After lot of unsuccessful attempts at keeping up stable habit for trading and guided by Atomic habits, I m trying my hand at creating this journal.
So here are some basics of system I am trying to follow.
MA based trend following
Stocks (mainly long only) all cash no margin.
Two screen system
Screen 1 Main trend weekly , 10 & 30 EMA
Screen 2 sub trend daily , 5 & 20 EMA
Candidate selection
10 w ema above 30
5 dema below 20dema
Trigger
Price closes above 5 ema/ 5 ema crosses 20 ema Divergence on MACD (31016) daily
Stochastic 21 daily fast crossover slow from oversold zone
Entry rules
SL pos - major daily swing low at price support
Risk & lot size
CMP and SL pos <= 0.5% capital
Exit rules
Trail SL using
PSAR (0.07,0.5) until SL hit
20 day ema line until SL hit
Caution - divergence Price ROC(2) daily
Other general rules
Do not take more than 1 or 2 trades simultaneously.
Try scale out of winning trade by breaking lots into half for each trail SL.
Assumed Capital - 500k
Would love to receive suggestions for any improvements.
Can you help answer these questions from other members on futures io?
Oh so ! , yes it is INR, I m actually focused on practicing rules of system and risk units based routine.
So I thought to practice a way of description which is neutral of these aspects.
Hi, I don't know if the system will work or not, but I think that if you go fully systematic you can try and back test it to see if it can give good results it looks easy to backtest.
From a strategic perspective (I am really biased because I am discretionary trader), I think that it's not a good idea to try to focus on completely systematic systems. Imagine that all the brilliant minds that come out of ivy league universities, phisics, engineers, mathematicians etc... they will have a lot of knowledge to make any kind of advance system. Why do you want to compete with them?
I would stay out of that route, it's like starting to playing tennis and playing against Nadal.
Consider that Artificial Intellligence systems will find inefficiencies in the market very easily, so if your system is too easy it means you assume that there are inefficiencies that are easy to spot.
Also try to backtest the system under different conditions, for instance a trending and a non trending market....and don't forget the risk of ruin as a parameter for backtest.
Hope it might help.
The following user says Thank You to SBtrader82 for this post:
Thanks SB, I agree with most of your points.
And if you see there is lot of discretion built into it, and back testing is a pain point which I have to address, after blowing several small accounts, I keep my risk very limited manually.
Considering that I am not professional yet and is developing the skill apart from main day job, i’ld appreciate any guidance on how to approach back test without investing too much money.
Hi, I am not an expert of back testing because I am a fully discretionary trader. However I know that many systematic traders use Multicharts. I have never tried the platform but it is quite well known in the industry. I think that since the strategy is quite simple you can also test it in tradestation.
In order to save money ( I have also blown out several accounts :-( ), I suggest you this:
1) give a look at MICROS. The Sp500 futures (/ES-mini) offer a micro version, in which every point is worth 5 usd, instead of 50. It is a great product, it is very liquid , so the slippage is basically inexistent, it is also very precise, meaning that if you compare it with the /ES-mini it is exact to the tick.
There are several micro markets, not all of them are as goos as the /ES-micro, but these ones are also very good: Nasdaq (/NQ), DowJones (/YM), Gold (/QM). Be careful with gold, the micro is quite ok to trade but do not trade the mini since it's not liquid at all. Also you can trade 6E micro, which is the micro for Dollar-Euro future.
Trust me you will save a lot of money, you can earn a living trading micros if your system work.
2) to save money focus on Risk reward!! forget the winrate.... focus on trades that pay you 3 times what you risk at least. Those are good trades. I know everyone speaks about RiskReward so maybe I am saying nothing new, the first time I read about it I thought it was bullshit. Now I can tell you, after blowing up so many times, that this is the only parameter that count.
3) if you are systematic back test everything, and remember to stay away from the news.... there will be moments of high volatility that will destroy your system.
4) do not trade for at least 2 / 3 years, I know it sounds crazy but it takes time.
You asked for feedback on your system.
I'ts not easy to give deep feedback without a little more work, but a few things jump to mind just off the bat:
1. I completely agree with a previous comment - a mechanical system so simple, can't be so easy.... This system is likely to have times where it performs very well and other times when it performs very poorly. Even if it works on average (and it's an "if"), I imagine it should have periods of serious drawdowns. You should research and backtest these times to know when this system is expected to work.
2. Keep an eye on your numbers - risk/reward and hit ratio: you are betting on the market reversing the trend completely while still in a downtrend, and buying relatively high on the reversal. Just a pop without a complete reversal - you take no profit. Doesn't reverse and resumes downtrend (which may well happen exactly at your buypoint) - you lose.
My gut instinct is that this is a problematic situation when measured quantitatively - may be better off either fading the initial move (buying tighter and exiting more quickly) or waiting for the market to establish ground (i.e. more established proof of reveral) before expecting a major uptrend. Maybe doing both. But again, only gut instinct - this must be verified.
3. Your idea of "scaling out" seems a little unorthodox. You're splitting exits between two different trailing stops (i.e. both exits have the same general idea, and differ only by a bit). I'd try taking half on strength, and the other half on a trailing stop - or any other strategy that uses two fundementally different exit strategies, which each have an advantage in a basically different set of scenarios (in my example - one works well if the market trends, the other if it doesn't).
I wish you success in your trading!
The following 2 users say Thank You to ZviTradingCoach for this post:
Was reviewing observations, is it not that system bets at continuation of weekly UPtrend at daily TF swing instead of betting on reversing the trend completely?
Yes, you are betting on the MAJOR trend continuation. However at your entry point and candidate selection, the INTERMEDIATE (what you call mid-trend) is still very much an intact downtrend. It is also visible on every one of the charts you attached. And intermediate trends don't often reverse "on a dime" without a little repeated testing and accumulation (they can, of course, but they don't often).
Keep in mind that moving averages are just useful indicators (I use them too), but are not the actual thing - which is the prices themselves. The fact that the short-term EMAs have crossed over or a close above the 5EMA does not in itself mean the intermediate trend has reversed.
Again, as it's your system, not one I have researched in depth, it is very possible I am mistaken. But you should check out your entry situations according the system, under different market conditions, and see what the intermediate trend looks like when it triggers an entry on multiple situations, and how it develops.
The following user says Thank You to ZviTradingCoach for this post:
, yes it is INR, I m actually focused on practicing rules of system and risk units based routine. 
instead of betting on reversing the trend completely?