Simple trading system (that works)

[Pazienza]

In terms of a system that "works", how many traders are realistically going to be able to cope with a 34% strike rate?

Not that there is anything wrong with it necessarily, but in practice very few could cope with the drawdown and emotional side of that kind of strategy.

 

[DashRiprock]

and anyway ********s it's not an interesting thread anyway;

Hi guys,

Mark from Helios Automated Trading here. I would like to share some of the things I learned while working as head systems developer at Helios. During my career, first as a trader and then later a developer I have developed a large number of profitable systems and hopefully I can pass on something useful to others here.
I thought I would do a series of posts here, exploring a number of popular trading ideas and testing them to see if they actually work, and if they do, how well they perform. There is so much ‘trading wisdom’ available in books and courses, but unfortunately very few of those actually show what works and what doesn’t by testing the trading concept in an objective way.
After describing and testing a trading system, in the next post I am then going to see if the system can be ‘tweaked’ in any way to make it even more profitable.

The classical dual moving average crossover system.

There are few traders who haven’t come across this simple and classic trend following method. A trade is initiated when a shorter term moving average (the ‘fast’ MA) crosses above/below a slower moving average (the ‘slow’ MA). A long trade is initiated on the next open after the fast MA crosses the slow MA to the upside, and a short trade is initiated on the next open when the fast MA crosses the slow MA to the downside.

Everything up to here is total bull****. It's just "filler".

We are going to test this system on daily bars of the EUR/USD currency pair

why?

Our data set is going to run from 1998 through to 2010

why?

Our fast MA is going to be a 13 period exponential moving average

why?

while our long MA is going to be a 21 period exponential moving average

why?

In this variation of the system, we are going to be always ‘in the market’. In other words, when an opposite signal occurs we are going to exit our present trade and reverse it (for example, we have a long position and then we get a MA crossover to the downside- we then exit our long position and we go short).

why?

At this stage, we are not going to use a protective stop loss or a profit target.

why?

System Results:
The system generated 98 trades, of which 33 were winners and 65 were losers. The win/loss ratio therefore was 0.34 but because the winners were substantially larger than the losers

By what factor? What was the variance?

the system generated $65,109 in profits.

Given how much original Capital? What was the maximum Drawdown? To what extent were comissions included? What is the max DD when you bootstrap the results 1,000 times?

EDIT: Answered: Lastly, the maximum drawdown for this system was $20,472

While this is less than half as profitable as the Helios trading systems

totally spurious (and probably a "plant")

this is not bad and we can see that the MA crossover could be used as a solid base for a good system.

logical fallacy

Lastly, the maximum drawdown for this system was $20,472, which is important to know if we want to trade the system going forward.

Yes it is. Good of you to mention it.

In the next post, I am going to add some stop losses and/or profit targets to see if we can improve the performance of this basic system. In addition, I am going to play with optimising the moving average lengths to see if this has a major effect on system performance. Until next time,

Regards,

No suprises there

 

[Mark Rose]

I’m a little bit disappointed Dash. Your method of attempted criticism of my post is to repeat “why” about six times, like a mentally challenged parrot. Also, after reviewing your previous posts it is evident that most of your contributions to this site consist of inane pop culture references, and unsuccessful attempts to be witty. I’m sorry, but you lack any sort of credibility.

It is fairly obvious that you spend too much time in front of various screens. Maybe its time to go for a walk in the fresh air, what do you think?

The system that I posted is one of the corner stones of basic technical analysis. Hundreds if not thousands of knowledgeable traders and technicians are aware of the value of this system, so I don’t really care what you think about it. The level of detail that I went in my post is quite appropriate for a beginner’s forum. If I wanted to discuss the statistical means used to evaluate the system performance, I would do it elsewhere.

It is very easy to crap on someone else’s work, but a lot harder to contribute something of value. From the looks of things, you do a whole lot of crapping, and not much else.
Have a great day

 

[arabianights]

behead those who insult dashrirprock

 

[the hare]

look mate, you're post is sh!t, about some retrospective trading strategy that no doubt you will take on a prepared "development" route in front of all and sundry here.

Im fairly certain that this same company has used similar tactics in the past, although I've never actually seen them complete what they started. I appologise if I'm mixing them up with another company with a similar name.

