Deadline June

This is a discussion on Deadline June within the Trading Journals forums, part of the Reception category; Performance of First Strike on some pairs was terrible, so I looked at the trades on one of those - ...

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Old Jan 22, 2011, 11:23pm   #676
 
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Re-engineering First Strike to work on more than just the core forex pairs

Adamus started this thread Performance of First Strike on some pairs was terrible, so I looked at the trades on one of those - EUR/GBP - to see what was going on.

The chart shows a typical bad trade.

It seems the clever little weighted ATR I am using just doesn't cut it here. The Open of the 06:00 bar is the middle horizontal line - the vertical is 6:00AM. The stop entries should be way further apart than this.

The weightings of the ATR must be off for it to fall to this low level. I guess I need to ditch this weighted ATR idea and stick with fractions of the weekly ATR, which after all is what First Strike in essence aims to exploit.

PS a break-out on its own looks quite flakey as well. I think I'll have to try some simple trend filter as well to avoid getting blown out of the water by rogue spike.
Attached Thumbnails
eurgbp_dtc-15-min-04_09_2001.jpg  
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Old Jan 23, 2011, 12:21am   #677
 
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Re: Gap Filler

Adamus started this thread Target is 90% of the gap, exit is at end of day Monday, from Jan to Mar inclusive 2010, changed to 1 mins bars - 15 mins bars was a waste of time since NinjaTrader backtesting was entered the trade not at the Open as I thought, but at the Open of the next bar. Bizarre.

New results:

HTML Code:
Instrument	Total Net Profit	Total # of Trades
$AUDCAD/$AUDCAD	-295.00	9
$AUDCHF/$AUDCHF	-200.00	6
$AUDJPY/$AUDJPY	-10.00	10
$AUDUSD/$AUDUSD	190.00	9
$CADCHF/$CADCHF	840.00	10
$CADJPY/$CADJPY	745.00	10
$CHFJPY/$CHFJPY	615.00	9
$EURAUD/$EURAUD	-245.00	10
$EURCAD/$EURCAD	275.00	8
$EURCHF/$EURCHF	335.00	7
$EURGBP/$EURGBP	-630.00	10
$EURJPY/$EURJPY	95.00	8
$EURUSD/$EURUSD	900.00	10
$GBPAUD/$GBPAUD	-160.00	9
$GBPCAD/$GBPCAD	-4360.00	10
$GBPCHF/$GBPCHF	-385.00	10
$GBPJPY/$GBPJPY	1410.00	9
$GBPUSD/$GBPUSD	-1050.00	9
$USDCAD/$USDCAD	910.00	9
$USDCHF/$USDCHF	400.00	9
$USDJPY/$USDJPY	690.00	9
COMBINED RESULTS	70.00	190
The system is really dumb at the moment - this is without proper stops, just the timed exit, so the risk/reward for some trades is ridiculous - it might just be a five tick gap, but it puts on a position and it can run in the wrong direction all day.

So I do need to optimise the stop. Something like a multiple of the hourly ATR.
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Old Jan 23, 2011, 1:05pm   #678
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Re: Gap Filler

Quote:
Originally Posted by Adamus View Post
Target is 90% of the gap, exit is at end of day Monday, from Jan to Mar inclusive 2010, changed to 1 mins bars - 15 mins bars was a waste of time since NinjaTrader backtesting was entered the trade not at the Open as I thought, but at the Open of the next bar. Bizarre.

New results:

