Chinos' Simple S&R FTSE 100 System

FetteredChinos

Veteren member
3,897 40
Well guys, having done some serious research last night and modified my existing trading method to the extent that it still gives me an "edge", i thought i would share the strategy/method that started it all off many moons ago :)

as i have alluded to in posts elsewhere on the site, the "indicator" that i have devised doesnt take into account the close, only the highs/low of each day. the "indicator" doesnt lag at all - it is simply an expression of the latest bars action to that of the bar immediately preceeding it.

in the chart attached to this post, i have included a chart of the closing prices of the FTSE100 for 2003, coupled with the BUY points marked in GREEN and the SELL points marked in RED.

as you can see, in choppy action this system works well, but doesnt cope too well with impulsive action. I have chosen 2003 as my example year, partly because showing the points of the last few years would have made the chart unclear, and secondly that 2003 wasnt the greatest year for the system (owing to the long trend we had), when it performed relatively poorly, but still turned a respectable profit.

from my calculations, 2003 yielded the follwing stats

Total Points 1026
58 Trades
43 Winners (win rate 74%)
points per trade 17.7 (pretty poor actually)

this is a truly poor year. 2002 for example was:

Total points 1777
70 trades
46 winners (win rate 66%)
points/trade 25.3 (more in line with historical averages)


whether this system is now past its best is debatable, but hopefully it can give the rest of you guys inspiration for your own systems. it certainly got me thinking.

this one suffers from fairly large drawdowns, but as long as the stake size is kept relatively small (for spreadbetting i use £1 stake for every £1,500 in my trading fund - quite conservative) then there shouldnt be too much drawdown.

the rules are::

1) Calculate the Average of the High and Low for today's trading day

2) if today's average is 20 points HIGHER than yesterday's average, then SELL at the CLOSE

3) if todays average is 20 points LOWER than yesterday's average, then BUY at the CLOSE.

4) thats it - its a simple Stop and Reverse strategy. hold a position until you get an opposite signal.

i have tinkered with it somewhat to minimise the drawdowns etc, but at the moment, these methods shall remain somewhat secret lol.


comments as usual are most welcome.

it works to some extent on the DOW, but the points/trade level is almost the same, and we all know how the DOW whips around like a beastie, hence why i prefer to trade it on the FTSE (plus the more sociable hours!!)


FC
 

Attachments

  • buy sell points chart.xls
    35.5 KB · Views: 1,227

FetteredChinos

Veteren member
3,897 40
no problems mate.

drawdowns are always a problem with stop and reverse systems.

when i get a moment free i will attach my backup spreadsheet which shows the system "in action".


by doing all sorts of crazy auto-filter jiggery pokery you can learn to filter out the bad trades!

(edit - i mean you can filter out where the bad trades are "more likely" to occur lol)


FC
 
Last edited:

rog1111

Established member
673 10
FC

Out of interest, may I ask whether your results are based on the FTSE index or FTSE futures prices ? Big difference. I recently came up with a nasdaq100 system that worked brilliantly for the index values, but it was hopeless for the NQs or QQQ.

rog1111
 

FetteredChinos

Veteren member
3,897 40
based on the Cash index im afraid, so the usual caveats apply.

the system is based on EOD prices, at which point the fair value of the futures in relation to the cash would have settled down. besides, in some cases the bias will work in your favour, in others it will work against you.


having said that, in my experience of trading it last year, as the nature of the entry points is contrarian, you often find that you have the SB bias on your side. which makes a pleasant change :)

FC
 

DUM TRADER

Newbie
5 0
With this type of system it does not matter if you trade the cash, because you are buying or selling at the close of trading and most spread betters allow for this. Anyhow the results would be the same as with the futures as all the trades are taken at the close.

I used to know a guy back in the states where he used something similar to fetteredchinos system. but he uses a moving avr and if price is higher or lower by. 050% of the moving Avr then he will trade the opposite direction. but he wouldn't take the trade at the close. he would wait for the open and use some kind of volatile breakout method to to back it up.
I will think up of some filters to see if we can make this work even better.

Byt the way what was you bigest draw down on the dow & ftse


DM
 

FetteredChinos

Veteren member
3,897 40
DM/ cj12 :cheesy:


thankfully i never experienced a mega drawdown, but according to backtesting, it amounted to 529 points (kaboom!)

however, this isnt as bad as it sounds. it only equates to about 33% equity if sensible position sizing is adopted (my £1 per £1500 rule)

i attach the backtest/forward-test spreadsheet for you guys to have a look through and play with the various triggers etc.

of course this can be improved etc, but this was what got me thinking about improvements etc, and hopefully it can trigger some ideas for the rest of you to come up with. i have since developed a new method (Chinos System 9 is its working title, and my god is the equity curve smooth!!! I may share this in good time ;) )


FC
 

Attachments

  • chinos pivot move.xls
    812 KB · Views: 794

rog1111

Established member
673 10
DUM TRADER said:
With this type of system it does not matter if you trade the cash, because you are buying or selling at the close of trading and most spread betters allow for this. Anyhow the results would be the same as with the futures as all the trades are taken at the close.


