Deadline June

This is a discussion on Deadline June within the Trading Journals forums, part of the Reception category; I think I have to start recording my errors, at least so that I've got a record. Yesterday was particularly ...

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Old Nov 23, 2010, 11:57am   #571
 
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Unforced Errors

Adamus started this thread I think I have to start recording my errors, at least so that I've got a record.

Yesterday was particularly bad with at least 4 seperate errors.

The first was on the AUD/USD. The system went long at 0.9885 on Sunday night and set a target at 0.9955 which was never hit. By 11am Monday morning the Aussie/USD was slightly off its high and I had to restart my system. When it was back up, I realised my strategy hadn't put any target or stop in for AUD/USD so I checked the log and saw the system had hit the stop in theory in its initialization and was currently flat. It was 10 points off its high and I figured it would make it back up there - it didn't, it hit my stop instead, placed discretionarily at 0.9915. So 30 ticks down the toilet for 10 points potential profit - not a good decision. Wasn't thinking obviously.

The next was actually Sunday night on the opening when all the Euro crosses and the CAD crosses gapped open at 22:15. I went into the weekend long from Thursday at 1.0220 and it had closed Friday at 1.0177. It gapped open at 1.0163'5. When I initialized the system, the system decided that it had reversed on Friday night at 20:00. So I had to reverse too, but I figured that it was going to climb back up and fill the gap at 1.0177 - which it didn't, instead it continued to fall and I bailed out at 1.0140 - 23.5 ticks gone for real and 23.5 ticks gone in theory if my system hadn't swallowed the reverse signal. The gap was of course filled 12 hours later.

The third foobar was CHF/JPY. I went into the weekend flat but on restarting the system, it decided that it had gone long at 84.15 at 22:00 on Friday night, which isn't actually tradeable because IB closes down at 22:00. Bizarrely though IB continues broadcasting prices until 22:15 so there is data there. So I was flat but the system was already long and the market was falling. I got in at 84.07, 8 ticks better. No big deal, but the problem is a technical one and I don't know how I'm going to sort it out so it doesn't happen again.

CHF/JPY also foobar'd me again, or better said, NinjaTrader crashed again, around 20:00, and after restarting, I missed another error. During initialization after 20:00 on restart, the system decided that it had in fact reversed at 20:00 @84.05 and was now short. NinjaTrader didn't reverse it for me (I configured it not to) and so it just placed the orders that should be there - although of course I was long still from 84.07 but the system thought it was short. So it placed a buy stop where the sell target should have been, at 84.50. This looked fine to me - a position, a stop and a target. And I went to bed. Fortunately nothing happened until 06:14 this morning when my position size was doubled as the buy stop order was hit. The market carried on up a little and at 07:45 I realised my mistake and bailed out at 84.67. That made / saved me 2 ticks on the bad reversal, and 45 ticks on the bad short from that reversal, and then 17 double ticks at double the position size from the stop to the point I bailed, i.e. 80 ticks.

I had an error on EUR/CHF as well. At about 10:30am NinjaTrader crashed and it took me about 45 minutes to get back up and restart and check all the systems and I somehow didn't see that EUR/CHF had gone short according to the system initialization at 11:00am, i.e. 15 mins before. I should have seen it because NinjaTrader would have submitted the target and stop orders and I should have seen immediately that they weren't against a position. I would have been short from 1.3579 and EUR/CHF fell for the next couple of hours. I saw my mistake only then when it was about to hit the target at 1.3498'5 - 80 ticks down the toilet.

So my net loss yesterday from incompetence and technical failure: 23.5 ticks. I guess I'm really lucky the CHF/JPY trades went my way.

No more horrific fills to report either, touch wood - a very big bit of wood. Like mahogony. Or that really expensive blackwood they use for making clarinets.
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Old Nov 24, 2010, 2:57pm   #572
 
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Testing entries: what percent profitable trades will do?

Adamus started this thread Yesterday was error-free. NinjaTrader behaved itself completely and acted like a General Release rather than a Beta version. It seems to go through these unstable phases. Being optimistic perhaps but it feels that the stable phases in-between are getting longer.

Right now I'm testing the entries on my version of the 3 Ducks which is still up on blocks in the garage unfortunately.

I am testing it on the extended set of forex pairs and I'm looking for an entry mechanism that works. But what is 'works'? My long term approach has always been 55% profitable trades is the threshold before I go on to test an exit mechanism on it.

The default exit mechanism I use for testing entries is equally distant fixed targets and stops.

Neither of these 2 factors - the % threshold or the default exit mechanism - has changed over the last 2 years reallly and I'm beginning to think I need to be a bit wiser about it.

