will force the system to be in the market more. You might run your correlation analysis on these modified systems. I'm thinking there might be more chance for overlap and thus yield higher correlation levels. Try doubling the holding time.

3. You might force a higher level of anti-correlation in picking systems that only trade uncorrelated markets.

4. The problem with max dd is the DD almost always increases with a longer track record: solution decrease leverage and accept potential for lower return.

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 Sazon 
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Obviously in hindsight, it looks like it might have been a better idea to run either the entire portfolio through an incubation period before going live, or as an alternative, run each system through its own incubation period before taking it live. Regardless of how good the historical analysis results tend to look, murphy's law always seems to rear its ugly head when real money is on the line.

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 tturner86 
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Thanks @SMCJB very interesting to see this kind of info on iSystems.

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 SMCJB 
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Monday 16th October

I have a big update coming with full September PnL and some (potentially alarming) results from some additional analysis I have done now that I can scrape the isystems website. Just need to get the analysis finished in a presentable format.

The mid-month October update, is that I'm up a couple of hundred dollars, which includes over $1000 in license fees and commissions! I mention this since as of close Friday fees represent exactly half of my approximately $6.5k in losses!

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 SMCJB 
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More Data Scraping ...

As I have already mentioned I have created a function in R that when given a system number it will scrape the isystems website and return the monthly PnL table. I then created a second function (that called the first) that when given a system number, a start date and an end date, it would return the average monthly PnL of that system between those dates. This was then replaced by a third function that once passed the PnL data table from the first function and the two dates, instead of performing the average calculation it returned an array with all the monthly PnLs between those dates. There were two main advantages of this. First to perform multiple analysis of the same system I'm only scraping the website once. Second I can now easily calculate more statics than the mean. For example I can calculate the sharpe ratio of any date range by just dividing the mean of the array by it's standard deviation. It was now relatively simple to calculate the Tracked/Backtest Ratio for any system given just its system number, start date and since tracked date.

All I needed then was a complete list of all the system numbers. To get this I went to the isystems website, pulled up a table with every system in it, inspected the element of the table to bring up the underlying code. Copy that code into word, used search & replace to find system name and number HTML tags, and insert line breaks. Then copy that into excel and with very little manipulation create a lookup table of name and number. Last thing was to create a CSV file with system name, system number, contract, type, and some dates which was saved and then loaded into R.

... and a Potentially flawed Hypothesis

The underlying theory of my analysis is that by using the since tracked data we can perform an out of sample incubation. Then by selecting the best systems that performed similarly in incubation to their backtest we should be picking robust systems that are not back tested. We can then trade these systems with an expectation that they are not overfitted.

An obvious implication of this is that we are assuming that if systems perform similarly in the incubation to the backtest that they will continue to perform similarly. After my terrible second month I decided to do more testing, specifically I wanted to test the 'obvious implication' above. I did this by filtering the systems to only include those with at least 2 years of since tracked data. I then calculated how those systems did in their first year of since tracked data and then their second year. If my theory was correct I would expect the data to look something like a barbell but at a 45 degree angle, with the center of the barbell just below a ratio of 1.

In reality the data looks like this. (with varying levels of magnification/subsetting)

All 344 Systems with more than 2 years of tracked data


Eliminate outliers - 320 Systems


The expected sweet spot - 155 Systems



While the slope of the best fit line, does get slightly steeper as we focus on the expected sweet spot, the R2 is so low as to imply any relationship is meaningless. Unfortunately I think that this would imply that there is no obvious relationship between how well a system performs in its 2nd year given how it performed in its 1st year and as such, my idea of using since tracked to incubate and pick robust systems seems to be fataly flawed.

Why would this be the case? The framework I used to develop the few successful systems I have is one taught by @kevinkdog. It's a framework that assumes you develop systems in the same way, using a walk forward optimization, with the incubation as the last reality check. Following this methodology the incubation is normally a reasonable indicator of results. When systems fail the incubation, there's often a reason why - you performed one to many optimizations, with just a little but to much knowledge of the data, tainting or biasing your results. In this case we have systems developed by about 100 developers. We have no knowledge of how they developed the systems, and whether they are over fitted. Hence it could be completely random that they did well (or badly) in their first 12 months, and not an indication of robustness in any way. If we generated 350 random systems, would the results look any differently?

Next Steps ... are there any?

At this point I believe my initial hypothesis is flawed and that my analysis does not help identify robust systems. As such it seems silly to leave money invested in systems whose results appear to be random and I plan to deactivate them in the next few days unless I miraculously find something that does give me confidence. (As an aside, I have already plotted the monthly sharpe ratio of the first 12 months of since tracked data, versus the second 12 months. The results are as disappointing as the T/B ratio charts above.)

I do still believe that this data set could be very valuable. It contains almost a 1000 systems that in some cases have several years of real, non backtested, performance history. That is quite unique and has to be valuable - all I need to do is find out how! I have an idea on how I could use this data to create an even larger dataset, which combined with some calculated metrics, could be a potential machine learning project. I'm just not sure I have the time to follow that path at this point in time. Maybe I need to find a grad student with nothing to do!

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 SMCJB 
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I was going to post another message to reply to some of the comments and questions posted here but I'm not sure that its really worth my time or theirs in reading my responses. Instead I would like to thank @Mabi @mattz @Sazon @suit @tpredictor @tradeday and anybody else I have missed for your comments, ideas, suggestions and support. A couple of you in particular definitely gave me some things to think about.

In the coming days I hope to post some more results and thoughts (especially about costs), but after that I suspect any further posts will be a lot more sporadic in nature. Hopefully this thread isn't dead yet though. :-)

SMCJB

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 tpredictor 
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Some thoughts:

1. Have you look for correlation in "sign" of the returns versus the magnitude? The regression might be too steep a hurdle.
2. Have you tried to break down the systems into factor components or based on proxy systems? If you could view the systems in terms of factor components then this might explain the performance better. I'd suggest the factor components of: mean reversion, trend, volatility, perhaps more exist. A PCA might enable this. A simple method is to check for correlations against your proxy systems and then group them based on the correlations. You should be able to view year over year performance in relations to the factors.

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 kevinkdog   is a Vendor
 
 
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I was hoping to see better correlation between these groups (it would have been nice to see that ones that did good in first 12 months tended to do better in second 12 months).

Based on your work, I agree that the process used to develop the strategies might be the key. With a consistent development process, it might be easier to find some predictive "markers" for future performance (as you have seen with your work outside of this study).

I'm going to keep thinking about this, because you've done a great job collecting and analyzing this data, and maybe there needs to be another way to think about how to frame this problem.

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 tpredictor 
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I suspect the changes you are seeing might be due to changing factors in the market. You need to group the strategies by the factors that are predictive with their performance and then see if those factors have changed. If the factors haven't changed significantly but strategy performance has then it indicates the strategy is failing to adapt. If the factors have changed then it would suggest possibility for strategy to come back to life when/if the factors return. First thought, create proxy strategies/factors for testing this such as intraday range, 1 day range, 5 day trend, 5 day reversion, etc.

A day trading strategies profits will probably correlate well with the magnitude of 1 day range range. Once you see the performance of the strategies in relation to its factors, you should understand the cause of the under performance. If you build this into a classifier then you can turn the strategy on or off based on the factors.

I would add, once you can identify the underlying factors, then you can start to turn on and off the strategies with more intelligence. For example, mean reversion is going to be more prominent during uncertain times. Momentum works best when their is a positive catalyst. Markets tend to trend when no one is watching. You can also use the factor analysis for your diversification. You can force the strategies to be always "in market" to generate your correlations.

