Dr. Toad's Journey to Bankruptcy or Financial Freedom

This is a discussion on Dr. Toad's Journey to Bankruptcy or Financial Freedom within the Trading Journals forums, part of the Reception category; Originally Posted by Dr. Toad So...I will consider tweaking the strategy if it becomes obvious to me the strategy has ...

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Old Sep 8, 2015, 5:30am   #31
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Originally Posted by Dr. Toad View Post
So...I will consider tweaking the strategy if it becomes obvious to me the strategy has a win rate less than 50%. I intend to give the 2.0 strategy at least 2 weeks before pulling the plug on it...of course if the first 5 trades are losses, I will probably pull it after only a week.
having 5 losses in a row for strategies in 50-70% win rate rate is not unusual..

Have you backtested the strategy? Backtesting can give you the confidence to get through the losing streaks.
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Old Sep 8, 2015, 7:53am   #32
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having 5 losses in a row for strategies in 50-70% win rate rate is not unusual.
Hi paszkman,
That's an interesting table you posted - just wondered what your source is?
Thanks,
Tim.
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Old Sep 8, 2015, 9:45pm   #33
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Hi paszkman,
That's an interesting table you posted - just wondered what your source is?
Thanks,
Tim.
The internets.
First place I saw it was this guy:
https://twitter.com/SJosephBurns

If anyone can prove/disprove/explain the table then I am all ears.
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Old Sep 9, 2015, 12:29am   #34
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The internets.
First place I saw it was this guy:
https://twitter.com/SJosephBurns

If anyone can prove/disprove/explain the table then I am all ears.
I believe you will find this article interesting:
https://courses.cit.cornell.edu/info2950_2012sp/mh.pdf

It goes through a conceptual derivation of how to determine the average number of occurrences needed before the first occurrence of a specific sequence. The basic formula to determine this from the article (equation d2) is as follows:

An = (1 - p^n) / [p^n * (1-p)]

So for instance, in my case I am shooting for a success probability of 65%. If I am interested in finding on average how many trades I would need to make before I had 5 consecutive losses in a row:

A5 = (1 - 0.35^5) / [0.35^5 * (1-0.35)] = 291.

So, I can expect to have 5 consecutive losses in a row about once every 291 trades with such a system. This means my original thinking of this was wrong since my original thinking was this could be derived simply as 1 / 0.35^5 = 190.

The article also indicates there is no good closed form solution for determining the probability of x consecutive occurrences in y trials. It used numerical simulation to determine this for a 50/50 probability situation with 100 trials. The simulation indicates that in this situation, the probability of 5 consecutive occurrences is 81%. For 50 trials I would expect this to be a good amount lower. Your tables indicates this as being 77%...my thinking is this is on the high side although I have not gone through this exercise to conclusively debunk it...yet.

One thing I will say though to justify scrapping the strategy if I have 5 consecutive losses off the bat, is the probability of this occurring is 0.5^5 = 3.1% for a 50/50 system. It would be only marginally higher for a sample size of 10. Yes, still possible, but highly unlikely with a 50/50 system and even less so with something higher than 50/50 probability. Since I am only risking $25 per trade though I may just let it go 6 consecutive losses before scrapping it :P .

I will probably at some point dust of my (quite substantially) lacking matlab programming skills and derive a table similar to this. This is an interesting way of looking at a system, especially in the midst of a loosing streak to help from getting discouraged (or to tell you something is off). I will use this going forward, but I think looking at it from a binomial distribution standpoint is perhaps a bit more useful than this.

See post #12 (page 2) in this thread if you are interested in knowing about that if you don't already. Skip down to the first table I have in that post and then start reading the paragraph before the list of 2 items. You can stop reading the paragraph after the second table. You may find that interesting if you have not already read it. I will give the disclaimer though that my knowledge of probability and statistics is quite limited and it has been a while since I used it, but I do believe what I have posted is correct (dusted off my trusty copy of Kreyszig when I was going through that).