55% is probably what I heard or read was a suitable level. I can't remember. That's 5.5 out of 10. The thing is, it's damn difficult to achieve.

Secondly the exit mechanism for it - fixed targets and stops - is fine, but how far from the entry should it go? I figure the stop should be one that I can realistically expect to use as the initial stop in the final system, so I've already made an assumption about the risk profile I want for this system.

I use fibonacci pivot points for part of the entry trigger, so I decided that the exit stop should be set at the PP itself, and I set the target the same distance above / below.

It's taken me 3 days to find something that produces >55% profitable entries but I'm finally there - or at least I hope I am, I developed this on a 2 year window and I'm now testing it over 10 years to see if it held up.

The entries are based on the 3 Ducks, but used differently from Captain Currency's textbook implementation. Instead of a simple

Code:
if (Close[0] > slowMA[0] 
	&& Close[0] > mediumMA[0]
	&& Close[0] > fastMA[0])
which doesn't work in any combination I can see across all the currency pairs I use, I changed it to this:
Code:
if (ma3[0] - ma2[0] > ma3[60] - ma2[60]
	&& ma2[0] - ma1[0] > ma2[240] - ma1[240]
	&& fastStraightRuns[0] > straightRuns[0] 
	&& fastStraightRuns.LongAverage[0] > straightRuns.LongAverage[0]
	&& Weighted[0] > pivot.R1[0])
where ma1 is the long 4hr duck, ma2 = 1hr duck and ma3 = 5mins.

StraightRuns is a simple indicator I wrote to give the average number of consecutive bars in the same direction - the default is either long or short, and StraightRuns.LongAverage is the number just for up bars.

.ShortAverage for consecutive down bars.

And pivot.R1 is the standard 3 Ducks daily pivots entry trigger.

So that hits 55% profitable trades - but appalling stats otherwise! Only $5 per trade.

How I would love to find something that isn't curve fit that gave 60% profitable trades.

Argh! The backtest on 10 years just finished and the results don't hold up. It only shows 52.5% profitable trades. I have to admit it did smell slightly of curve fitting with those 5 degrees of freedom going just on the entry filter.
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Old Nov 26, 2010, 9:05am   #573
 
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Back to where I started

Adamus started this thread Normally I get up at 6:00am to work a couple of hours before breakfast but a combination of overtiredness and sloth meant I just got up now. Despite hating myself for being emotional about my trading, I'm really chuffed to see my equity is back where it was 2 months ago after being in drawdown and being raided for rent and food money. So I'm now at £34K which will drop to £32.5K after taking out another £1.5K for subsistence through December. Fortunately my family does Secret Santa so there's only one present to buy, but I've got a skiing trip to pay for too. I have to admit I feel like I'm walking a tightrope, especially with only 1 proper system in place.
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Old Nov 26, 2010, 9:11am   #574
 
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Laurence Beggs

Adamus started this thread This guy has good ideas.

The-ID-NR4-Setup

Asian-Session-False-Breakout

Notice I didn't say he comes up with good ideas - I just said he has them, as in he can write well about them and likes doing his newsletter. Not that that's a bad thing. I wouldn't have come across it on my own. And maybe he does think some of them up himself. Thanks to NVP for the tip who's a big admirer of the newsletter.
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Old Nov 26, 2010, 10:35am   #575
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Re: Back to where I started

Quote:
Originally Posted by Adamus View Post
Normally I get up at 6:00am to work a couple of hours before breakfast but a combination of overtiredness and sloth meant I just got up now. Despite hating myself for being emotional about my trading, I'm really chuffed to see my equity is back where it was 2 months ago after being in drawdown and being raided for rent and food money. So I'm now at £34K which will drop to £32.5K after taking out another £1.5K for subsistence through December. Fortunately my family does Secret Santa so there's only one present to buy, but I've got a skiing trip to pay for too. I have to admit I feel like I'm walking a tightrope, especially with only 1 proper system in place.
I've been in drawdown since a rather heady peak in May. Still up for the year, but some ways from the top.

I've got two systems in action, a shorter term FX breakout system and a longer term trend system on FX, commodities and interest rates. The latter system has been flat for over a week now and I'm not close to getting any signals - I don't mind this though. The short term system is long USD against a few currencies.

I've made some modifications to the strategies over the year. Looking back at what I've done, the two things I've tried to achieve are a) simplicity and b) lower frequency of trading. For example, I originally had the stops 0.75 ATR away on the short term system, but I've now moved that out to 1 ATR, as it reduces the number of trades. It's not a big change, but it has aligned it more to how I want to trade.

I've now coded up an option pricer in Amibroker, the next challenge is to incorporate options into a mechanical strategy (this could take a while..!).