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 Mabi 
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I currently run almost 300 strategies live on FX ( small accounts) some for over a year even thought they trade very small amount I still have to have 25k locked to trade them all. Equity wise I am on plus. They are combined in portfolios about 20 of them. During this year I tried many things. I copied the 15 best strategies out of the oldest portfolios and made a new one and thought (he he dude) you will be rich now. Well bullshit this new portfolio went straight down and surprisingly the Original ones EQ curves started to really perform well even thought they still included the 15 strategies. What does this tell me. Well diversification is the only thing that matters. It is hard to diversify in FX market and to risky in futures for my capital base at the moment but you can using different type of strategies in FX, timeframes and you can avoid having to WFA by having correlated strategies on the same instrument working with different set of exits and targets making them together handle different types of markets and you can easily size them to even out the EQ curves . Watching these 300 strategies trade is fun they take on average 26 trades per day and I want to add more. My plan is to trade the equity curves by copy them from master accounts via an WEB/php/MSQL server and control which ones will be allowed to take a trade or add size or lower size based on whatever I can up with which can be some standard deviations from mean, drawdown value, consecutive looser or winner or other indicators. Currently I am struggling with getting the system up and running. When it works If ever I will share the experience . I might add that the 15 strategies did have 40 % drawdown directly after I moved them out but today they are today up 18 % after 7 months.

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 tpredictor 
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I have been trying to think about what any real lesson might be gained from this. And, I think a few things stand out in mind. The first is market cognition. One of the chief problems with trading systems is that without expert trading insight then such systems are more likely, due to convenience bias and significant difficulty -- not impossibility -- to develop around such problems, to be built around the less important factors.

One way to think about it is that a great discretionary trader will identify the factors that are influencing their market and they will then capitalize on those factors. Sometimes it is impossible to prove that these were the factors influencing the market until after the fact. In other cases, systems might be able to be built around such factors successfully. What is relevant is that the market cognition is much higher and more likely to be sound. On the other hand, trading systems are more likely to try to find the I'm imagining "NASH-like" equilibrium for a mix of factors under the assumption that they are random. What I think is relevant is that if a system was tested and did well on out of sample performance that the causes of the failures are probably not due to simply that the system didn't work in the past but rather due to several specific types of causes. One problem with trying to develop systems in this way is that certain persistent effects can drown out other types of effects. For example, a system developed on a market that is mostly mean reverting but has some good momentum trading times will be unlikely to discover those momentum effects esp if they only occur as a result of non price data.

Sometimes having a good insight into market dynamics combined with exceptional technical read can provide superior benefit. A good example is that markets tend to be more mean reverting during periods of uncertainty. A good discretionary trader can pick up based on the news, sentiment, etc. regarding the uncertainty. This will give such a trader insight into the possibility that the market is mean reverting combined with ability to see if that is what is happening. Is it technically possible to develop this into a system? Sure but you will need special data feeds or you will have to result to price proxy data. In other words, system developers are more likely to be led down the wrong path because of what is available in most system development packages. Imagine, also, for something like Bitcoin -- where you have some future event that is known that can influence the price. Can you develop a system that takes into account future impacts? Sure. But most will not because it is difficult.

But, let's go back to why systems that worked can fail. A system that has many trades might be prone to small changes in profitability. For example, if the market is 52% more trending then mean reverting over some sample period then a small shift can cause impact. Changes in volatility are the most difficult for both discretionary and systems.

There are several reasons: the factors driving the market can change, the mix of the factors can change, the expectation of the patterns can change in a significant or small way, the frequency of the patterns/trades can change, etc. The good news is that it is possible with serious investigation to probably identify the causes for any particular system. The bad news is that it is not clear that identifying the differences will clearly state whether the system will work in the future. I can imagine, for example, if a market like Bitcoin is getting a lot of news stories, a lot of press, then the technical patterns might be different then if the market isn't getting a lot of attention. Sure, it is simple in concept: a classifier for technical patterns based on frequency of news. That is not going to be easy to build or test though. So, you know that most systems are going to be built exclusively on price data. The cognition though factors in the news.

The other lesson is know your enemy. Futures markets are decidedly unfair due to the fact that large liquidity providers can basically take the fair bet against the other traders. It is mathematically given that the more trades one places for a given level of return will reduce the risk needed to be taken on any one trade (provided one isn't trying to profit from outliers-- and even possibly then). But, traders are often told to be selective. Don't over trade. But, if you're a trader: the more trades you take then the more you can make. Selectivity introduces several forms of risk but one of them is the need to bet more per trade and to trade during more risky periods.

The CEO of Virtu, a market making firm with multiple stretches of multiple years without losing days, said "we don't trade quantitative models and that's why our models don't break." Basically, their model is to capture the spread. If you look at most top tier futures firms: they are all market makers.

Let us take a moment to notice something important: most retail system developers cannot develop systems that effectively capture the spread or even half of the spread. If you run a managed system then the costs are higher and it is even worse. Of course, you might counter but the spread provides liquidity. But why does retailer need such liquidity? They don't. It is only the whales. And the futures market is designed for the large liquidity providers that can trade for free and the large traders who tend to hold their trades for longer. If you have a (1) larger edge and (2) longer holding time then the spread, via the liquidity, can be a benefit. But, it is based on all the evidence much more difficult to build such systems. I think the large futures spread systematically hurts the small speculator who wants to trade frequently to obtain HFT like returns. Also, when you factor in that futures exposes the short-term trader to valuation change risk then it is even worse. Why do valuation changes hurt the small/short-term trader more then the long term trader? Because, a small trader will typically have both stop and target in market. The target is never blown but the stop can be blown. A large trader might not even have a target in market. Before HFT, there might have been some order to it all: the liquidity provider takes the risk of getting hit but now it is only the small trader who is disadvantages. The liquidity provider is more likely to pull their orders when times are negative and then to stuff the books when times are good. That's why I'd like to see a true 50/50 risk limited futures market for small traders who want to take the fair bet.

Regarding limit orders, some of the more interesting work I've seen on the matter has been written by Dr. Jonathan Kinley (C2 vendor/trader).

The takeaways on my mind are:

1. As a system developer, you must make special effort to avoid convenience bias. You might be well served by trading at least the open or for 2 hours using discretion, even if on the sim, to keep market cognition sharp.
2. While going to market is more sound for the trader who has the larger edge I.e going to market, trading costs cannot be ignored. Even the quantitative/system trader should seek to minimize their trading costs.
3. More trades is better then less trades. You can get in more trades by trading more markets or by trading more often. If you do (1) then you can probably get by with current generation tools. However, the downside is you will need to take a lot of risk per trade relatively speaking. If you try to route (2) then you will probably have to develop your own tools and do the hard work to figure out why other traders cannot make limit order systems work, fix it, and make it work.
4. It is very possible that quantitative trading for a trader with already high market cognition and the ability to do the hard work could provide very superior returns to discretionary trading alone.

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 SMCJB 
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Thanks @tpredictor you made some good points in there.

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 Mabi 
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Thanks @tpredictor !!

Lately the market i trade on have changed alot you can see that from the performance of some of my older portfolios that have been stable but now are turning straight down. I do not think there is any strategies or ever will be any strategies that always work. You will always have to make new ones or update the old ones. The problem is to know when to do it i wish there were an autoWFA feature build in that you can set parameters for when to perform the update automatically. That would be cool.