As a final note:
With regards to backtesting. No I have not backtested this one formally yet. I have done a look back with my screener (as far back as 6 months ago) and the majority of the time the stocks that show up in the top 10 continue down for at least some time. Since this system is not purely mechanical I would need to do a monte carlo simulation to properly backtest it...probably allowing it to pick randomly from the top 10. I do not have the software needed to do this. There might be a way to do this in Matlab feeding in data from yahoo finance, but really I am not smart enough to figure that one out. My programming skills are seriously lacking.
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Old Sep 9, 2015, 4:22am   #35
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Dr. Toad started this thread First trade in 2.0 system:

Click the image to open in full size.

A loss (seems to be the norm) - This one came close to dropping 1% before heading back north. I may consider revising my targets so I have a very high percentage chance of hitting the target gain (in excess of 80% instead of the 50% I am going for). I considered doing this at the outset but figured I have two things going for me with this. One being I am going in on ones that have a probability of a down day greater than 65%. Two being I am going in on ones with a R:R close to 1:1 with the probability of the worst case scenario being hit less than about 10% of the time and the probability of the target being hit about 50% of the time.

I will leave the system as is for now, but may consider this even if how I have it proves to be successful. In order to help me determine what is best, I will be tracking what could have been if I went with the second option (very high probability of target hit but reward lower than risk).

So, trade 1 summary:
Date: 9/8/15
Stock: ARMH
Outcome: -0.23% (no commission)
"could have been" outcome: -0.23% (no commission)

Tomorrow is the same play for me. One more up day on this one though and it will have broken through the down trend so I will be trading a different play Thursday. If it is a down day tomorrow, I will likely have the same play Thursday.
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Old Sep 9, 2015, 8:29am   #36
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A bad batch of trades has the same effect on account as a series of consecutive losses , ie one step forward 2 steps backwards or 8 losses with 2 winnings in between . The calculation above is for consecutive losses but it doesn't give you the odds for a bad batch .
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Old Sep 9, 2015, 11:59am   #37
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A bad batch of trades has the same effect on account as a series of consecutive losses , ie one step forward 2 steps backwards or 8 losses with 2 winnings in between . The calculation above is for consecutive losses but it doesn't give you the odds for a bad batch .
Which is exactly why I feel looking at it from a binomial distribution standpoint is more useful. You might also find post 12 interesting if you don't already know how to do this.
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Old Sep 9, 2015, 12:07pm   #38
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Which is exactly why I feel looking at it from a binomial distribution standpoint is more useful. You might also find post 12 interesting if you don't already know how to do this.
Its all hypothetical , if my win rate now is 60% it doesn't mean it will stay like that , past results are not necessarily indicative of future results.


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Old Sep 10, 2015, 12:44am   #39
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Its all hypothetical , if my win rate now is 60% it doesn't mean it will stay like that , past results are not necessarily indicative of future results.
Right, but if you don't have an idea of your expected wins and losses for a certain period of time, how will you know when something is going wrong? Also, I feel that a good system will not fluctuate much during different market cycles. In the case of this one, it can be done long or short. Even in a ranging market I would imagine there are sectors that are in up trends as well as down trends which is what this strategy seeks out. But then again...maybe I am just dreaming, heck, I don't even have one thing that works decent yet.


A bittersweet victory today for my system. Bittersweet because I was unable to make the play (was on a job site in the morning at market open). I am still considering it as a trade in the system.

Click the image to open in full size.

Trade 2 summary:
Date: 9/9/15
Stock: ARMH
Outcome: +1.50%
"could have been" outcome: +1.00%

I am switching it up for tomorrow since a better opportunity has presented itself. ARMH still looks like a good play and is right at the trend line. My play for tomorrow is:

Click the image to open in full size.

Click the image to open in full size.

Click the image to open in full size.

Click the image to open in full size.

Stock is TCO, target is 1% decrease, stop loss is 1% increase. Both the stock and sector are currently in a downtrend. I will be setting a market order for the open from now on with this one. This strategy lends itself nicely to that, and by doing this, there is less chance I will "screw it up" by trying to get a better entry. It will also allow me to enter if I am otherwise unable to right at the market open.