HTML Code:
Instrument	Total Net Profit	Total # of Trades
$AUDCAD/$AUDCAD	-295.00	9
$AUDCHF/$AUDCHF	-200.00	6
$AUDJPY/$AUDJPY	-10.00	10
$AUDUSD/$AUDUSD	190.00	9
$CADCHF/$CADCHF	840.00	10
$CADJPY/$CADJPY	745.00	10
$CHFJPY/$CHFJPY	615.00	9
$EURAUD/$EURAUD	-245.00	10
$EURCAD/$EURCAD	275.00	8
$EURCHF/$EURCHF	335.00	7
$EURGBP/$EURGBP	-630.00	10
$EURJPY/$EURJPY	95.00	8
$EURUSD/$EURUSD	900.00	10
$GBPAUD/$GBPAUD	-160.00	9
$GBPCAD/$GBPCAD	-4360.00	10
$GBPCHF/$GBPCHF	-385.00	10
$GBPJPY/$GBPJPY	1410.00	9
$GBPUSD/$GBPUSD	-1050.00	9
$USDCAD/$USDCAD	910.00	9
$USDCHF/$USDCHF	400.00	9
$USDJPY/$USDJPY	690.00	9
COMBINED RESULTS	70.00	190
The system is really dumb at the moment - this is without proper stops, just the timed exit, so the risk/reward for some trades is ridiculous - it might just be a five tick gap, but it puts on a position and it can run in the wrong direction all day.

So I do need to optimise the stop. Something like a multiple of the hourly ATR.
Hey Adam.

Can you explain the gap trade to me? Or your version of it.

Brett
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Old Jan 23, 2011, 1:45pm   #679
 
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Re: Gap Filler

Adamus started this thread
Quote:
Originally Posted by brettus View Post
Hey Adam.

Can you explain the gap trade to me? Or your version of it.

Brett
Hi Brett

it's really simple! Goes to show how convoluted my journal entries must be if you can't figure out what I'm on about.

It really is just about putting on a position at the end of the weekend when the market opens with a gap from the Friday close.

The technical details are laid down by my broker, IB: they stop sending price data at 22:00 GMT+0 on Friday, and recommence at 22:15 GMT+0 on Sunday.

I assume there is only one definition of a gap: clear space between the top or bottom of the previous bar and the new open.

Since I'm trading it mechanically (21 forex pairs - try doing that manually) I have to code it and it's not straight forward to code it for backtesting. I could code it with tick data from Disktrading, but I want to test it on the Interactive Brokers data which is closest to the live feed it will trade - and I don't have tick data for that.

I only have minute data.

While writing this it occurs to me that I should just ask NinjaTrader support straight out how best to code a market order to fire off when the open is above or below a certain price. I just think NinjaTrader won't let me do that.

It also occurs to me that backtesting with 1 minute data will mean all my entries will be 1 minute after the open. I guess I can compare the results on 1 minute data with the same data set to tick resolution and find out what difference it makes. Maybe it all works out the same.
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Old Jan 23, 2011, 3:33pm   #680
 
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re: Gap Filler - optimisation problem

Adamus started this thread Here's the optimisation results for the period 2001-2008 on GBP/USD using 1 min bars:

HTML Code:
Instrument	Net Prof	Avg Trd	Max. DD	Trds	%Wins	Profit/DD
$GBPUSD_DTC	4080.00	12.79	-2965.00	319	68.0%	1.38
$GBPUSD_DTC	8130.00	25.49	-3980.00	319	79.6%	2.04
$GBPUSD_DTC	10850.00	34.01	-5390.00	319	85.3%	2.01
$GBPUSD_DTC	12825.00	40.20	-7355.00	319	88.4%	1.74
$GBPUSD_DTC	10720.00	33.61	-9620.00	319	89.3%	1.11
Hopefully the table will appear legible.

The five results are using different multiples of the 15min ATR as the stop. Row 1 uses a stop placed 1 15min ATR away from the entry, row 5 uses a stop 5 ATRs away.

If I optimise purely on profit, I would choose row 4 with $40 per trade, which would cover commissions and slippage nicely. However look at the equity curve below for it - there's a steep drop in profitability at the end of the test period (that would be thanks to the volatility from the credit crunch crisis).

So if I optimised on profit over drawdown, the last column, I would choose row 2 - but the profit per trade is only $25, which is barely enough to cover commissions and slippage.

Do I compromise and choose row 3?

If I trade it in a basket with other instruments, do I ignore the individual results and just check to see which setting enhances the portfolio more? Hmm. Maybe it's time to read that chapter in the Mathematics of Money Management on portfolio optimisation.
Attached Thumbnails
row2.jpg   row3.jpg   row4.jpg  

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Old Jan 23, 2011, 4:20pm   #681
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Re: Gap Filler

Quote:
Originally Posted by Adamus View Post
Hi Brett

it's really simple! Goes to show how convoluted my journal entries must be if you can't figure out what I'm on about.