What was rather worrying, is that in the process of searching a couple of forums to verify my suspicions, I've seen the exact same post made at T2W posted on a number of sites that seamed to be aimed at your typical get rich quick mug punter.

Its perhaps not the most sensible strategy if the intended market is traders, but a great strategy if you want to con a few hundred bucks from a bunch of gullible ***** (which is fine by me, they deserve it and good luck to the guy !)

 

[DashRiprock]

to be fair, most of my posts are pop culture references and poor attempts at wit. When I joined I tried to make serious posts and a good impression but to be honest there is very little quality trading discussion here at all so I just come for the lulz now. 90% of the crap here is a) retail forex punters b) schiesters anc c) LULZ, of which only c) is a concern of mine.

I just can't be arsed to explain a thousand times how I a) monitor context, b) pick a bias, and then c) trade the order flow. That is pretty much my entire strategy, bar a few "special" cases.

ON WITH THE LULZ!

 

[timsk]

When I joined I tried to make serious posts and a good impression but to be honest there is very little quality trading discussion here at all so I just come for the lulz now.

DR,
If the members who are also knowledgable and experienced traders made more effort to partake in "quality trading discussions", then the lulz content would reduce dramatically. Lulz from idiots who have nothing of value to contribute is annoying, but it can be ignored. Lulz from people like you who clearly know a thing or two and have the potential to make very worthwhile contributions to the forum is altogether more harmful and infectious. If the likes of you, Pazienza and arabianights were to kick this sad addiction, the quality of content on T2W would soar overnight.

Count your lucky stars that I don't write the site guidelines and I'm not a Mod; otherwise you'd have to go elsewhere for your lulz fix.

OFF WITH THE LULZ!
Tim.

 

[barjon]

to be fair, most of my posts are pop culture references and poor attempts at wit. When I joined I tried to make serious posts and a good impression but to be honest there is very little quality trading discussion here at all so I just come for the lulz now. 90% of the crap here is a) retail forex punters b) schiesters anc c) LULZ, of which only c) is a concern of mine.

I just can't be arsed to explain a thousand times how I a) monitor context, b) pick a bias, and then c) trade the order flow. That is pretty much my entire strategy, bar a few "special" cases.

ON WITH THE LULZ!

Dash

Firstly, if you think T2W is devoid of quality trading discussion, crap and full of lulz then that's because you and others like you make it so - despite our best efforts at moderation . So, instead of pouring juvenile scorn on the OP's system (you'll note that I have removed the advertising element from his signature) why don't you explain why you think it is flawed.

Like you, I don't hold with systems as such - although I employ my strategy systematically - but it's interesting to note that of all the systems tested by Perry Kaufman in his well respected tome Trading Systems & Methods a simple ma cross over run without stops (presumably the next cross takes care of that) was the only system to come out on the positive side over a twenty year (I think) testing period.

jon

ps: oh timsk beat me to it

 

[arabianights]

With respect timsk, in my view you need to understand what drives people to lulz in the first place... and the answer to that isn't other lulz...

 

[the hare]

Dash

Firstly, if you think T2W is devoid of quality trading discussion, crap and full of lulz then that's because you and others like you make it so - despite our best efforts at moderation .

If you actually believe that to be the case then you have a very poor comprehension of the reality of this situatuion.

The lulz is simply the effect, the management of T2W and the policies that you enforce are responsible for the cause. Its blindingly obvious to most people, and thats what makes it so funny. T2W has become a parody of a trading forum.

I dont think its necessarily anything to get upset about as the situation seams to suit all paries concerned. Its just a bit annoying occassionally when quality content is removed by moderators who dont seam to understand whats actually happening.

 

[timsk]

With respect timsk, in my view you need to understand what drives people to lulz in the first place... and the answer to that isn't other lulz...

Hi arabian,
I dare say that it's not what drives people like you, DR and Paz to it in the first place. Only you know why you do it? However, that you do, and because many members know that you're a pro trader who knows his onions, they are either willing to overlook it if they don't like it or, alternatively, they see it as a green light to engage in it themselves.It's well know that if pro football players screw around, take drugs and knock the poop out of one another etc. - there's a trickle down effect in the behaviour of the supporters, who then copy the players they so admire. T2W is no different.

