Flatline....

This is a discussion on Flatline.... within the Trading Systems forums, part of the Methods category; ok, the patient is dead.... attached is an equity curve of a home-grown trading strat tested on data as far ...

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Old Feb 21, 2005, 2:59pm   #1
 
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Flatline....

ok, the patient is dead....


attached is an equity curve of a home-grown trading strat tested on data as far back as 1990.

the inputs (all two of them) are dynamic, and so should therefore respond to current prevailing market conditions..

it is counter-trend..


performance has been rather stellar (50pts per trade, 80% win rate), until we hit 2004, whereupon it has basically flatlined.

this...
is...
annoying....

looks like 60,000 points is providing overhead resistance..


anyway, the point of my posting was..

has anyone come up with a decent mechanical strat that has performed well on the Dow during 2004? all my trend-following ones have got a similar pattern, as have my counter trend ones.


it cant be due to current market volatility can it, as the inputs are based on recent volatility levels......?
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flatline-dow.jpg  
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Old Feb 21, 2005, 3:08pm   #2
 
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Fettered, you are giving them riddles to solve ~ they don't like this, you know they don't.
Some bright spark is going to suggest something unworkable, just for the sake of it....
Actually, there is no difference, because if you presented the chart upside down, it would be
likely to have the identical effect. <g>.
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Old Feb 21, 2005, 3:10pm   #3
 
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Have you had a look through the trades to see how it is failing?
It is quite likely that the inefficiency it was using has just been traded out, probably never to return.

This type of problem happens to every trading system which is why I run at least half a dozen at a time so if one or two hit the ceiling the portfolio still makes money and I can replace the dead systems with fresh ones.

At least flatline is better than a loss.
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Old Feb 21, 2005, 3:12pm   #4
 
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FetteredChinos started this thread true, and i see where you are coming from..

what im trying to get at is that something other than volatility drying up has changed in the markets over the past 18 months or so, and im trying to work out what it might be.

was looking at the monthly ranges on the dow earlier today.. ranges of 1200 points were not uncommon a few years ago....

(sigh)
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Old Feb 21, 2005, 3:14pm   #5
 
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FetteredChinos started this thread agreed jm...

at the moment i am trading a method or two based on the fundamental principles of this strategy.. so im using the discretionary side to turn the flatline into a (very slight) up-slope..

its annoying though, as im a big fan of set and forget systems..
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Old Feb 21, 2005, 3:14pm   #6
 
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Well, now that the thread is started and you are getting responses, I bet you are pleased, I remain an observer with interest to see how this develops. The truth is, I myself do not know
how to solve this one.
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Old Feb 21, 2005, 3:26pm   #7
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FC - it's fractal.

Take any smaller timeslice and enlarge.

Socrates was close to it without realising it. You could present it upside down and it would still be fractal.

I don't 'do' plug-n-play - far too many dynamic events & variables to leave to a totally mechanistic system approach.

Last edited by TheBramble; Feb 21, 2005 at 3:31pm. Reason: answer 2nd part of FC's question
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Old Feb 21, 2005, 3:32pm   #8
 
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FetteredChinos started this thread hmm interesting brambs..

so you mean, if i broke it down to an hourly level , for example, it would exhibit the same characteristics?
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Old Feb 21, 2005, 3:34pm   #9
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I'm saying a quick look at the graph you provided showed similar 'patterns' of the whole throughout. I counted half a dozen without squinting.
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Old Feb 21, 2005, 3:39pm   #10
 
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FetteredChinos started this thread ah now i get you.. mini flatlines throughout the entire curve.. interesting...

so on the huge scheme of things years from now, we could end up with a whopping great flatline as this particular inefficiency gets eroded completely

interesting..


might as well stick all my money in a savings account now....
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Old Feb 21, 2005, 3:47pm   #11
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Yeah. As JMR mentioned, any 'set' system is going to become inefficient - but not permanently. It's not that 'the Market' gets wind of your system and changes. Or that other traders trade it and 'flatten' it.

It's just the normal 'Flow' of the market and it replicates itself over time.

It's important to understand I'm not talking about Momentum here. Momentum requires time, effort and energy (effort is actually a function of time & energy, but...). Flow requires nothing more than recognition. It simply IS.
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Old Feb 21, 2005, 3:53pm   #12
 
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FetteredChinos started this thread hmm, thanks brambs..

the question is , can we quantify this "flow"?

or as a compromise, perhaps running a MA on equity would show us when the "flow" isnt in our favour...

the point i was trying to get at, was that this "flow" is currently aiding neither counter-trend, nor trend-following systems that i have looked at.

so where does this leave us? what other ways to trade are there? Trend-ignoring?

FC
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Old Feb 21, 2005, 4:00pm   #13
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You're not looking at a price curve FC - it's an equity curve. So look at what your system is 'trading'. That's the bit that isn't working as you expected.

You're making a distinction about the system - not price action.

You're also assuming it's not working in trend or counter-trend in all timeframes.

On the upside, an equity curve flat-lining is preferable to one heading South - n'est ce pas?
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Old Feb 21, 2005, 4:04pm   #14
 
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Quote:
so on the huge scheme of things years from now, we could end up with a whopping great flatline as this particular inefficiency gets eroded completely
Or more likely you will end up with a whopping great loss and the inefficiency gets eroded completely.
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Old Feb 21, 2005, 4:06pm   #15
 
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FetteredChinos started this thread yes i know, i know, but i want to eat my cake and have it...

the reason i mentioned the MA of equity, was that it may not be obvious to the human eye WHY the system isnt working..as you said, there are so my dynamics and variables to consider..letting the system tell you it isnt working is better than trying to second guess the markets?

the human brain is impressive generally, but not in my case..i generally like confirmation...


10710 for a Dow close this friday?
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