S&P Daytrade (Hill, Pruitt & Hill)

[tomorton]

I'm not a daytrader but these guys (The Ultimate Trading Guide etc.) seem to know what they're talking about. They backtested a range of strategies and for daytrading they say this one consistently outperforms. It is marketed under differing names but as a guide this is the one that involves determining whether the next day will be a Buy Easier Day or Sell Easier Day based on recent volatility etc.. From this you can set entry points for buying or selling, and a reversal point if the market reverses and goes the other way.

I understand the methodology (only summarised here) but, assuming that the trade goes into profit, they are pretty quiet (like many strategy developers) when it comes to exit. They do say that each trade is exited at the close. It seems to me that a clever sytem for picking entry points can be made useless if bad exits erode the gains, regardless of timeframe.

I am paper-trading this system at present and will look forward to sharing findings in a few weeks. In the meantime, how have traders found this system in practice? Does it still work? Does it work via SB platforms? What exit signals do you set?

 

[tomorton]

System recommended no trades 20/02 or 21/02 (prices based on Finspreads S&P Daily Cash).

 

[kluivert]

I've backtested this in WealthLab on the Naz100 over past 10 years with the addition of the following exit rule :
"Every time we move three ATRs in the profit place a trailing stop three ATRs from the high of the day that penetrated that point."
System results:

	Long + Short	Long Only	Short Only	Buy & Hold	
Starting Capital	$100,000.00	$100,000.00	$100,000.00	$100,000.00
Ending Capital	$444,014.06	$750,598.70	$-206,584.65	$1,512,493.03
Net Profit	$344,014.06	$650,598.70	$-306,584.65	$1,412,493.03
Net Profit %	344.01%	650.60%	-306.58%	1,412.49%
Annualized Gain %	10.44%	14.37%	NAN%	19.84%
Exposure	94.10%	53.17%	0.00%	99.93%
				
Number of Trades	513	358	155	99
Avg Profit/Loss	$670.59	$1,817.31	$-1,977.97	$14,267.61
Avg Profit/Loss %	6.48%	12.80%	-8.14%	1,411.43%
Avg Bars Held	55.49	61.74	41.07	3,779.00
				
Winning Trades	235	185	50	93
Winning %	45.81%	51.68%	32.26%	93.94%
Gross Profit	$1,420,454.25	$1,305,312.60	$115,141.65	$1,415,378.06
Avg Profit	$6,044.49	$7,055.74	$2,302.83	$15,219.12
Avg Profit %	31.75%	37.53%	10.36%	1,505.81%
Avg Bars Held	91.65	95.45	77.60	3,779.00
Max Consecutive	7	8	5	N/A
				
Losing Trades	278	173	105	6
Losing %	54.19%	48.32%	67.74%	6.06%
Gross Loss	$-1,076,440.19	$-654,713.90	$-421,726.30	$-2,885.03
Avg Loss	$-3,872.09	$-3,784.47	$-4,016.44	$-480.84
Avg Loss %	-14.89%	-13.64%	-16.95%	-51.46%
Avg Bars Held	24.93	25.69	23.68	3,779.00
Max Consecutive	9	11	20	N/A
				
Max Drawdown	$-315,643.44	$-214,606.34	$-326,644.66	$-946,954.31
Max Drawdown %	-55.90%	-31.27%	-309.75%	-62.34%
Max Drawdown Date	14/10/2002	9/10/2002	2/08/2007	5/08/2002
				
Wealth-Lab Score	4.89	18.58	0.00	7.48
Profit Factor	1.32	1.99	0.27	490.59
Recovery Factor	1.09	3.03	0.94	1.49
Payoff Ratio	2.13	2.75	0.61	29.26
Sharpe Ratio	0.56	0.91	0.11	0.86
Ulcer Index	24.44	10.89	185.07	23.90
Wealth-Lab Error Term	16.13	14.39	686.96	17.54
Wealth-Lab Reward Ratio	0.65	1.00	NAN	1.13
Luck Coefficient	36.07	30.51	4.00	5.66
Pessimistic Rate of Return	1.59	2.53	0.23	288.70
Equity Drop Ratio	0.43	0.22	0.00	0.22
[CODE]

 

[kluivert]

So Long strategy is ok if you can tolerate a 31% drawdown but forget about going short with it.

 

[tomorton]

So Long strategy is ok if you can tolerate a 31% drawdown but forget about going short with it.

hi kluivert -

thanks for your generous sharing of test data. I actually ran into maths difficulties as I continued to paper trade this sytem - it isn't all that hard to work out the strategy using the index OHLC data. The problem I have had is converting this into a usable system through a spreadbetting account: the SB quotes are always a little adrift from the real index price but their OHLCs are way off because they are 24hrs/day, and this led me into a lot of self-confusion. If I can make some time available I will pursue this using the index data only but its very interesting to see your results and a surprise that the long strategy should be so much more successful.

I love the ulcer ratio - I hadn't heard of this before, its a lovely concept.

 

[kluivert]

thats ok glad to help since I was attracted to their systems myself and this system was what got me into using WealthLab to backtest their ideas but also to try other ideas myself. I also bought and read their book a few years ago(quite heavy material but the systems do work just that there are other systems out there that also work lol which you can only confirm through backtesting). You can try running a backtest yourself for a single stock from the wealth lab site at
ChartScript
For me though 30% drawdown is a bit much to take psychologically so I'm still trying other ideas to improve on that.

 

[tomorton]

hi kluivert

I agree - 30% is totally unacceptable, I could not sleep with that. But at least the system has potential and I am sure it could be refined to cut this figure.