Anyone have thoughts on market orders at open? I have avoided them to this point since I always think I will get screwed over doing it, but now I am thinking most of the time I will get filled close to the open price. I would imagine I will get better fills as often as I get worse fills doing this. Anyone with experience care to comment?
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Old Sep 10, 2015, 9:29am   #40
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Stock is TCO, target is 1% decrease, stop loss is 1% increase. Both the stock and sector are currently in a downtrend. I will be setting a market order for the open from now on with this one. This strategy lends itself nicely to that, and by doing this, there is less chance I will "screw it up" by trying to get a better entry. It will also allow me to enter if I am otherwise unable to right at the market open.

Anyone have thoughts on market orders at open? I have avoided them to this point since I always think I will get screwed over doing it, but now I am thinking most of the time I will get filled close to the open price. I would imagine I will get better fills as often as I get worse fills doing this. Anyone with experience care to comment?
Hi Dr. Toad,
I've not swing traded a great deal and I'm certainly not any good at it, largely because - whenever I've tried - I've struggled to make the kinds of decisions you're making here because you're not able to screen watch. However, for what it's worth, if I was going down the route you propose, I'd make sure that the volatility of the stock and my stop loss (SL) and profit targets are aligned.

TCO is trending down and you're short (or will be at market open) so, in theory at least, probability is on your side and your profit target will be hit before the SL. However, if you look at the volatility of TCO (adding the standard 14 period ATR is as good a way as any that I know of), then you'll see that the stock could easily move almost $1.50 on the day. Current price is around $67.00 and, with a target of 1%, you're aiming for $0.67 per share traded. One thing's for sure, with an ATR at well over two times your stop loss and profit target - the probability of one or other of them being hit during the day is very high indeed. I'd happily bet on that - and heavily. As to which one gets hit first is anyone's guess!

tco.png

So, what to do? If it were me, I'd have a much wider stop - say at least 2 x ATR above the current price. (This would put your SL at around the resistance level of $70.00 which, needless to say, is technically where some traders may try to go short!) Also, I wouldn't set a profit target - at least not one that's percent based. If you feel the need for a target, I'd suggest looking at something that's TA based and has some logic behind it, rather than an arbitrary number. That's not to say what you're doing is wrong and, if it works for you, that's all that matters. Also, while you're at work, if you're able to, take a gander at what the S&P futures are doing half an hour or so before market open. If they're trending up, then cancel your pending short order - especially if you're sticking with the 1% SL and profit targets. If you have pending orders to the long and the short side, then you could use the futures as a guide as to which to leave in place and which to cancel. Just a thought.
Tim.
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Old Sep 11, 2015, 1:46am   #41
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TCO is trending down and you're short (or will be at market open) so, in theory at least, probability is on your side and your profit target will be hit before the SL. However, if you look at the volatility of TCO (adding the standard 14 period ATR is as good a way as any that I know of), then you'll see that the stock could easily move almost $1.50 on the day. Current price is around $67.00 and, with a target of 1%, you're aiming for $0.67 per share traded. One thing's for sure, with an ATR at well over two times your stop loss and profit target - the probability of one or other of them being hit during the day is very high indeed. I'd happily bet on that - and heavily. As to which one gets hit first is anyone's guess!
It was not by accident that this was done. If you take a look at the screener results, it is showing that 11 of the 15 previous days the 1% target profit was hit (~$0.70), and 5 of the 15 times the 1.5% (~$1.05) target was hit. Only 2 of the 15 previous days hit 1% up. There were a few days with a substantial downside and one with a large upside which skewed the ATR. So although the average range of the stock is quite large relative to the stops I set, the immediate trend is showing that the range is significantly skewed to the downside. I expect this will be the case of most of the trades in this system and is something I will keep in mind if I need to rework it.