DM

With respect, being the cautious trader that I am, and not wishing to detract from FC's results, before using the system, I myself would still check that it was valid for futures prices. You could still use the index values for signals, but you would have to use the futures prices for testing, making sure of course that if EOD data was used, then the time frames matched exactly (not always the case). Also there are plenty of other threads here that stress the importance of verifying the accuracy of the index data, particularly from free sources.

GL
rog1111
 

FetteredChinos

Veteren member
3,897 40
agreed rog,

but the fact of the matter is that i have actually traded this methodology with success in the past, and in fact the only reason i have changed it is that i have found better, more consistent methods, that are derived from it.

again, this method that i have shown isnt the most robust of systems, so i have displayed it only for "educational" purposes.

FC
 

pogle

Member
64 4
thankfully i never experienced a mega drawdown, but according to backtesting, it amounted to 529 points (kaboom!)

FC,
I don't think this is correct, at least according to my idea of what drawdown is (which may not be the same as everyone else's!).
Your code seems to accumulate losses until the next win at which point you reset the drawdown to 0. I calculate drawdown as the difference between the current trading balance and its highest ever value. I've modified your spreadsheet and get a maximum drawdown of 673 points. Still not disastrous but it's a bigger KABOOM!

As I say I don't know if my version of drawdown is the 'correct' version but it's always worse that your version which is no bad thing in my mind.

Thanks for posting this (and your other ideas).

pogle
 

wolfie

Junior member
12 0
FC

If I have followed your s/sheet correctly you would have made 117 points so far this year, would you mind confirming this?

You mentioned you've tinkered with the 'rules' to improve the returns, have you introduced a stop loss rather than wait for a signal in the opposite direction?

Thanks for the post.

Wolfie
 

FetteredChinos

Veteren member
3,897 40
wolfie, if you read my journal, you will see my last few entries and exits. on cloed positions the past month has yielded 129 points. (3 wins from 3)

i had a bit of a disaster in january with "The Dow Experiments" (see other threads on the tradings strats board) , so im only back level with my starting capital as at 1st Jan. curses. still, im clawing it back, and it finally looks as though the DOW is jumping off its cliff :)

as regards a stop loss, i tried all sorts of levels - fixed, absolutle levels, say 100 points etc, or even a trailing stop loss. they made little difference to the overall results, in fact, more often hindered that helped. which kinda makes sense - the trade only stops and reverses when the market has its "blow-off" (ahem) in your favour.

pogle - good point re:drawdown - i just couldnt think of a way to code it in excel - my brain has been very tired lately.


as regards rules to improve the system, instead of improving the exits, i sought to improve the entries.

a good place for the rest of you to look is to note the relationship between a current day's high/low points and that of its predecessors, and then note the course the market then followed.

still, if this method shows us one thing, it is that a high win% system is far easier to stick with through thick and thin, and also has a smoother equity curve, in my opinion.

as always, i shall be doing some more research over the weekend. amazing how i keep getting inspiration when hungover like a donkey :rolleyes:

cheers

FC
 

TheBramble

Legendary member
8,395 1,170
pogle said:

I don't think this is correct, at least according to my idea of what drawdown is (which may not be the same as everyone else's!).
Your code seems to accumulate losses until the next win at which point you reset the drawdown to 0. I calculate drawdown as the difference between the current trading balance and its highest ever value.

investopedia agree with you pogle:-

http://www.investopedia.com/terms/d/drawdown.asp

"The peak to trough decline during a specific record period of an investment or fund. It is usually quoted as the percentage between the peak to the trough. "
 

KIMMRUNNER

Member
58 2
I find all these automatic systems interesting.

But the most difficult question of all is how to define what is a 'better' system, and the answer is not easy

I tried to open a recent thread to debate this point: but didnt get much of a response.

Which is better?

A system which trades only once every 30 days but with 99% success, or one which trades every 2-3 days with 70% success?
Waiting for trades is frustrating, but there are patterns which are infrequent but more or less infallible.

Is a system which trading single point achieves (say) 20000 points profit allowing for spreads over the last 4 years, but at the cost of a dip of 1000 points, better or worse than a system which achieves only 10000 points but does so only dipping 100 points?

I have also pointed out that to avoid the accusation of over optimisation, there must be a set of dates when external events take over - eg 9/11 to which response must be random, since no system can predict 9/11!!!

It would be nice to produce a set of rules which assign a performance index to a system then have a competition for the best system!
 

FetteredChinos

Veteren member
3,897 40
eh up Kim, i didnt think you were still around!!

i have been trying to reverse engineer your system for which you posted the results up a few days ago. i thought i had it, but when i extrapolated it into the other data, it didnt work. curses.

could you perhaps share a bit of it? it seems to be a simple close at EOD system when the entry criteria have been set. but what im not sure about it that it seems to buy/sell at the extremes of the day. is it something related to a gap-trading strategy?


in relation to your questions here, i would prefer to trade a system that trades more often, even if it is necessary to sacrifice a bit of a win rate, and perhaps overall profit. maybe it is just in my nature, but i would prefer to have locked profits in, rather than have them on paper.

but it all depends on how long you want to spend in front of a PC. i dont like sitting here for any longer than i have to, so perhaps one system that trades every few weeks, but allows your to define the limit orders beforehand etc, is preferable , if you would rather be on the golf course.

on the other hand, why not trade both systems together, so you load up when you get a simultaneous signal from both?

FC
 
 
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