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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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  #291 (permalink)
 kevinkdog   is a Vendor
 
 
Posts: 3,033 since Jul 2012
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montanajtt View Post
I have three strategies working on ES, they did pretty good the last two years since I put them live but this year I'm really having hard times keeping them working. Overall they are still in profit YTD but numbers are very small and defenitely this is due to the low volatility. I'm trying to think which could be the events that could increase volatility, French election for example were a non event.
So I was wondering if anyother who have strategies on ES is experiencing my same difficulties...

Sure, at any given point in time, I always have some strategies doing really well, some strategies around breakeven, and some strategies doing poorly. That is why I have many strategies, in many markets, with many different styles. I want to be covered no matter what happens.

As an example, here is an ES strategy that is thriving right now. It has been hitting new equity highs (green dots) since July 2016... but I also have ES systems that aren;t doing well now, but are still within historical bounds...


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  #292 (permalink)
 montanajtt 
Como, Italy
 
Experience: Advanced
Platform: Tradestation, IB
Broker: Tradestation, IB
Trading: ES
 
Posts: 183 since Aug 2014
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Hi Kevin,
thank you for your reply, yes I know the key is diversification but I never been able to develop good strategies on any other futures then index...maybe because I understand better what I should do with index than maybe with oil or gas or wheat.

You are really good at being so well diversified, I know you have maybe 2/300 or more strategies and that is a goal I will never reach, tryed hard for years, developed thousands of strats on every symbol but very few survived the incubation period and none the real money so at the end the only profitable ended up to be those on the index.

It's not like my strats on ES are loosing money, they actually are profitable YTD but with this level of volatility trades are much less and much random. Basically I'm not concerned by results but by the fact the strategies are trading a way different market then the one they were developed for. You find below the equity curve of one of my strats.



But I know...at the end I'm only concerned because unlike you I'm not diversified enough

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  #293 (permalink)
 kevinkdog   is a Vendor
 
 
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montanajtt View Post
Hi Kevin,
thank you for your reply, yes I know the key is diversification but I never been able to develop good strategies on any other futures then index...maybe because I understand better what I should do with index than maybe with oil or gas or wheat.

You are really good at being so well diversified, I know you have maybe 2/300 or more strategies and that is a goal I will never reach, tryed hard for years, developed thousands of strats on every symbol but very few survived the incubation period and none the real money so at the end the only profitable ended up to be those on the index.

It's not like my strats on ES are loosing money, they actually are profitable YTD but with this level of volatility trades are much less and much random. Basically I'm not concerned by results but by the fact the strategies are trading a way different market then the one they were developed for. You find below the equity curve of one of my strats.



But I know...at the end I'm only concerned because unlike you I'm not diversified enough

With an equity curve like that, I would not worry about some underperformance, unless it looks dramatically unlike previous flat/down periods.

That is a nice equity curve, how much of it is live trading?

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  #294 (permalink)
 montanajtt 
Como, Italy
 
Experience: Advanced
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kevinkdog View Post

That is a nice equity curve, how much of it is live trading?

Thank you, said by you it means a lot! This one is real money since March 2016 and sim since October 2015. Unfortunately it's not a so good system to run with the volatility we are experiencing since December. I have a strategy working on Nasdaq that usually traded 5/6 times a month and didn't make a trade this year yet...go figure! I guess until we go for new highs it can only go worse.

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  #295 (permalink)
 bluefightingcat 
Espoo Finland
 
Experience: Intermediate
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Trading: Stocks
 
Posts: 35 since Sep 2015
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I've been inspired by your book and our discussions in this forum to give WFA a try. I think I got a decent process in place but I wanted to get your opinion of whether this is viable. I am working with 15min Futures with data from 2009 until the end of 2016.

Step 1: Use data from 2009-2014 to optimise my strategy for the specific market with the aim of getting 10k per year per contract.
Step 2: Check to see whether it's still valid with out of sample data using 2015-2016.
Step 3: Optimize WF process using 2009 data (e.g. in sample/out sample lengths and ratios, and parameter sets to be stepped during WF).
Step 4: Run the WF from 2010-2016.
Step 5: Start Incubation period by live trading 1 contract.
Step 6: Gradually add contracts over next few months if continues to be successful.