It has been going down since August the only thing that kept it hanging until september was a great gold trade that finally reverst and gave most of it back.

Belowe is essetially the same type of strategies but they have other settings and have been working great during the same period.




Even though trading many strategies seems to remove the drawdown it definately also flattens the gain it might even become a 0 sum game. But hopefully if you always are in the market with so many strategies you can improve the gain by analysing when to trade them. But for that You need alot of history of live trades. By the way this is all intraday strategies 15M,30M, 60M.

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 tpredictor 
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I want to point out something, also. Even if a developer makes successful systems and uses whatever method they use to validate them such as WFA. It doesn't demonstrate that the systems work because the validation method. The developer must keep the the systems that were promising but failed validation and track how they perform. Even this is not going to be conclusive because if the developer has a belief that the systems that pass the validation are better then they are more likely to spend more time to improve and work on them.

If the validation method doesn't demonstrate the validity of a system then what does? There are three somewhat similar explanations. The first is market cognition. It means understanding how markets work, which markets are likely to see action, etc. The second is that it is a combination of market cognition and active tracking and management. The third is a similar but slightly different concept which is an understanding of the nature of statistical measures that are likely to work or fail in trading. The concept is related to the prior but again slightly different. For example, a developer that avoids optimizing a parameter that is likely to be curve fit is demonstrating a type of "strategy or statistical cognition" or just "experience". Realistically, it is probably a combination of all these working together that explain the performance of any developer.

As an example of how one might apply market cognition toward system selection, one might first start with selection of markets that are likely to see volatility or trend. I do not trade interest rate products but I think interest rates, such as 2 years, are likely to rise and/or see volatility. I'm willing to predict that 2 year rates or the prices thereof will rise. As such, I look for any products trading those products. As well, I think it is possible that any markets/products sensitive to cryptos could either see trend or volatility. So, that suggest the NASDAQ. Based on those ideas, I added a few other requirements such as filter by time in market, profitable most recent 3 months, and live traders. As a disclaimer, I have never attempted to predict system performance.

I do not have any relationship to these vendors. And I have no idea how these systems trade. I would likely want to lock to short only or long only based on what I seen developing and my expectation of trend. I have not studied the trades they make nor reviewed the logic by which they trade.

The basket I came up with though would be: CIRUS RVST 30 T-BOND INTI (time in market is high a concern), IRU T-BOND, Dothraki Gold ST, IRU NASDAQ

I will not be taking any action on this as I develop my own systems/trade ideas. I would need to do additional analysis before I'd be interested in that, certainly. However, it might be fun or entertainment to check back and report on how I did. I have a knack for predicting things. My time horizon is around 90 days. I think I would need a bit more understanding as to the underlying logic to trust trying this. It is possible if the systems are designed wrong and/or do not adapt to the regime shifts then they might move to either significant under performance, as well.

But, I agree regardless this may not be a rewarding answer for someone looking to quantify the future performance. However, you could generalize the approach to tracking a measure of volatility for markets traded and analyzing performance in relation to the volatility.

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 Mabi 
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Yes, if you can anticipate a dircetion of a market and then pick strategies that trade affected instruments you have a greater change of success picking a good strategy then just picking something that looks good.

Simple market change from trending to sideways is the simple answer to my failing portfolio in an correlated market as illustrated below. The change in market behavior is identical to it´s performance by time line.



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 SMCJB 
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Final PnL Recap

As promised here is the final PnL recap through Friday. At this point I have switched off most (but not all) of the systems and consider the first phase of this experiment closed. Obviously not happy with losing $5k but in the big picture I think it was a worthwhile experiment, the upside if I was correct could have been considerably higher.

The reconciliation below matches brokerage statements to the ¢ but varies slightly to my previous August PnL analysis due to a difference in license cost accounting. The "Currency" column reflects the small gains and losses incurred by have a USD denominated account but having EUR margined futures in the account - meaning I had an implied currency exposure, long USD short EUR.



As you can see almost 65% of my losses are fees rather than trading loses.

Next Steps

As I said previously I still believe that this data set could be very valuable. It contains almost a 1000 systems that in some cases have several years of real, non backtested, performance history. At this point I have written more R code to extract as much system information as I can ~ and also to calculate all sorts of different metrics on that data. My next step will be to use some machine learning techniques (probably Random Forest's initially, followed by an SVM) to try and use those metrics to identify systems to trade.

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helminiakj
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I have done a ton of hours looking over which systems and really only found one. I did all the look up and background as well as loookup with NFA and found the developer on Linkined and emailed them, It is a firm. I dont like how little it trades but I cant argue with the P/L. Last few months have been rough as I'm up very little. Now IMO anything put out by this firm is good but that is only my option.

My point is:
There are only a few gems out there and it takes a lot of work to find them. Your own homework will save you many times over because you know the background instead of just what "they" want you to know

However, I do believe iSystems is much better then C2 as iSystems developers can not change their systems once their system is put on the server. I.E. there are zero discretionary systems on iSystems

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 SMCJB 
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Minor Update

Just doing some month end accounting. As I mentioned I switched off most but not all the systems. Glad to report that the few systems I have left on performed well in late September and my account is now positive again! Yay!

On a different note, I've performed my initial Machine Learning (Random Forest) analysis of my data set and must say the results are encouraging. Not excellent but definitely shows some potential. More to follow (eventually).

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pathania
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I picked some back in sept and I am up 27k on 7 of them , it touched 30k , but all came from one which is star volatility xiv picker was $18k up.

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 Mabi 
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Been away from trading for a couple of weeks due to workload. This morning i looked in on performance of my live 300 strategies. It takes time to collected data so i have not really done this before. I noticed something that i thought i share that can be a way to choose which strategies to trade. It is really simple actually. Looking back only 3 months i find that strategies that have a winrate of 60% and above have a great performance in short term . They were at 60 % performance 2 weeks based on latest 3 months live taken trades and 2 weeks later they have been doing great aswell. The ones that were at 50% performance 2 weeks ago has been losing grouped together. Looking longer term if i group the performers (1 year) the ones that are at 50 % and above is the ones that has produced the equity and the 50% and below has been losing equity all thought there are ofcourse individual exceptions but they are few.

Below is more then 1000 trades in past 3 months.






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Minor Update

Just doing some month end accounting. As I mentioned I switched off most but not all the systems. Glad to report that the few systems I have left on performed well in late September and my account is now positive again! Yay!

On a different note, I've performed my initial Machine Learning (Random Forest) analysis of my data set and must say the results are encouraging. Not excellent but definitely shows some potential. More to follow (eventually).

Congrats. iSystems started releasing every month some suggestions for portfolio. I have not evaluated what their criteria, but I assume it's last's month performance. Would be happy to send you if necessary.

Thanks,
Matt Z
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Trading futures and options involves substantial risk of loss and is not suitable for all investors. Past performance is not necessarily indicative of future results. You may lose more than your initial investment. All posts are opinions and do not claim to be facts. Please conduct your own due diligence. Use only Risk capital when trading Futures.
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 SMCJB 
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pathania View Post
I picked some back in sept and I am up 27k on 7 of them , it touched 30k , but all came from one which is star volatility xiv picker was $18k up.

That was the experience I was hoping to have!!

Anything you can say about how you choose your systems?

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 SMCJB 
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Congrats. iSystems started releasing every month some suggestions for portfolio. I have not evaluated what their criteria, but I assume it's last's month performance. Would be happy to send you if necessary.

Hey Matt, where can I see this?