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Also, I wouldn't set a profit target - at least not one that's percent based. If you feel the need for a target, I'd suggest looking at something that's TA based and has some logic behind it, rather than an arbitrary number.
I do not disagree with your statement that a hard profit target should not be set. In fact, if I had time to dedicate to screen watching, I would play these by setting a soft target and as the target was approaching look at the trend to make the final decision as to when to exit. Essentially I would let the trend I see continue until it is broken and then exit (provided it is not near the end of the day). This was actually how I tried to play the 1.0 version trades, but I simply can't dedicate the time required to do this while at work. This is why I have the hard targets set.

However, the hard targets I set are not completely arbitrary. The way they are derived comes from the immediate (15 day prior) price trend. This is a system based on momentum so the underlying theory is that the price action will continue to act in a similar fashion in the immediate future (i.e. the following day). It is possible that 15 days is still to large of a window to look at for a short term strategy...or simply possible that there is no edge to be found from looking at it in this way. Time will tell.

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Also, while you're at work, if you're able to, take a gander at what the S&P futures are doing half an hour or so before market open. If they're trending up, then cancel your pending short order - especially if you're sticking with the 1% SL and profit targets. If you have pending orders to the long and the short side, then you could use the futures as a guide as to which to leave in place and which to cancel. Just a thought.
Tim.
This is doable and something I will keep an eye on for future trades. Not going to incorporate it quite yet, but I have been thinking along these lines as well. I am also considering doing one short and one long play each day to hedge my risk somewhat in the event of a major good (or bad) news event that impacts all stocks. Some things to consider going forward, but not going to act on them yet.


Today was a loss for the system:

Click the image to open in full size.

I forgot to set my alerts after open so got screwed a bit more than I should have with the trade. A mistake that is good to make while my risk is still small...won't do that again, but it is clear that luck does not favor me.

Trade 3 summary:
Date 9/10/15
Stock: TCO
Outcome: -1.42% (-1.42% normalized)
"could have been" outcome: -1.42% (-1.42% normalized)

I have also realized that unless I normalize my results, they won't tell me much, so I will normalize all trades planned risk to 1%.

This changes the previous trades to:

Trade 1:
normalized outcome (both cases): -0.153%

Trade 2:
normalized outcome (actual): + 1.00%
normalized outcome (could have been): + 0.667%


TCO still looks like a good one, but I have been watching CBS for a while now and like it more since the trend is better defined. So, tomorrow my play will be CBS. ARHM is still hovering around the trend I drew...slightly above it now I think.

Click the image to open in full size.

The stock has been trading sideways (but nearly always a down day) for a little bit now, but it is approaching the main down trend again. The trend of the sector is down as well.

Click the image to open in full size.

Target profit and stop will be set at 2%. 42 of the 60 previous days have been down open to close, and the recent trend for Fridays is down so I am liking the odds.

Last edited by Dr. Toad; Sep 11, 2015 at 1:52am.
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Old Sep 11, 2015, 8:32am   #42
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It was not by accident that this was done. If you take a look at the screener results, it is showing that 11 of the 15 previous days the 1% target profit was hit (~$0.70), and 5 of the 15 times the 1.5% (~$1.05) target was hit. Only 2 of the 15 previous days hit 1% up. There were a few days with a substantial downside and one with a large upside which skewed the ATR. So although the average range of the stock is quite large relative to the stops I set, the immediate trend is showing that the range is significantly skewed to the downside. I expect this will be the case of most of the trades in this system and is something I will keep in mind if I need to rework it.
Hi Dr. Toad,
I'm not disputing either your logic or your analysis - both of which are fine. All I'm saying is that if your SL is less than ATR (under 50% in TCO's case), then it's pretty much a 50:50 gamble as to whether it's your SL or profit target that gets hit first. Without wishing to rub salt into the wound - yesterday was a case in point. To my way of thinking (which I accept may be different to yours), this overrides everything else. You can trade any instrument in any market and the analysis can be top drawer - really first class - but it will all count for nothing if you don't factor in the instrument's volatility.
Tim.
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Old Sep 12, 2015, 9:30pm   #43
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Dr. Toad started this thread Friday was a success in the system. I made my exit when the trend was broken around 2:30. Reason being that it was unlikely to hit the target with just 1.5 hrs left to trade and if the downtrend resumed, I probably wouldn't get a much better exit anyways. I was fortunate to see the trend break since it headed back up afterwards although still ended as a down day open to close so a win in my system both ways.

