Automatic Pattern Search

This is a discussion on Automatic Pattern Search within the Trading Software forums, part of the Commercial category; Originally Posted by Albert Carey There are roughly 10 x 4 x 5 x 6 = 1200 4H bars in ...

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Old Oct 12, 2008, 11:01pm   #201
Joined Feb 2008
Quote:
Originally Posted by Albert Carey View Post
There are roughly 10 x 4 x 5 x 6 = 1200 4H bars in that period.

This is a number that is very small for statistical analysis purposes. You need to consider a time span where there is at least one primary uptrend and a primary downtrend and extract your patterns from there. In this way you cover both longs and shorts.

I hope the 10K was virtual money because a 90% loss in 10 days/4H bars is a clear indication of overtrading and non-existent risk management. Basically, in 60 bars you lost 90% of your account. Based on your pip stops I will assume that each trade was closed in maybe 2 to 3 bars minimum. I will also assume that you stayed flat for at least 1 bar so this sums up to about 4 bars.

Summary: I estimate that in about 15 trades or less you lost 90% of your account. This is not related to trading technique but to risk management. Your loss shouldn't have exceeded 15 - 20% max drop from high mark.

I risk 0.5% of my account on each trade and in your case that would account to maybe a 10% drop and you would have plenty of time to change/modify system and maybe end up with making a profit.

Risk management is more important that trading system. System may be good but in the process of experiencing a drawdown and if one is overtrading often it is given no chance of recovering.
The period was 02.01.2008- 18.09.2008 and contained 1105 4HR bars (I got the date period wrong in my last post).

Looking at a weekly chart of EURAUD it had been trading in a range for the last 3 years I would have to go back to 2004 to catch a significant downtrend. It has moved very suddenly up recently though most probably as a result of huge volatility recently in the financial markets.

The 10K was virtual money and I was using excessive leverage in order to boost returns for the period of the competition which lasts 3 months but it has worked against me in this case as the trading is fully automated and there is no option to change the parameters of a system once the contest has started. I will bear this in mind for real trading and set a 1% risk limit.

Looking at the trade hsitory of the system, under Account History:

Participant warwickquant - Automated Trading Championship 2008

It looks like some trades were held for 2 or 3 bars but many were opened and closed on the same bar. There were 33 trades with 22 resulting in a loss.

I will extract patterns on a greater timespan, put in proper risk management and forward test the system.
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Old Oct 13, 2008, 9:38am   #202
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Originally Posted by mballagan View Post
The 10K was virtual money and I was using excessive leverage in order to boost returns for the period of the competition ...

I think you shouldn't put the blame on APS but on your wrong use of the program, as well as your bad risk management:

Data FAQ

You sound like several other posters in these and other threads who constantly blame indicators or chart patterns for their losses. Most of these traders start with a small account and huge leverage and they hope they will make it big in a few months...

Last edited by intradaybill; Oct 13, 2008 at 9:47am.
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Thanks! The following members like this post: trader3cnd
Old Oct 13, 2008, 11:05pm   #203
Joined Feb 2003
Another question:

Has anyone ever found success in using range bars are volume bars with APS rather than time based OHLC?

I can't run the tests myself because my charting platform doesn't offer such data, but I was curious.
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Old Oct 14, 2008, 5:02pm   #204
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jiacopel...the problem is you cannot define exits in APS based on range or volume bars. The program operates based on OHLC only:

Tradingpatterns.com Michael Harris article

mballagan...what you have done has nothing to do with trading but it's pure gambling. Save the wrong application of APS. Maybe you should not trade a real money account before you study risk management seriously and understand that even the best of systems can fail under conditions of high leverage.
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Old Oct 14, 2008, 11:42pm   #205
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Originally Posted by intradaybill View Post
I think you shouldn't put the blame on APS but on your wrong use of the program, as well as your bad risk management:

Data FAQ

You sound like several other posters in these and other threads who constantly blame indicators or chart patterns for their losses. Most of these traders start with a small account and huge leverage and they hope they will make it big in a few months...
Thanks for the link - useful info on number of bars required for statistically significant patterns. Will go back to the drawing board and test systems using proper risk management e.g 1% of trading capital on each trade.
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Old Oct 14, 2008, 11:59pm   #206
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Originally Posted by equtrader View Post
jiacopel...the problem is you cannot define exits in APS based on range or volume bars. The program operates based on OHLC only:

Tradingpatterns.com Michael Harris article

mballagan...what you have done has nothing to do with trading but it's pure gambling. Save the wrong application of APS. Maybe you should not trade a real money account before you study risk management seriously and understand that even the best of systems can fail under conditions of high leverage.
The competition was a virtual account of USD10,000 so I havent lost any real money this time but I am aiming to trade a live account next year. You are right its gambling and I learned my lesson. I will see if I can create profitable systems using APS patterns with data sampled properly according to the timeframe being traded and with proper risk management. The objective is to build systems for fully automated forex trading on the Metatrader platform.
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Old Oct 21, 2008, 11:04am   #207
 
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Virtual trading has nothing to do with real money trading. No real counterparty involve in the virtual game. You are wasting your time. Better try mini account with real money.
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Old Oct 23, 2008, 5:15am   #208
Joined Jun 2008
To any and all using APS:

A couple of questions.

I'm evaluating the demo right now and it appears to generate rules going 3-5 bars back. In the demo version only partial code is visible, but it looks like 3-5 bars. e.g. Buy when Close is less than Close of two days ago, and Low of one day ago higher than Open of five days ago, etc.

(1) Generally how many bars back do the actually patterns go? Is it always five bars and less? Or does some model logic go back even further, for longer term patterns?

(2) For anyone using APS for a year or more, have the results remained consistent for you in real world trading? Or has your portfolio profit/loss swung wildly?

(3) For experienced users - has the program really paid for itself, like some claim?

I'm currently not finding great results testing the demo on Forex daily and 15 min data over two years (2004-2005) and then backtesting the patterns on year 2006. But I continue to investigate.

Thanks for any input from experienced users.
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Old Oct 23, 2008, 9:06pm   #209
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Hi,

I do not consider myself an experienced APS user but I will offer some comments to your questions.

Quote:
Originally Posted by ozzymandius View Post
(1) Generally how many bars back do the actually patterns go? Is it always five bars and less? Or does some model logic go back even further, for longer term patterns?
I believe they go back 6 bars max. If you try the patterns with the delayed entry that can increase significantly.

Quote:
Originally Posted by ozzymandius View Post
(2) For anyone using APS for a year or more, have the results remained consistent for you in real world trading? Or has your portfolio profit/loss swung wildly?
It depends what you mean by results. This program only finds patterns that meet some criteria based on historical performance etc. I use those as basic elements to develop more complex trading startegies that include indicators and a banch of heuristics. If you are asking about the performance of individual patterns I think the examples APS developers display on their website about QQQQ are impressive but I don't think they can be easily generalized to other markets:

Tradingpatterns.com Michael Harris article

Quote:
Originally Posted by ozzymandius View Post
(I'm currently not finding great results testing the demo on Forex daily and 15 min data over two years (2004-2005) and then backtesting the patterns on year 2006. But I continue to investigate.
Try 1H and 4H data. I am suspicious of forward testing though because it has cost me a lot. A couple of years ago I rejected a system I developed based on data from 1996 to 2003 because it failed during 2004 testing. Then it exhibited a stellar performance during 2005 and 2006 but I was not trading it.

There is no theoretical justification for forward testing unless you are looking for systems that make money each and every year. In that case I recommend investing in T-Bills. I prefer a return of 200% during one year and then giving back 25% of the profits next year and then making again 100% and then giving back 30% of that and so on...At the end of the day you can become very rich by realizing that giving back profit is part of the game.
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Old Oct 25, 2008, 4:25am   #210
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Intradaybill - thanks for the input. I appreciate the feedback.
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