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 SMCJB 
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Mabi View Post
Been away from trading for a couple of weeks due to workload. This morning i looked in on performance of my live 300 strategies. It takes time to collected data so i have not really done this before. I noticed something that i thought i share that can be a way to choose which strategies to trade. It is really simple actually. Looking back only 3 months i find that strategies that have a winrate of 60% and above have a great performance in short term . They were at 60 % performance 2 weeks based on latest 3 months live taken trades and 2 weeks later they have been doing great aswell. The ones that were at 50% performance 2 weeks ago has been losing grouped together. Looking longer term if i group the performers (1 year) the ones that are at 50 % and above is the ones that has produced the equity and the 50% and below has been losing equity all thought there are ofcourse individual exceptions but they are few.

Below is more then 1000 trades in past 3 months....

Just to confirm I understand what your saying.
Each of these charts represent the forward looking performance of a group of systems, grouped by their previous 1 year (?) win rate?

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 Mabi 
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Just to confirm I understand what your saying.
Each of these charts represent the forward looking performance of a group of systems, grouped by their previous 1 year (?) win rate?

They represent the forward period performance of strategies that were grouped after their previous performance on the same period of time. To me it indicates that you should avoid trading startegies that in short lockback perspecitve are doing bad because you then have greater change of going into drawdown immediately.

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 SMCJB 
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Mabi View Post
They represent the forward period performance of strategies that were grouped after their previous performance on the same period of time. To me it indicates that you should avoid trading startegies that in short lockback perspecitve are doing bad because you then have greater change of going into drawdown immediately.

Thanks Mabi.
Have you looked at how breakout systems perform (low win rate) vs mean reversion (high win rate)?

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pathania
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That was the experience I was hoping to have!!

Anything you can say about how you choose your systems?

It has been bull crazy months for last 3 months, so xiv and smart bulls have been the best.

regds
navdeep

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Hey Matt, where can I see this?

I will send it to you. It is not published on the iSystems site.

Thanks,

Matt Z
Optimus Futures

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Trading futures and options involves substantial risk of loss and is not suitable for all investors. Past performance is not necessarily indicative of future results. You may lose more than your initial investment. All posts are opinions and do not claim to be facts. Please conduct your own due diligence. Use only Risk capital when trading Futures.
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 Mabi 
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Thanks Mabi.
Have you looked at how breakout systems perform (low win rate) vs mean reversion (high win rate)?

Actually they all work but it depends on.

1. Instrument
2. Timeframe
3.Current market conditions



Point 1 and 2 you get from the backtest´s. Prefrably strategies with low % stagnation in my current opinion max 20%

Point 3. Very difficult to predict . WFO is the only edge You can use to improve short time performance of individual strategies but even then 6 months drawdown is highly likely. The main edge is diversification but it is difficult to find diversified portfolios that never had a significant time period of drawdown aswell. So my focus today is not making new complicated strategies it is to build a program to determain when to trade the simple ones instead and to automate this.

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 SMCJB 
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Had some RL issues that have kept me from working on a lot of things including this. Probably won't be able to dedicate the time intend to for at least another week, but I will be back soon.

Still have a couple of systems going, glad to report that they are doing okay, and that not only am I still profitable, but I've almost eliminated my drawdown. Also interesting to note that several of the systems I did switch of continue to do poorly, while several others are flat. Only one of the switched off systems has had positive results in the last 6 weeks.

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 SMCJB 
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Everything back to normal so hoping to make some progress before getting into 'Holiday Mode'.

Was having a very nice month trading the few systems I have left but then on the 29th had a large down day (70% larger than my worst previous day) which pretty much wiped out the month, leaving me with a small monthly loss.

With regards to my attempt to use ML to pick systems, I'm hoping to tune my Random Forest this week with an emphasis on 'True Positives' rather than overall 'Accuracy'.

A collaborator friend of mine recently asked whether I would create him an isystems dataset so that he could test some portfolio optimization rules he was looking at. Since this is his project and not mine I'm not in a position to share what the data was or what the rules he was testing where. I will say though that (to me at least) it illustrated how non-robust this set of systems are. Also while there was some early success (2008/9) since 2011 portfolio performance was generally very poor. This could be random, or it could be showing how much more difficult and competitive this space has become as computers have become more and more advanced.

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 SMCJB 
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Last weekend my laptop with all my R code (and hence my isystems analysis) got knocked off the coffee table. Unfortunately it was not save-able. I have a new laptop on the way but no more analysis for the next 10 days at least. This is a shame as my random forest selection system was showing promise and will have to wait.

Regarding isystems in general I have recently discovered that some systems do get deleted, and don't show in the performance reports anymore. Unfortunately this does bring survivorship-bias into the equation!

Regarding the systems I am still trading - had another nice $8 run up this month, and was within $1k of break even again, but then got hit with a $3.5k drawdown yesterday. My trading is up, but my nearly $5k in fees and commissions makes that negative.

One of the few systems I'm still trading continues to do poorly. Plan to do a deeper review in the next few days and maybe switch it of before month end. We will see.

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 SMCJB 
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New laptop arrived and all the important stuff reloaded over the weekend. First thing I plan to do, probably this evening watching the football, is code up a function that will automatically create charts to display and visually check system performance. This is taken from @kevinkdog's teachings and that I illustrated in this post here. I reviewed the systems I am trading around the Winter Solstice and while none of the systems I am trading are doing spectacularly well - none are doing that poorly either - so decided to keep them in place for now.

Then the good news. Had a nice little runup the last week of December and at year end, after 5 full months of trading I was within $923 of breakeven. That's over $8k above my low water mark up, but still almost $6k below my high water mark which was set - set on my 19th trading day. That equates to $5500 in trading profits and $6400 in commissions and system fees.

Then the better news. My end of year good fortune continued into the new year. As of Friday's close I'm only $2k below (September) account highs! Unfortunately I've been here twice before (both in November) and both times saw $5+k drawdowns immediately!

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 SMCJB 
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I guess when you have a team with a top rushing offence and a top D playing another team with a top rushing offence and a top D it's never going to be that exciting, but it was a good game.

Ran into a slight problem, that we're now in 2018, so the isystems web scrapes return the results slightly differently than previously. Not anything I couldn't fix once I realized that was the problem. Not finished yet but almost there.


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 SMCJB 
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General Update

Another good week in the markets and I'm happy to announce that I believe I've put in a new 'iSystems' account high and exceeded Septembers previous high water mark. Remember this is just a few systems that I've left active from my initial experiment, and not part of any official ongoing experiment.

Finally finished my 'plotting function'. Took a little longer than I expected as I decided to switch from R's base graphics functionality to ggplot2 which is a lot prettier. ggplot2 is something I have wanted to learn for a while, so this became my 'learning on the job' project, and I'm glad I did it. I have a set of 4 different charts, but the interesting one, and the one I've discussed before is below. System 10417 is one of the longest tracked systems with a decent positive PnL - not one I trade, but a good illustration. Interesting system. For it's entire 70 months it's made $75k, but its best run, month 15 to 48 it was up approximately $110k. If you were trading this system would you have pulled the plug, and if so when?



Using Random Forests to Predict "Good" systems

When I went back to revisit my random forest project I was disappointed to find that the last file I had saved (before my laptop disaster) was almost a week old. So I obviously hadn't saved the work from my last few days. That's very rare for me but definitely something I'm more guilty of with R than anything. I tend to have to many different scripts open at one time, testing individual snippets of code. This meant I had to recreate my previous analysis.