Hang in there Adam, you've put in a lot of work, will be a shame to let it go. As I always say, the hardest part is when you're losing money - BUT I find that the strategies usually start to make money when you're at a low ebb.
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Old Nov 26, 2010, 11:18am   #576
 
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Re: Back to where I started

Adamus started this thread Options?!? You'll have my greatest respect, if you can do that. Just remember, the Black-Scholes formula only works 95% of the time. Are you going to price them, or do you have historical options data that you're going to work with? I thought about that once but decided the different strikes and months all trading at the same time made it too much of a black hole for time and effort.

I think wide stops are pretty much the way to go, they generally increase any given system's profitability for me in backtesting.

The system I'm currently running (not the 3 Ducks) sets its exits on entry - a stop and a target - and leaves them like that. When the stop's miles away, it makes it pretty hairy, especially when it's close to the target - at which point the stop is on average twice as far away from the market as it was when the trade entered. The nightmare scenario is of course checking up on the almost-at-target trade and finding a massive bar taking it down to the stop. Reminds me of snakes and ladders.

I was also going to say something - psychology. I can't say I've cracked it or anything but I do think I'm a pretty objective type and my approach is essentially do-or-die. I made my decisions and I know where my cut-off point is. And so I stick to that. It doesn't feel good, especially when my equity hit £23.5K on Monday, and of course it feels great when it goes the other way like Tues to today, but so far I have been successful at isolating the feelings that come from trading and not letting them influence my decision making.

My bail-out equity is when it falls to £20K so at least I would have a little to live off while finding another job. When my equity hit £23.5K, I admit I started thinking about what other kind of job I should look for, but I didn't stop or change my trading. In fact I thought that when it hit 29K, and then 27K, and 25K too.

It totally surprised me that I'm back up to £34K so quickly. Getting down to £23.5K was long and drawn out. Looking at the equity curve from my backtest though, it can happen. But then this is the future compared to that, and so anything can happen. I've got to get this 3Ducks back on the go and then I'll be less dependent on this one system I'm running now.

I'm actually also running a variant of the FMT system on GBP/USD which is hot at the moment. I spent quite a while trying to apply it to other markets but didn't find anything. FMT is so hot at the moment I know I should give it more leverage but I haven't done the grunt work yet to see how long I can expect it to last, and the big question right now is how it behaves over December and the New Year break.
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Last edited by Adamus; Nov 26, 2010 at 11:23am. Reason: correcting sloppy writing
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Old Nov 26, 2010, 11:32am   #577
Joined Jan 2009
Re: Deadline June

Well, you could always look for a job anyway. If your system is automated, you can leave it running whilst you're at work?

For options backtesting, I'm going to have to make some fairly wild assumptions. I was thinking I could use historical vol to price, and add on 1 vol when I'm buying, and subtract 1 when I'm selling.. very crude but I can't overlay past implied vols onto a backtest.
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Old Nov 27, 2010, 3:43pm   #578
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Re: Deadline June

Adam, it strikes me that in a month or two, your thread title will have relevance again, as it looks like you'll be shooting for June 2011
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Old Nov 27, 2010, 9:19pm   #579
 
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Re: Deadline June

Adamus started this thread It's an unfortunate side effect of trying to discover something, e.g. mechanisms for trading systems, that you can't predict how long it's going to take.

That is also true of any effort that relies on beta software like NinjaTrader 7.

Put them together and any prediction of project timelines is subject to non-linear influences.
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Old Nov 29, 2010, 4:07pm   #580
 
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More backtesting hell and damnation

Adamus started this thread This time it's stop orders.

I thought for a long time that I was incapable of writing a system whose exit strategy was based on trailing stops. There would always be a few instruments in the portfolio which just lost money wholesale. So badly that I just dropped it automatically.

I then discovered this weekend that actually it is possible to set trailing stops with appropriate parameters that make those instruments backtest quite profitably.

I haven't done any forward tests yet because the problem is on some of those instruments, e.g. EUR/CHF, and optimization run will always give the best parameters that pick out one monster trade.

Ninjatrader won't allow me to optimize on profits minus the biggest win, which I have seen on other platforms.

It looks like I'll be manually optimizing the trailing stops on my system now.

So I haven't got my second basket system in place yet. Productive weekend, but not productive enough. Meanwhile my first basket system (meaning one system running on a whole basket of different currency pairs) is in action and is beating a retreat from the equity high of Friday.

The weekend was good, with a nice gap in my favour on EUR/GBP - but today so far stinks. Down two grand GBP. Mustn't complain. I have no doubt my second system wouldn't like the conditions today either.
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Last edited by Adamus; Nov 29, 2010 at 4:13pm.
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