Click the image to open in full size.

Trade 4 summary:
Date 9/11/15
Stock: CBS
Outcome: +1.17% (+0.584%% normalized)
"could have been" outcome: +1.50% (+0.75% normalized)

Week 1 summary:
2 wins (+1.584% normalized), 2 losses (-1.573% normalized). A wash in every sense so risk stays at $25 for next week.



I tend to favor stocks that have stronger trends, and I think I need to pay more attention to the trends within the major trend. This would have kept me out of TCO since it was near the bottom of the secondary channel trend the day I went in and so should (and has) head north for a few days. I went in on this purely based on the statistics it was showing. Also, looking back at it, the trend is not that clear likely due to the volatility as timsk pointed out.

In order to help focus myself a bit on stronger trends and not purely good stats, I have gone through the first several hundred result of my screener and have selected stocks that appear to have good trends as well as good stats. After all, why make a play that only has good stats when there is an equally good one that has a clear trend and good stats.

I have gone through these and derived the slope of the trendline. Some of the ones that looked good a first glance, appear only mediocre after a closer look. I will be outlining each below with my intents. In general, if a stock has a day completely above the trend maximum price, I will consider the stock to have broken the trend and intend to leave it out of play unless it goes back below the trend maximum price or otherwise develops a new trend. I will still run my screener for all stocks since I doubt I have captured all of the good plays in this, but these will likely be my plays for the next week and possibly two.

Stock 1:
Click the image to open in full size.

Click the image to open in full size.

Although I know I said I was going to not make plays in the oil and gas sector due to their comparatively larger volatility, it would be stupid for me to completely dismiss the strongest trending sector based simply on how I feel. Compared to most other stocks in this sector, this one is showing some of the least amount of upside to it and is trading right on the main trend as I see it for the time being.

For now I am setting target profit and stop loss both at 3%. I have added the ATR(14) into my screener as well as RSI(14). With a stop and profit at 3% (~$1.30), I am setting targets at 67% the ATR of about $2.00. The RSI(14) is showing the stock is on the verge of "oversold" so people trading this way might start buying in late this week.

This looks to be a good play for Monday and potentially the following few days.


Stock 2:
Click the image to open in full size.

Click the image to open in full size.

This one was good to me Friday, but it would probably be wise to hold off on this one for about a week. It is trading sideways still, and will likely do so until it approaches closer to the trendline. I plan to wait on this one until the trend is confirmed to hold, or a new downtrend begins. I expect this will approach the trend as I see it in about a week.

The RSI(14) is still indicating a downtrend which is how I see it as well.


Stock 3
Click the image to open in full size.

Click the image to open in full size.

Currently at the main trend line as I see it. This stock did slightly break from the secondary trend (consolidating up) on Friday favoring to follow the main trend. I will wait for one more day to confirm the secondary trend broke and the stock is still following the main trend. If it drops on Monday I will consider making this my play for Tuesday. RSI(14) is right at 50, so not favoring uptrend or downtrend.


Stock 4
Click the image to open in full size.

Click the image to open in full size.

Another oil and gas sector stock. This one is towards the bottom of the channel it is trading in, so I will hold off on making this play as I expect it might have 1 more down day but then turn north for a few days.


Stock 5
Click the image to open in full size.

Click the image to open in full size.

This looks like a good play for this week in addition to Stock 1. The stock just approached the main trend line and was repelled down on Thursday and Friday. The targets for this stock will be 1.5% profit and stop loss (~$0.40). The current ATR(14) is about $1.20 which puts the targets at 33% the ATR. This may be a play later in the week.


Stock 6
Click the image to open in full size.

Click the image to open in full size.

This stock is also a potential play for later in the week. It is unclear if it's main trend will be broken or remain in tact at this point in time although the RSI(14) is still indicating a downtrend. Targets for this play will likely be 1.5% profit and stop (~$0.60). ATR(14) is about $1.10 which puts the target at 55% the ATR. This may also be a late week play.