At this point in time I have a data set with over 15,000 records, where each record has 13 consecutive months of a single systems results. Each record is given a Good/Bad flag depending upon whether month 13 was positive or negative. The goal then is to use the first 12 months of the data, and some additional analysis of those 12 months, to predict the Good/Bad flag. I am doing this with a Random Forest ("RF"), which is a popular Machine Learning ("ML") Algorithm, that creates hundreds of different decision trees, and then classifies based upon the popular vote of those decision trees. There are several ways that you can 'tune' an RF most of which effect how the trees are selected and built/expanded. Number of Trees, number of variables/features considered at each node, minimum size of each node and maximum tree depth are the four most popular. R is unfortunately not multithreaded and running an RF with this dataset takes almost 50 seconds. Hence to analyze 4 different options of each of the four tuning options, means running 264 different RFs which takes over 3 hours. This doesn't take into consideration that since the features are selected randomly, different runs on the same data will yield slightly different results. Hence proper model testing also involves cross validation, most often k-fold cross-validation. Basically this means running the same analysis multiple times and combining the (error) results. Now we are talking about hours multiple times. In other ML projects I have found that tuning RFs can improve results significantly. With this dataset my initial results show little improvement by tuning.

The problem I run into is that RFs, like most ML algo's optimize to have the lowest error rate. Since 57% of the records are classified as bad, classifying every record as bad immediately means the algo is 57% correct. Since there are more bad than good, improving the 'bad' classification yields a better result than improving the 'good' classification. But I don't care about the bad classifications, I only care about good classification. Even if I can correctly predict bad systems, I can't bet against them. So what I care about are good predictions, and how many of the good predictions are correct. Technically speaking I'm less interested in the error rate/accuracy and more interested in what is called the precision, or the True Positive vs the False Positive rate. One way to do this, is to adjust how the RF counts votes/classifies. Normally voting is decided by a simple majority, but that can be changed. While a RF gives you it's classification of each data record, it also gives you the voting results. Hence it's very easy to only consider positives where say 75% of the trees predicted positive rather than the normal 50%. While this decreases the number of predicted 'good' classifications, it increases the accuracy of those classifications, aka the precision. The higher I set the required cutoff the greater the precision becomes. If I set it to 90%, every system predicted to be 'good' actually turns out to be good. The problem is there's only 8 of them (out 15+k). Initially I was disappointed at this point, and started trying to improve the precision. Eventually I realized I was approaching it wrong, and needed to balance the precision vs the number of systems, in order to maximize PnL. This is where the results begin to get interesting, but I need to double check some things first.



In the charts above
"Pct Cutoff" is the "Percentage of Trees that are needed to vote good" inorder for a record to be classified as "good"
"Number of Systems" is the number of records that were classified as "good"
"Precision" is True Positives / (True Positives + False Positives)

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 SMCJB 
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Fixed the issue that one of the two charts posted yesterday wasn't showing up.

This chart is rather crude, but blue represents trading the highest rated system every month, while red is trading the lowest rated. Rated meaning percentage of the trees within the RF (500 trees total) voting "Good". The downward sloping red line for the last two years is because the RF is picking systems that aren't trading, hence the monthly loss is the cost of the system. This makes me realize something. I am still trying to predict good vs bad where good is positive and bad is negative. I'm not yet trying to identify the systems that make the most money. For example the RF could be giving a system that $1 every month a higher rating that one that makes more money but has the occasional down month.

edit: I should point at that the training data only includes trading results and other statistics derived from the trading results. There is no descriptive information (System Number, Name, Developer, Contract etc) given to the RF. So when it is identifying systems that have stopped trading and are losing money consistently, that is NOT because it has the system number and can tell that from previous months.

The eventual plan will be to have several models and create an ensemble model.


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dadarara
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algo by the name : CIRUS RVST SILVER ARTICROAK

results for live activity:
Jul17 - Feb18(curr)
+2700,-3913,+3910,+5460,+4881,+9575,-2727,+3660

looks amazing.

what am I missing? the Live activity is looking very good and in line with the historical run.

so why do I need anything else?
why this should not be the first choice ? and maybe the only one?

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 SMCJB 
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Greetings @dadarara and thank you for your interest in this thread.

First let me say, when I did my initial work this system was only weeks old and as such was eliminated from the analysis. Since I decided the hypothesis that recent performance similar to that in the back test isn't necessarily a good indicator of future success, I have not analyzed any new systems. I know from reference tables though that isystems have added a lot (and deleted a few) systems recently.

Your question gives me an oppurtunity to show off my latest system charts...



Two things jump out at me looking at that chart.
  • First, the fact that the equity line is below the lighter of the two gray funnels means that the system is performing 2 standard deviations worse than the backtest results.
  • Second, in the eight months that it has been live, it has had two drawdowns that were 4 times larger than the largest drawdown seen in the backtest
Performing some quick calculations the in backtest performance was $7540/month with a standard deviation of $4716, while since live it is $2943/month with a standard deviation of $4387. So your getting less than 40% of the performance with almost the same risk. (Ave/SD's 1.60 vs 0.67). So from a "compared to it's backtest perspective" I don't think it's in line with it's historical results at all. Of course that doesn't mean it isn't a good system.

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dadarara
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whooo
an excellent analysis. I am really amazed at the depth of your knowledge and how passionate you are with this subject.
great great work.
thank you for somewhat opening my eyes on this.
What I learn from this is that there is probably no system (openly available to public) that will behave exactly like its historic run. some will do better than others and only incubation/live period can tell that.

I myself have written my first algo on Ninja platform, on DAX, which I run in incubation for about a month now. (live data/demo executions).
it more or less follows the historical projections. I mean after each session I run it again but this time as a historical run.
there are differences in the results. not huge ones but they are there. I have only one month of data so its not really enough.
I would like your opinion if I may. I am not very scientific about this all, and probably misunderstand a few things.
I am puzzled. From one hand the P&L/yr on historical 5 yr data is above 200%, taking the highest drawdown of 17k+40%.The session to session success rate is 65%.
but the Sharp/Sortino ratios are quite low (0.7/1.8). and the profit factor calculated is 1.3.
my algo makes between 4 to 12 trades per day. the win/lose ratio is 2.


So on surface, it looks promising, but the ratios are not very good. Compared to some of the algos in the iSystem, they have less P&L numbers but high ratios, together with even bigger drawdowns. if I compare to same level of drawdown , their P&L drops considerably.
So my thoughts are, that even if my ratios are bad, the reward is very high (assuming it will stay that way).
So I am confused having the low ratios and high P&L.

Also, I am of course trying to play with the parameters so that the curve will be nice looking. (curve fitting?)
and the total P&L and drawdown will be good. But what does it mean that over the 5 year market conditions the totals are positive, so why is it bad?
isn't it logical to assume that the better the historical results will be, so the realtime future results will be as well? I mean obviously the "past results do not...." but I rather start live testing with something which has the best past results rather than with algo that on paper doesnt make money consistently.

I tried to run walk forward optimization on some parameters, but it is negative compare to the standard run over the 5yr period. So whats the problem with staying with the same parameters that work for 5 years? (assuming of course that the incubation/live prove it to be close to expectation) Moreover, running walk forward proves that past result of a period doesn't promise good results for the next test period. Seems like an average parameter set that is good for whole of the 5 years may as well be the best option, suitable for most of the market conditions.

again, I am missing lots of things. and trying to learn on the run. apologies if some of my thoughts may be silly.

