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KJ Trading Systems Kevin Davey - Ask Me Anything (AMA)


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KJ Trading Systems Kevin Davey - Ask Me Anything (AMA)

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  #21 (permalink)
 kevinkdog   is a Vendor
 
 
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trendisyourfriend View Post
@kevinkdog

What are the core beliefs at the root of your trading ideas? I think this is something you never discussed so far. For a price action trader it may be when prices fail to do something twice for another it may be price valuation as proposed by tools like market or volume profiles for another it can be harmonic patterns etc. but what about you? Do you have any core beliefs or the markets are just a giant puzzle you need to solve and you are in an ever constant search of this elusive idea that will bring you more profit. Thanks.


For me, anything that can be programmed and tested can be part of a viable strategy. Price action, candlesticks, chart patterns, tech indicators (typically used in different ways), seasonal approaches, etc - anything is fair game.

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  #22 (permalink)
 trendisyourfriend 
Legendary Market Wizard
Quebec
 
Experience: Intermediate
Platform: NinjaTrader wt Rancho Dinero's profiling tools
Broker: AMP/CQG
Trading: ES, NQ, YM
 
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kevinkdog View Post
For me, anything that can be programmed and tested can be part of a viable strategy. Price action, candlesticks, chart patterns, tech indicators (typically used in different ways), seasonal approaches, etc - anything is fair game.

Have you formed a master mind group to discuss various ideas or bounce ideas off?

 
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trendisyourfriend View Post
Have you formed a master mind group to discuss various ideas or bounce ideas off?

Yes, but we discuss "bigger picture" topics than entries and exits. I let testing tell me if an entry or exit is good or bad - when done correctly, testing is unbiased and objective.

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  #24 (permalink)
 trendisyourfriend 
Legendary Market Wizard
Quebec
 
Experience: Intermediate
Platform: NinjaTrader wt Rancho Dinero's profiling tools
Broker: AMP/CQG
Trading: ES, NQ, YM
 
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kevinkdog View Post
...I would absolutely love a strategy that held for very short periods of time. Intraday would be perfect. And that is usually where I start when I create a new system.

Unfortunately, the "best" system (the way I define it) usually ends up requiring a longer holding time, days to weeks many times. This seems to get above the noise level in the price signal.
...

Kevin, did you ever create strategies to take advantage of the RTH opening range period on instruments like the ES, NQ, YM, CL etc.?

 
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trendisyourfriend View Post
Kevin, did you ever create strategies to take advantage of the RTH opening range period on instruments like the ES, NQ, YM, CL etc.?

Trend -
Thanks for the question.

Nothing for NQ, YM and CL. I've just never found an opening range strategy for those instruments. Doesn't mean it can't be done, it just means I have not been successful enough to find one to trade one with my own money.

I have one strategy (and variations thereof) I've been trading with my own money for a few years that uses pre-open and RTH open for ES. It is a decent strategy, not earthshaking or Holy Grailish.

Roughly 1:1 Annual Return / Max DD for the past year.


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  #26 (permalink)
 trendisyourfriend 
Legendary Market Wizard
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@kevinkdog

I would be interested in getting your opinion about the various exotic bar types that exist like the popular unirenko here on futures.io (formerly BMT). Have you studied some of them and did you find any advantage in using them in your automated systems? Thanks

 
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trendisyourfriend View Post
@kevinkdog

I would be interested in getting your opinion about the various exotic bar types that exist like the popular unirenko here on futures.io (formerly BMT). Have you studied some of them and did you find any advantage in using them in your automated systems? Thanks

I can't speak directly about exotic bar types in Ninja, since I have never tested with them.

I use Tradestation, and they have exotic bar types too, so...

I think anytime you test with an exotic bar type, you run a greater risk of getting fraudulent results, depending on how the backtesting engine works. Of course, you can also get fraudulent results from running standard time bars, with stops and limit orders, too. I recommend people spend a lot of time reviewing backtest results, and look at data tick by tick - could the trade have even happened as the backtest engine thinks it did?

Another route to take is to run the system live for a few trades, and compare to the backtest engine results. If results are different, you may have a "fraud" problem. Such a test might be the best few hundred dollars you ever spend, because then you'll know the pitfalls of a particular bar type.


For years, the only way I would test is by using time based bars, and using market orders only ("buy next bar at market", "buytocover next bar at market", etc). I do more limit and stop order systems now, but I look at results and individual trades very carefully before drawing any conclusion.

So, here's my feeling:

1. Time based bars, market orders only - pretty safe
2. Time based bars, market, stop and limit orders - should be OK, but do a lot of verification too
3. Exotic bars, any kind of orders - be VERY careful, and very skeptical


The golden rule: "if it looks too good to be true, it probably is."

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  #28 (permalink)
 trendisyourfriend 
Legendary Market Wizard
Quebec
 
Experience: Intermediate
Platform: NinjaTrader wt Rancho Dinero's profiling tools
Broker: AMP/CQG
Trading: ES, NQ, YM
 
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Posts: 4,129 since Oct 2009
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kevinkdog View Post
...So, here's my feeling:

1. Time based bars, market orders only - pretty safe
2. Time based bars, market, stop and limit orders - should be OK, but do a lot of verification too
3. Exotic bars, any kind of orders - be VERY careful, and very skeptical


The golden rule: "if it looks too good to be true, it probably is."

Not sure i understand the difference between these two's...
1. Time based bars, market orders only - pretty safe
and
2. Exotic bars, market orders only - be VERY careful, and very skeptical

Why is that?

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  #29 (permalink)
 kevinkdog   is a Vendor
 
 
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trendisyourfriend View Post
Not sure i understand the difference between these two's...
1. Time based bars, market orders only - pretty safe
and
2. Exotic bars, market orders only - be VERY careful, and very skeptical

Why is that?


It has to do with how the bars are built in real time, versus how they are built using historical data. I remember running into this with Point and Figure charts, an "old" exotic bar type. I thought I had a great system, based on historical data. But then I watched bars in real time, and realized what I was seeing in historical results was totally different than what I could expect real time.

My point is not to disparage exotic bar types, just to warn people to be careful when testing with them. As long as you can convince yourself that you can execute your strategy live, and have results like the backtest, that is all that matters.

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 kevinkdog   is a Vendor
 
 
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And again, I'm not saying accurate testing with exotic bars is impossible. In my aforementioned experience with P&F charts, I was able to figure out what was going on, make chart and strategy ordering adjustments, and I ended up with something that worked the same real time as it did historically.

I wish trading software creators provided more instruction on backtesting, since it is so easy to create "junk" backtests that don't work the same in real time. I suppose that is a topic for another thread...

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