Stock 7
Click the image to open in full size.

Click the image to open in full size.

This stock just recently broke into a downtrend after a 50-200 moving average cross. I will see if the trend develops a bit more before making the play. It is a possibility for the week after next. Targets will likely be 1.5% profit and stop (~$0.35). ATR(14) is about $0.62 which puts the targets at 56% the ATR. All indicators point to this one continuing down, but the trend needs to develop a bit further for me.


Stock 8
Click the image to open in full size.

Click the image to open in full size.

Stats on this one look good and the trend looks good, but this one is at the bottom of the channel it is trading in so it might be heading up this week. Stats indicate the target and stop should be set at 1.5% (~$0.41). The ATR(14) is about $0.65 which puts the targets at 63% the ATR. This is one to watch for the time being especially since the up gap was just completely filled, so the downtrend on this one may have just ended.


Stock 9
Click the image to open in full size.

Click the image to open in full size.

Another play that looks good, but is currently at the bottom of the channel it is trading in, so it may trade sideways for a bit.


Stock 10
Click the image to open in full size.

Click the image to open in full size.

Currently just above the trend as I see it. Upon a closer look at this one, the stats don't seem that good as the range does not seem to favor down or up. I probably will not trade this one although it does have a nice trend going for it.


To make it easier to track these and see when the trends are broken I have derived the slope of the trend line as I see it and extrapolated it out the next two weeks. If the stock has a day above the max price then I am considering the trend broken.

Click the image to open in full size.

I will be taking a look at the sectors to verify they are all in a downtrend. Probably won't post that, but I am pretty sure they all are. Summary is, Monday I will be going in on Stock 1.
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Old Sep 15, 2015, 12:34am   #44
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Dr. Toad started this thread Went in on TTM instead of MPLX today. For some reason my order for MPLX kept getting rejected...perhaps no available shares to short. First time that has happened to me though.

Click the image to open in full size.

TTM was my second pick although it does have a secondary trend upwards. I was going to wait for another day to confirm it had broken from it, but decided to just go ahead and go in on it since my risk is small. In the end it made no difference. Both choices ended the day practically where they started, but both slightly below the open.

Click the image to open in full size.

Trade 5 summary:
Date 9/14/15
Stock: TTM
Outcome: +0.272% (+0.181% normalized)
"could have been" outcome: +0.272% (+0.181% normalized)

One interesting thing to note about this one is a buy order that was an order of magnitude (nearly 2 orders) greater than all other orders appeared in the Level 1 bid ask. It was a buy order for ~800 - fluctuated a bit. This order was present from about 11:30 - 1:00 and chased the price up from about 25.85 to the eventual day high of 25.96. The order then dropped off (it had been gradually reducing as the price increased) and the price plummeted below the initial level. This seems to confirm an earlier suspicion I had:

Quote:
Originally Posted by Dr. Toad View Post
Very counter-intuitive, but the next time I get an opportunity to trade with level 2 quotes I will play them by going towards the high order of magnitude orders rather than away from. The basic assumption with this is the order is set mainly for someone to try to unload or buy as many shares as possible prior to the point being reached.
Perhaps the big players display a large order similar in magnitude to the size of order they want to place in the opposite direction they want to go and then slowly place small orders that fill in the opposite direction. They then reduce their large order as their net position favors the direction they really want to go. If I had several million to play with and didn't have to pay commissions, this might be a technique I would employ and seems to be the norm for when these large orders appear.

Another note on this is that most of the orders seemed to be being filled just above the large order. So say the bid was 800 @ 25.88 and ask was 10 @ 25.89, the orders seemed to always be filled at the 25.89 and rarely into the large order (25.88).

Maybe that is the "big secret" with level 2 quotes...go into the largest order. Of course it is super secret, so I doubt anyone who actually knows will confirm or deny this. It's of no consequence to me now though since I can't use level 2 quotes at my job, but interesting nonetheless.
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Old Sep 26, 2015, 10:49pm   #45
Joined Jul 2015
Dr. Toad started this thread I haven't given an update in a while partially because my trading scheme was completely systematic, so pretty boring to post and read I would imagine.