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 SMCJB 
Legendary Market Wizard
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General iSystems Update

Put in new all time highs early last week but had bad days Thursday and Friday which pulled me down from all time highs to negative !!! WTF !!! Was looking at my systems this weekend and thought, "Well if all but one of them doesn't do better in the rest of the month, I may be switching them off!". Then of course Monday (-5.5ish%) happened and the one system that has been money got smoked. So in about 6 trading days I've gone from account highs to new account lows, a swing of over $20k! WTF Part 2!

Machine Learning / Random Forest Update

Last time I made an update on the progress of this, it may have been apparent that I was concerned that my features and target variables were not aligned properly. Expanding on the conversation below with @dadaraa, things like gross profit aren't very useful in predicting system performance, while things like PF and Sharpe should be better. I did already know this, and wasn't using gross profit, and was using both PF and Sharpe, as variables. The problem is I was using some variables that were a little ambiguous. In the last several weeks I have completely reviewed my original data set, removed certain variables and added significantly more that are all scale-able. This took time because it involved rewriting the analysis functions that I pass the PnL tables to, which was a bigger job than I planned. I had hoped to use these new variables with the RFs this weekend but as it happened I just didn't have time. Maybe next weekend - if I'm not looking for a part time job to make up for all my trading losses

In reply to dadaraa

dadarara View Post
whooo
an excellent analysis. I am really amazed at the depth of your knowledge and how passionate you are with this subject.
great great work.

Passion yes, but my PnL implies my knowledge still isn't good enough.

dadarara View Post
thank you for somewhat opening my eyes on this.
What I learn from this is that there is probably no system (openly available to public) that will behave exactly like its historic run. some will do better than others and only incubation/live period can tell that.

Not necessarily. As I've mentioned before a lot of my thoughts on analyzing automated trading systems come from what I've learnt in particular from @kevinkdog. He teaches WFO analysis which I strongly believe generates much more robust systems. By definition, none of the iSystems systems are WFO and as such are based on single point in time backtests. While I believe there are WFO systems that behave nearly as well outside of backtest, I agree there are very few single point in time backtests that do as well.

dadarara View Post
I myself have written my first algo on Ninja platform, on DAX, which I run in incubation for about a month now. (live data/demo executions).
it more or less follows the historical projections. I mean after each session I run it again but this time as a historical run.
there are differences in the results. not huge ones but they are there. I have only one month of data so its not really enough.
I would like your opinion if I may. I am not very scientific about this all, and probably misunderstand a few things.
I am puzzled. From one hand the P&L/yr on historical 5 yr data is above 200%, taking the highest drawdown of 17k+40%.The session to session success rate is 65%.
but the Sharp/Sortino ratios are quite low (0.7/1.8). and the profit factor calculated is 1.3.
my algo makes between 4 to 12 trades per day. the win/lose ratio is 2.

So on surface, it looks promising, but the ratios are not very good. Compared to some of the algos in the iSystem, they have less P&L numbers but high ratios, together with even bigger drawdowns. if I compare to same level of drawdown , their P&L drops considerably.
So my thoughts are, that even if my ratios are bad, the reward is very high (assuming it will stay that way).
So I am confused having the low ratios and high P&L.

There's several essay long answer's to the questions in that paragraph. I would remind you, that everything needs to be considered in relation to risk. Would you rather trade a system that has monthly returns +10 -1 +10 or a system that is +1, +.5, +1? The first because it makes 19 versus the second that only makes 2.5? Well assuming those returns were commission and slippage adjusted (and hence scalable) would you rather be trading +10 -1 +10 or +10 +5 +10? Obviously the latter, but that is just the original second system scaled by a factor of 10. Hence absolute numbers are not always relevant. Things ilke PF and Sharpe are scaled metrics, while gross PnL and drawdown aren't (more to come on this when I get around to describing my most recent Random Forest iSystem Models). Kevin runs a challenge for his students every month, in order to even enter the challenge the system needs to have a Return to Drawdown ration of 2.0. Trust me, that is not easy to without cheating.

Without knowing a lot more about your system it's difficult to give you advice. There are so many things and ways you could be doing that could be distorting things. Even then I'm not sure I'm the best person to ask compared with somebody like Kevin*.


dadarara View Post
Also, I am of course trying to play with the parameters so that the curve will be nice looking. (curve fitting?)
and the total P&L and drawdown will be good. But what does it mean that over the 5 year market conditions the totals are positive, so why is it bad?
isn't it logical to assume that the better the historical results will be, so the realtime future results will be as well? I mean obviously the "past results do not...." but I rather start live testing with something which has the best past results rather than with algo that on paper doesnt make money consistently.

My hypothesis was exactly that. Systems that have a good backtest, and outside of backtest perform similarily, should be robust systems. I think my hypopthesis, at least in relation to isystems, was proven wrong.

dadarara View Post
I tried to run walk forward optimization on some parameters, but it is negative compare to the standard run over the 5yr period. So whats the problem with staying with the same parameters that work for 5 years? (assuming of course that the incubation/live prove it to be close to expectation) Moreover, running walk forward proves that past result of a period doesn't promise good results for the next test period. Seems like an average parameter set that is good for whole of the 5 years may as well be the best option, suitable for most of the market conditions.

again, I am missing lots of things. and trying to learn on the run. apologies if some of my thoughts may be silly.

I can generate backtested systems that look great easily. Inevitably as soon as I run them on out of sample data they fail. I really struggle (annoyingly so) to generate systems that perform well on a WFO basis. The few I do, tend to perform well out of sample. I would have said I'm still an intermediate system trader, but after the last few days I'm probably back to being a newbee. So again, I'm probably not the best person to ask about this. Now if you want to talk about trading crude oil butterflies, maybe we can talk.

* Full disclosure, I'm a Kevin fan, have his book, attended his course, and two of his seminar's, but am not affiliated in anyway.

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 Mabi 
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Maybe I am an Idiot but i think doing this trading third parties strategies should be done using CDF´s and or Forex. It works the same it is just less risky but real money which is a game changer and You can easily scale up. I am still trying to figure out which strategies to trade and when even after having traded them live on mini accounts after 1,5 years. Portfolios can have 3 months draw down and then take everything back in 1 week.

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Tradesignalgo
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Hi guys, any more update on iSystems live trading results and experiences? Some of the ML and AI based strategies looks interesting and does that mean with AI involved in constant adaptation, there is no need to re optimize the strategy parameters?

Regards
TSA

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 SMCJB 
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Mabi View Post
Maybe I am an Idiot but i think doing this trading third parties strategies should be done using CDF´s and or Forex. It works the same it is just less risky but real money which is a game changer and You can easily scale up. I am still trying to figure out which strategies to trade and when even after having traded them live on mini accounts after 1,5 years. Portfolios can have 3 months draw down and then take everything back in 1 week.

CFDs aren't legal in the US so this is a moot point for me - but maybe not others.


Tradesignalgo View Post
Hi guys, any more update on iSystems live trading results and experiences? Some of the ML and AI based strategies looks interesting and does that mean with AI involved in constant adaptation, there is no need to re optimize the strategy parameters?

I'm a full time trader, so this is a part time, after hours hobby for me - that doubles as an R learning exercise - and triples as fulfilling my machine learning interest. I also try and enter Keven Davey's Strategy Factory Club every month as well. The SF club entry has to be in by the 25th. So normally from the 25th to the 15th I'm working on my iSystems project and then from the 15th to 25th my Strategy Factory entry. Starting this month though I'm putting more effort into my Strategy Factory entry, so I'll only be working on iSystems once I get a successful entry for the club done. Saying that...