It really is just about putting on a position at the end of the weekend when the market opens with a gap from the Friday close.

The technical details are laid down by my broker, IB: they stop sending price data at 22:00 GMT+0 on Friday, and recommence at 22:15 GMT+0 on Sunday.

I assume there is only one definition of a gap: clear space between the top or bottom of the previous bar and the new open.

Since I'm trading it mechanically (21 forex pairs - try doing that manually) I have to code it and it's not straight forward to code it for backtesting. I could code it with tick data from Disktrading, but I want to test it on the Interactive Brokers data which is closest to the live feed it will trade - and I don't have tick data for that.

I only have minute data.

While writing this it occurs to me that I should just ask NinjaTrader support straight out how best to code a market order to fire off when the open is above or below a certain price. I just think NinjaTrader won't let me do that.

It also occurs to me that backtesting with 1 minute data will mean all my entries will be 1 minute after the open. I guess I can compare the results on 1 minute data with the same data set to tick resolution and find out what difference it makes. Maybe it all works out the same.
Ok thats how i thought it works. I trade it at 9pm on sunday though. Sometimes the gap closes by 10pm and by 10:15pm the price could be the other way round. My friend backtested this and it seems to work better at 9pm as opposed to 10pm. I also stick to EURUSD, GBPUSD and AUDUSD. He also tested it over news when the price gaps. I think column 3.

Last edited by brettus; Jan 23, 2011 at 4:27pm.
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Old Jan 23, 2011, 4:41pm   #682
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Re: Deadline June

Adam, what's the rationale for thinking this should work? Is it exploiting an inefficiency with IB?
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Old Jan 23, 2011, 4:59pm   #683
 
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Re: Deadline June

Adamus started this thread
Quote:
Originally Posted by brettus View Post
Ok thats how i thought it works. I trade it at 9pm on sunday though. Sometimes the gap closes by 10pm and by 10:15pm the price could be the other way round. My friend backtested this and it seems to work better at 9pm as opposed to 10pm. I also stick to EURUSD, GBPUSD and AUDUSD. He also tested it over news when the price gaps. I think column 3.
Which broker opens at 9pm Sunday? I'm with IB as stated and 10:15pm is when they start sending quotes and accepting orders. These results are based on these IB times, although using Disktrading tick data where I have to ignore the data earlier than 10:15pm.

Can you give me an idea how big the spreads get for you at 9pm Sunday? I should imagine they are even bigger than I see on IB at 10:15pm, and there they can get pretty huge. I'm not going to trade a system that only makes $30 a trade @$100,000 lot size if I have to cross a $50 spread!

Quote:
Originally Posted by meanreversion View Post
Adam, what's the rationale for thinking this should work? Is it exploiting an inefficiency with IB?
The rationale is that the markets retrace over the gap back to the price at the close before moving off in their own direction.

It's not an inefficiency with IB, more an inefficiency with the whole human week-end. Whatever the broker - and Brettus seems to have a broker who would allow more profit from this - the market often opens at a price outside the last bar on Friday night.
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Old Jan 23, 2011, 5:04pm   #684
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Re: Deadline June

Quote:
Originally Posted by Adamus View Post
Which broker opens at 9pm Sunday? I'm with IB as stated and 10:15pm is when they start sending quotes and accepting orders. These results are based on these IB times, although using Disktrading tick data where I have to ignore the data earlier than 10:15pm.




The rationale is that the markets retrace over the gap back to the price at the close before moving off in their own direction.