The following is where I stand with the probability 2.0 system. I made tweaks to the selection criterion last weekend in addition to doing some backtesting of it. Tweak, backtest, retweak, backtest again, retweak, backtest over different time, retweak, backtest again. You get the idea...very time consuming. BUT I do believe I am on to something with this.

The filter and selection criterion backtested over a market trending up and assuming all instances where stop and target were hit counted as a loss resulted in essentially a wash of the system. No gain, no loss. If half of the instances where both target and loss were hit were counted as loss and half were counted as gain, the system returned about 2.5% per month.

I tested over 7 months, so a sufficiently large sample size in my opinion for a daytrade strategy. Absolutely no discretion was used in selection and since the system was shorting stocks in an uptrending market and maintaining no loss or slight profit, I think that is quite convincing for something that will work in a downtrending market.

The recent few months (June to now) generated a 20% gain with a completely systematic approach counting all instances of both profit and stop hit as being a loss which just furthers my confidence that this will work well in a downtrend especially if some discretion is applied to the selection.


In addition to the selection tweaks, I am now waiting for what I consider confirmation of downtrend continuation before entering (instead of the blind market open entry). I am also exiting if I feel I have been proven wrong instead of waiting until market close or waiting for my stop to be hit. The final modification is instead of the hard profit target being set it is a soft target. If I am able to during the day, I will trend follow until stopped out. If I don't have time during the day, the blind system can still be used and should still be effective.


The reasons for the more discretionary based approach is mainly because I completely agree with this:

Quote:
Originally Posted by tar View Post
Its all hypothetical , if my win rate now is 60% it doesn't mean it will stay like that , past results are not necessarily indicative of future results.
Knowing that something is wrong with a completely blind systematic trading method is good to have, but that means you need to tweak it until it works again. Since I am in this for the long haul (hopefully), I need to be able to trade without a completely blind systematic approach in the event that a system I develop actually works for some time but then fails.

Being able to see highly probable outcomes for the stocks I trade is my intended edge, but this is not really any edge if the trades can't be made effectively. I am coming to the realization that there are many decisions in intraday trading that need to be made when trying to maximize returns when trend following intraday. Perhaps this is not the case when making multiple trades a day, but by limiting myself to 1 or 2 trades at most a day, I absolutely must try to squeeze every trade for as much as I can to be successful.

So, my intent is to create a playbook of sorts for trading stocks for myself. I intend to look at every conceivable intraday situation and develop the best way to trade it. In this way I am creating a completely systematic approach to what I would consider highly discretionary trading.


I began this more discretionary approach on Tuesday of this week. Although I will not implement this yet, my plan at some point will change to the following. Enter a short from screener selection process if/when confirmation occurs. If I get stopped out quickly from this, enter a long from screener selection process (need to create a filter opposite of the one I am currently using). I did test this a little on Friday although I just used the stock I shorted to do it.

The reasoning for this is that even in a market downtrend, there will be blocks of time where the market goes up (also vice-versa). This is likely the reason my backtest was able to be a wash in an uptrending market. My hypothesis is that by entering a highly probably long trade after a failed highly probable short trade I will be able to recover a portion of the loss incurred from the short. Obviously if the market is ranging that day this will potentially result in two losses instead of one so I will need to develop some rules around this if I get to that point.



Summary of Probability 2.0 Trades (tweaked to 2.1 as of 9/22/15):

This table does not include commission as that will become practically irrelevant as my final trade size is approached (and about 75% of the time my trades have no commission).

Click the image to open in full size.

Per my original plan, I increased to a risk of $50 per trade last week and I will be increasing to a risk of $100 per trade this week.

A detailed account of the more decision based trades along with my thinking as the day progressed are shown below. If anyone thinks these should have been played a different way or disagrees with my logic please say so to help me learn.

Click the image to open in full size.

Click the image to open in full size.

Click the image to open in full size.

Click the image to open in full size.


Now off to start developing my playbook...
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