General iSystems Update

Last update account had just swung to new all time lows in the Feb Equity Melt Down. Since then it's been one step forward one step back. One of the systems continues to perform well, while the others do not. I was looking at the performance charts last night and it looks like all of the poor ones will exceed previous max drawdown this month so I think I'll be switching them off. Question is do I leave the one good one running. For example (and this is NOT an equity index system) ...


(excuse the poor quality graphic but it's just a screenshot of a report I ran last night)

Machine Learning / Random Forest Update

I have my new data set and I quite like it. I've run some real simple initial random forests and the results look interesting. Unfortunately when I ran the simulation of the best and worst system each month the results were almost identical to the old data set. I had hoped to have done enough work on this to get the new systems rolling in March but I don't think that will happen now.

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 Mabi 
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Below is a tutorial of the copier i am using to trade my own portfolios. It is commercial available copier but by me and a friend heavely modified . What i want to show with this is how I control when to trade a portfolio and what tools i use to control risk.

Q4a_webtour_tutorial_24022017.mp4

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 SMCJB 
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iSystems Update

The systems I am trading continue to do poorly putting in new account lows. I'll post the graphs latter, but for now I have deactivated everything prior to month end.

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Tradesignalgo
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SMCJB View Post
iSystems Update

The systems I am trading continue to do poorly putting in new account lows. I'll post the graphs latter, but for now I have deactivated everything prior to month end.

Hi SMCJB, sorry to hear about the unsatisfactory results you experienced, if even these systems with nice equity curves cannot work, what chance are there left for systematic traders who are starting from scratch? I wonder if it will help if you zero in on a pool of systems with consistent performance and activate them only after previous month is losing month, for a 'x' period of months and switch them off regardless after that.

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 SMCJB 
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Tradesignalgo View Post
Hi SMCJB, sorry to hear about the unsatisfactory results you experienced, if even these systems with nice equity curves cannot work, what chance are there left for systematic traders who are starting from scratch?

If you have a strong robust process, I think there's a lot of possibility. Key to that is Walk Forward Optimization rather than single point in time optimization. Unfortunately the way iSystems works, with code being locked upon submittal the opportunity for people to use WFO is limited.

Tradesignalgo View Post
I wonder if it will help if you zero in on a pool of systems with consistent performance and activate them only after previous month is losing month, for a 'x' period of months and switch them off regardless after that.

That's what I'm hoping my machine learning venture will discover. If there are patterns like that the algorithms should find them.

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rfolgate
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Ive been wondering about using the isystems. Does it actually work and can you make any money off off it. I will only do minis and i have researched the sytem for profitable developers. I was going to go with Gain Direct.

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rfolgate
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This isystems looks like Fores robots that always lost money. The broker makes all the money. I am ging back to my ETF which makes 20& a year Its safe.

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 SMCJB 
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rfolgate View Post
Ive been wondering about using the isystems. Does it actually work and can you make any money off off it. I will only do minis and i have researched the sytem for profitable developers. I was going to go with Gain Direct.

The platform works as advertised and is both very professional and easy to use. The problem is, picking the right systems of course.

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rfolgate
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SMCJB View Post
The platform works as advertised and is both very professional and easy to use. The problem is, picking the right systems of course.

I really like the system and i think they have improved it in ten years of its existence. The brokers are also Forex brokers so they can work the system to their benefit. I am going with Gan Direct. That introducing broker stuff is another Fores holdover..They are US regulated so maybe they are more honest.I am going to throw 6K on a developer system who I see doesnt trade when the conditions aren't right. No trade is the best trade

I've have been autotrading for many years and I can tell if it wont make any money because of fees,slippage etc.I can tell if the broker is keeping you from winning. If I see anything that is suspicious I will immediately stop the system and get the broker to send me a check.

Also i'll get only systems that trade minis. The regular contracts are scary and you can lose big time. Minis were introduced for the little guy.

I just discovered the Holy Grail they claim of auto traders with eoption. Of course Ill have to see automated results before I would believe it. I made 700K in the early 2000"s with an auto trading service on TOS so I know you can make money with the right developer..

I can always make a 20% dividend with AMZA but then you got the ps and downs of the stock market to contend with.

Happy trading guy

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  #83 (permalink)
 SMCJB 
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Recap

I was reading through this again last night and realized that I never gave an update - and that people are probably wondering where I've been. To recap in December I dropped my laptop damaging the hard drive but thankfully not losing much data. I didn't get things rolling again until after the holidays when I rewrote all my analytical functions, and developed some nice looking graphics for illustrating system performance. I also may some headway in developing a random forest model to predict successful systems. At the end of February the systems I was still trading all continued to perform poorly so I switched them all off.

Then on the 9th March I opened my 9 week old laptop and was greeted by a system message saying it can not find my hard drive. Yeap the hard drive failed. Being an SSD there was no way to recover anything that wasn't backed up. Thankfully I had backed up all my Tradestation work just days before. Unfortunately I hadn't backed up any of my R programming (aka my isystems work) at all. So everything I had done since getting the new laptop was lost. At this time I was trying to focus more on qualifying for Kevin's Strategy Factory Club, and wasn't enamored about trying to recreate what I'd just lost, so isystems got put down prioritized. Then we had house guests for 3 months, and my laptop time was greatly reduced. I was still (unsuccessfully) focused on qualifying for Kevin's Strategy Factory Club so there was virtually no isystems work done at all.

Long Overdue Update

After three months off I'm revitalizing this effort. You'll probably think that this is due to the recent Stage 5 / isystems webinar but actually it's not. One of my school summer vacation projects (we finish very early here in Texas) is to teach my teenage daughter R and some data science (She's already done AP Statistics and Computer Science). I'm doing this by tackling the Kaggle "Titanic: Machine Learning from Disaster" Challenge something I found very entertaining when I did it a couple of years ago. Not surprisingly I found it very entertaining a second time showing it to her. It wasn't long before I pulled out my own 2 year old Titanic models. There wasn't much extra to do though and I didn't want to go back and rewrite everything.

After a quick project trying to calculate which 10 of the 18 US cities in the 2026 World Cup bid should host games, based upon geographical population*, I ended up pulling up my isystems work and here we are.

* This was an idea I got from a fivethirtyeight.com project regarding the gerrymandering of congressional districts. One of the analysis they performed was what the congressional districts look like if they were designed to make them as compact as possible. No politics here - just lovely math models

Going Forward

As you may recall I have a group of nested functions that I use to scrape the isystems website for system monthly performance data and then manipulate that data into a usable data set. This weekend I reviewed these functions, and made a couple of minor changes. I have now created a new updated data set with 15,498 rows each with 15 months of performance data with the intention of using the first 12 months as training data and the last 3 months as results data. (ie use the 12 months to predict the 3). The first step is what whether to include FDAX. Early isystems was very europe centric and has such there are not only a lot of FDAX systems but many of these systems have much longer histories than other systems. As such almost a third of my 15k data points are FDAX - why is this an issue - because the FDAX contract/margin size is 3 times the size of any other contract, hence it could distort everything.

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 SMCJB 
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FDAX

Two charts to highlight the FDAX dilemma. The first shows the # of available systems as a function of average since tracked date and margin requirement. FDAX not only has the most systems, but also one of the longest average since tracked. As such when I create my data analysis table there are a lot more FDAX data points than anything else. The second chart shows this, specifically the number of data rows I have versus the required margin rate. There are systems currently available for 7 symbols that appear in chart one, that do not have enough data to be included in my data set and hence do not appear on chart2.