Of course, with each step, you don't move to the next step unless the current step is successful.
What do you think?

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  #296 (permalink)
 kevinkdog   is a Vendor
 
 
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bluefightingcat View Post
I've been inspired by your book and our discussions in this forum to give WFA a try. I think I got a decent process in place but I wanted to get your opinion of whether this is viable. I am working with 15min Futures with data from 2009 until the end of 2016.

Step 1: Use data from 2009-2014 to optimise my strategy for the specific market with the aim of getting 10k per year per contract.
Step 2: Check to see whether it's still valid with out of sample data using 2015-2016.
Step 3: Optimize WF process using 2009 data (e.g. in sample/out sample lengths and ratios, and parameter sets to be stepped during WF).
Step 4: Run the WF from 2010-2016.
Step 5: Start Incubation period by live trading 1 contract.
Step 6: Gradually add contracts over next few months if continues to be successful.

Of course, with each step, you don't move to the next step unless the current step is successful.
What do you think?

Thanks for the question. This is different than what I do, and I've never done it the way you are proposing, so I can't say for sure how good it is. But, it very well could work out well - you just have to test it with a bunch of strategies, and see how it does.

I would NOT recommend step 5, unless you have money to burn. Trading live right after developing the strategy is generally not a good idea. The whole idea with incubation is that you want to see if the strategy falls apart in real time, without having actual money on the line. Of course, there is an opportunity cost to this (watching a good performing strategy live, but not trading it with real money), but for most people, waiting to see if walkforward performance continues is generally a good idea.

Good Luck, and keep everyone informed how it goes!

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  #297 (permalink)
 bluefightingcat 
Espoo Finland
 
Experience: Intermediate
Platform: TradingBlox
Trading: Stocks
 
Posts: 35 since Sep 2015
Thanks: 0 given, 10 received


Quoting 
I would NOT recommend step 5, unless you have money to burn.

The reason I choose to do incubation with real money is because you get a better idea about things like slippage and how orders fill. A paper account will never be fully accurate in that sense. I learned this the hard way in the past with a strategy looking good on paper but that would fall apart because of harder slippage during live trading. Of course these days, in my backtests, I tend to put a little extra slippage and commission than a little too little.

But thanks for your advice. I will definitely have a re-think about the live incubation part.

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  #298 (permalink)
 kevinkdog   is a Vendor
 
 
Posts: 3,033 since Jul 2012
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bluefightingcat View Post
The reason I choose to do incubation with real money is because you get a better idea about things like slippage and how orders fill. A paper account will never be fully accurate in that sense. I learned this the hard way in the past with a strategy looking good on paper but that would fall apart because of harder slippage during live trading. Of course these days, in my backtests, I tend to put a little extra slippage and commission than a little too little.

But thanks for your advice. I will definitely have a re-think about the live incubation part.

Understood, I have done that before, once when I was trading an NG strategy around weekly report time. I had no idea what slippage would be, since everyone pulls their orders right at the report time.

Turns out I was underestimating slippage, and even though the strategy was still profitable, it wasn't great on a reward/risk basis, so I stopped trading it.

Not sure how you are doing orders, etc, but usually I use market orders to get in and out, and normally using 1-2 x the bid ask spread is a good estimate of slippage.

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  #299 (permalink)
 bluefightingcat 
Espoo Finland
 
Experience: Intermediate
Platform: TradingBlox
Trading: Stocks
 
Posts: 35 since Sep 2015
Thanks: 0 given, 10 received

In your book you touch on position sizing. I was particularly interested in the position sizing method when trading several markets at the same time and taking into account correlation.

What kind of software do you use to do the analysis?

 
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  #300 (permalink)
 kevinkdog   is a Vendor
 
 
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bluefightingcat View Post
In your book you touch on position sizing. I was particularly interested in the position sizing method when trading several markets at the same time and taking into account correlation.

What kind of software do you use to do the analysis?


Thanks for the question. And thanks for reading my book!


I use Excel for all my position sizing analysis. I've created tons of different spreadsheets over the years doing all sorts of crazy stuff. But nowadays I tend to keep things simple, still using Excel, but trying not to overthink the whole thing (which usually only makes historical testing look better!).

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