It's not an inefficiency with IB, more an inefficiency with the whole human week-end. Whatever the broker - and Brettus seems to have a broker who would allow more profit from this - the market often opens at a price outside the last bar on Friday night.
Well someone like Oanda opens earlier, but i just use IG. Do you every watch the price before 9pm? from 6pm to 9pm, because the market is officially open from 6pm Sunday night. It might influence you slightly. That's a good point. I think the model averaged 13 pips per trade.
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Old Jan 23, 2011, 5:26pm   #685
 
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Re: Gap Filler

Adamus started this thread
Quote:
Originally Posted by brettus View Post
Well someone like Oanda opens earlier, but i just use IG. Do you every watch the price before 9pm? from 6pm to 9pm, because the market is officially open from 6pm Sunday night. It might influence you slightly. That's a good point. I think the model averaged 13 pips per trade.

No. I have a connection to IQFeed as well as IB - for historical data - and they open at 10:00pm but that's as early as I've seen it.

I'd need a broker that I can connect up to NinjaTrader otherwise I'm looking at scripting it in yet another language for yet another platform.

I think with IB it might be possible but it does depend on the slippage which I can't really be sure about at that time of day.
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Old Jan 23, 2011, 6:45pm   #686
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Re: Deadline June

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Originally Posted by meanreversion View Post
Adam, what's the rationale for thinking this should work? Is it exploiting an inefficiency with IB?
Have you seen the gap trade before on a sunday night? It seems to work. It's not exploiting the Ib. Its the bankers stop hunting.
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Old Jan 23, 2011, 7:34pm   #687
 
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Re: Deadline June

Adamus started this thread
Quote:
Originally Posted by brettus View Post
Have you seen the gap trade before on a sunday night? It seems to work. It's not exploiting the Ib. Its the bankers stop hunting.
The bankers? Which ones? The ones in New Zealand? I never believe these reasons. Nobody is really bigger than the market. I've seen some stuff where you can see their actions in the level 2 book, but I think a more rational explanation is that a huge number of traders believe that the gap should be closed, and trade accordingly, which duly leads to the gap closing.
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Old Jan 23, 2011, 9:22pm   #688
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Re: Deadline June

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Originally Posted by Adamus View Post
The bankers? Which ones? The ones in New Zealand? I never believe these reasons. Nobody is really bigger than the market. I've seen some stuff where you can see their actions in the level 2 book, but I think a more rational explanation is that a huge number of traders believe that the gap should be closed, and trade accordingly, which duly leads to the gap closing.
Yea but the order board for the uk for example will go to the traders in asia overnight. Think about the logic. EURUSD and GBPUSD at the moment have been on a bullish run, and there might be a few long into the weekend and i doubt many will be short with that bullish close. So How can you make a quick buck? Well surely these longs will have stops below the current market price at the close of friday. So how do we stop these guys out? We sell down to that price and move the market so they are stopped out and we have effectively closed our position against a client position. Why does the price then go back up? Well like you said everyone is buying it back to the close. Other than a few are trying to pick up a few cheap GBP and EUR, unrelated to the gap idea.
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Old Jan 23, 2011, 9:25pm   #689
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Re: Deadline June

I have to say, this sounds very tenuous. When do you trade, at the close on Friday? How do you decide which way to trade?

IG provide normal prices from 9pm, but your system is in suspension until 10.15pm. It seems a little bizarre.. just because you've found a pattern, what's the justification for it continuing? This reminds me a little of people who go hunting for patterns, e.g. EUR/USD spot rallies first week of September for the last 14 years out of 15, thus go long EUR/USD 1st September..

Or is there something else? I can see that prices often gap on Monday, but how are you calling the direction?
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Old Jan 23, 2011, 9:33pm   #690
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Re: Deadline June

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Originally Posted by meanreversion View Post
I have to say, this sounds very tenuous. When do you trade, at the close on Friday? How do you decide which way to trade?

IG provide normal prices from 9pm, but your system is in suspension until 10.15pm. It seems a little bizarre.. just because you've found a pattern, what's the justification for it continuing? This reminds me a little of people who go hunting for patterns, e.g. EUR/USD spot rallies first week of September for the last 14 years out of 15, thus go long EUR/USD 1st September..

Or is there something else? I can see that prices often gap on Monday, but how are you calling the direction?
Nah. I trade at 9pm tonight. In about 30mins. If it gaps down more than 25 points i'll buy from fridays price and if its 25 above, i'll sell.
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