DM is S&P400, URO is 6E

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 Mabi 
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Hi , for some reason i cant see the charts. Also another post in this Forum got me thinking that when building a portfolio maybe the only thing You need to look for is the correlation of losing trades per month.

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 SMCJB 
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Mabi View Post
Hi , for some reason i cant see the charts.

That's really weird. On my laptop which I posted from last night I can see the charts perfectly, but if I log on with a different computer I can't see the charts either! Weird!

Mabi View Post
Also another post in this Forum got me thinking that when building a portfolio maybe the only thing You need to look for is the correlation of losing trades per month.

I think I saw the same post. Also something I know Kevin has discussed. If I ever get going again definitely something I will analyze.

Anyway here are the two charts (again)



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 SMCJB 
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Highlighting how difficult systems picking is

I have 15498 samples of data, with 15 consecutive months of since tracked, not backtest, data. For now I am keeping back the most recent data and using 13924 samples. If a system has a 50% chance of being profitable each month, then the probability of being profitable 12 months in a row is 0.5^12 which would equate to 3.4 of my 13924 samples. In fact I have 4! Maybe surprisingly all 4 of these lost money over the next 3 months! The distribution of winning months is as follows. With a mean of 5.31 and sd of 1.89 the distribution is skewed to the lowerside as we would expect 6 to be the largest bar.



The next chart shows average profitability over the first 12 months versus average over the next 3 months for all ~14k samples.



So it does have a slight upward leaning regression, but pretty random. 189 or just 1.4% of the samples made money in 75% or more of the 12 month periods. Here's what their chart looks like. Again not impressive. Historical results obviously not much of an indicator of future results.


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Tradesignalgo
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did you guys take a look at the Google Trends systems on weekly GC, NQ and monthly GC, NQ? seems to be driven by big data and machine learning and working well

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 SMCJB 
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Tradesignalgo View Post
did you guys take a look at the Google Trends systems on weekly GC, NQ and monthly GC, NQ? seems to be driven by big data and machine learning and working well

Most of the Google trends are too new and don't have enough history to be in my database. The NQ monthly does look nice, amazing looking equity curve, but it's severely over-performing. Average profitable month in backtest is $2030, while since being tracked this has jumped to $4578, a 225% increase. In the backtest 8 of 158 months, or 5% made $5k or higher, since tracked this has jumped to 5 of 15 or 33%. Does look good though

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rfolgate
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With all kind of fancy charts and analyzing everything,the bottom line to me is has anybody been making money with this isystems. I would just pick a systema and put the minimum in play and see what happens .YOu can always bail out if the system does not produce an upward trend.

I going with an auto trading newsletter on Autoshares that trades Google, Netfles, Bidu Options. I ll start by just trading one contract to see how they do.

You can be like a math stats professor on this isystems and never make a cent.

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rfolgate
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When I get some more money in in the next 2 months I will throw 5 K to AutotradingBot on isystems and see what happens. Its up to the developer to use graphs and analysis to make me money I pay him handsomely. If he cant make me money then it is the futures market or the broker who is making all the money.Unlike SMCJB I won't let the principal go down much. If I am 1k down I will cash out and nice knowing you isystems. Ill conclude its a scam by the brokers or market to get your money.

AutotradingBot is conservative as they don't trade if conditions aren't right and if they lose then the system is rigged. I've studied their trading and they have very few losing days and months . I'll trade with one of their systems ans if my account loses consistently i am out. Then its other factors that is causing the losses broker or market.

Ill let you know guys but I wont lose as much as SMCJB and I wont bore you with mind numbing charts. I'll let you know if isystems is a scam.

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 SMCJB 
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Did i offend you somehow @rfolgate? For what it's worth if you put in 5k and lose 1k then that's a 20% loss and would be far worse than anything I experienced. Regarding 'my boring and mind numbing charts' nobody is forcing you to read this thread. If you have something to contribute, I'm more than willing to discuss it with you, but if you only want to troll, please troll elsewhere.

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 kevinkdog   is a Vendor
 
 
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SMCJB View Post
Did i offend you somehow @rfolgate? For what it's worth if you put in 5k and lose 1k then that's a 20% loss and would be far worse than anything I experienced. Regarding 'my boring and mind numbing charts' nobody is forcing you to read this thread. If you have something to contribute, I'm more than willing to discuss it with you, but if you only want to troll, please troll elsewhere.

FWIW, I find the jabs at you and your approach to be unfounded and misguided.

I know you have been a full time SUCCESSFUL professional trader for a long time, so whatever you are doing must work.
It is too bad some others here seemingly do not appreciate your contributions.

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rfolgate
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SMCJB View Post
Did i offend you somehow @rfolgate? For what it's worth if you put in 5k and lose 1k then that's a 20% loss and would be far worse than anything I experienced. Regarding 'my boring and mind numbing charts' nobody is forcing you to read this thread. If you have something to contribute, I'm more than willing to discuss it with you, but if you only want to troll, please troll elsewhere.

I have a finance degree from the Univ of Texas so I know about financial analysis. I don't expect to lose 1k but I just was tying to point out that i get out if the system shows consistent losses. Id probably be out if I was 100 down. I know they win and lose daily and the end of the month shows the results plus or minus. I look for trends.

The bottom line is you can show a brokers statement showing your profit or loss.

I'm not a troll as I am genuinely interested to see if anybody has made money from isystems. I cant find any sources except this forum that has experience with this isystems. The brokers on here are a joke as they just want you to trade and make money off of you.

Sometime this year I plan to have a go with one of autotradingbots systems on isystems. They don't trade on days that are not worth it. If I make anything I will post my Dorman brokers statement. I wont post graphs and charts. I've never made any money off of charts and graphs. The markets are totally helter skelter and nobody can predict them. Now we have high speed trading by computer by the big guys to add even more unpredictable to the markets.

I've spent a lot of time going through isystems developers and I have them all memorized and if they make money it


will be a great thing. I like it that they take the fee out of the trade. I don't like the futures market or brokers though.

Right now I am waiting for Autoshares broker to ACH me 20K so I can start autotrading with Predictive Financial who trades single option contracts on high end stocks like Google Netflix. It is difficult for the big money to manipulate these stocks. Predictive Financial goes to 100% losses as they feel they might reverse but I plan to manually exit any option which does not move in the right direction fast. We will see. I'm expecting to make big bucks.

Im no troll. I am a serious investor who knows the ropes after 25 tears of trading.

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 Big Mike 
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@rfolgate, please adjust your attitude to one of respect and appreciation for those in the community who share their time and experiences. Name calling and other insults of any kind will not be tolerated, and neither will an attitude of superiority. This community is about helping each other in a friendly, respectful way.

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 SMCJB 
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rfolgate View Post
I have a finance degree from the Univ of Texas so I know about financial analysis....

I've spent a lot of time going through isystems developers and I have them all memorized....

Im no troll. I am a serious investor who knows the ropes after 25 tears of trading.

If that's the case would you mind sharing any of your insights? Are there any specific systems you could highlight that you believe are good?

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 amoeba 
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Quiet appreciator of your efforts @SMCJB, please continue your open & transparent contributions.

Cheers, Mick

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 Sazon 
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Quiet appreciator of your efforts @SMCJB, please continue your open & transparent contributions.

Cheers, Mick

Same here. Thanks for this thread and your contributions @SMCJB.

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 JohnS 
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Thank you @SMCJB for all of your contributions!

John

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 SMCJB 
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Thank you all for your nice comments. Getting back on topic though I'm hoping @rfolgate will share some of their insights and maybe highlight some systems they think are good?

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