In all seriousness, if the 3 of you decided to quit the lulz for just one month - while maintaining your level of posting, then the ratio of quality content to lulz would reverse! Don't get me wrong, I'm no killjoy - even I enjoy some lulz from time to time. It's just a question of proportion and that's something you 3 people can influence profoundly. It's a bitter irony that the people who comment (as DR did above) that T2W is only good for the lulz, tend to be very the ones who generate most of it.

Tim.

 

[DashRiprock]

anyway what is the incentive for anything other than lulz?

Lulzing up howards thread was the only option really after it was revealed that he didn't know **** all about options in theory or in real life, and was tryin to run a course. Timsk and Barjon I exchanges PM's with both of you regarding him and his thread, and to be honest the way the Howard situation was treated is representative of the site.

At the end of the day it was the lulz (and the volplosion that we explained would inevitably come back to bite him in his arris) that caused him to go away, so really you should be thanking us.

and anyway there is some stuff on here made by "well respected" members (no names) that is lauded as "high quality content" by most, but I reckon most people who are actually market facing will agree that it is a bucketfull unadulterated crapflap.


==========================================================================

Anyway look to make my point I'll post some "High Quality Content" (denoted by the hashtag #WINNING) below:

Copper future, daily chart (Chart - #WINNING).

Recent swing low (#WINNING) at previous resistance (WINNING, now turned support - #WINNING) and a 50% fibbonacci (#WINNING) level showing confluence (#WINNING). The price action (#WINNING) at the level (#WINNING) shows pin bars (#WINNING), indicating a bullish sentiment (#WINNING).

Also note the RSI Divergence (#WINNING) as referenced by the blue lines, and the (12,26,9) MACD (#WINNING) looks like it is about to turn positive (#WINNING) and is also showing divergence (#WINNING), yet more confluence (#WINNING) that this is a high probability setup (#WINNING)

In that case trade the breakout (#WINNING) of the red trendline (#WINNING) with stops (risk management - #WINNINNG) below the purple resistance turned support (#WINNING). Take 1/3rd off at a new high (trade management - #WINNING) and let the rest run with a target of the 161.8 fib extension (#WINNING).



Decide for yourselves if this is "high quality content" or not.

 

[arabianights]

You miss my point... the culture here is not one that encourages useful posts... or real traders for that matter... it's geared towards £1pp trade cable off a 5 minute chart with a trillion indictaors types (of both traders and posts)

That and charlatans and spam

That is a cultural issue and I don't envy your job in trying to fix it but that is where you need to look, not the lulz!

 

[DashRiprock]

trade to win is to "trading" what chicken tonight and microwave rice is to "cooking"

look I am only here from 1/1/2011 until 1/05/2011 (for various reasons I am in limbo... pergatory if you prefer), so I thought I'd frequent a forum during that time just to shoot the breeze with other trading folk. After then I'll be out of your way and you can all go back to "confluence" and sh!t.

 

[the hare]

..... and to be honest the way the Howard situation was treated is representative of the site.

I was banned about a month ago for telling the truth about something or other (IIRC it was something to do with Grey1, the mods are always a bit touchy about that particular fiasco)

On my return I was greeted with the following article splashed across the front page of the site.

Interview with Index Option Credit Spread Trader - Howard Cohodas

If that isnt LULZ what is ? That article is a deliberate attempt by T2W's management to establish a particular culture, and it seams to be working.

 

[barjon]

You miss my point... the culture here is not one that encourages useful posts... or real traders for that matter... it's geared towards £1pp trade cable off a 5 minute chart with a trillion indictaors types (of both traders and posts)

That and charlatans and spam

That is a cultural issue and I don't envy your job in trying to fix it but that is where you need to look, not the lulz!

Arabian

Well, the site is not geared towards anything, but it's almost bound to look like that when there are so many new and inexperienced people trying to make a go of trading in some shape or form and who join T2W in the hope of learning. How are those people expected to make any reasoned judgement of how to go about it with some prospects of success if all they get from the experienced traders is "nah, that's a load of crap" rather than a proper explanation of why what they are doing (or being enticed to do by some vendors) is not the way to succeed.

If you're good hearted enough to want to help people along the road and to protect them from being seduced by the "charlatans" then the lulzy stuff doesn't do much.

jon

 

[arabianights]

they won't accept the truth when you point it out to them, anyway

it's like being on a homeophathy site full of true believers sometimes

 

[timsk]

Hi arabian,

You miss my point... the culture here is not one that encourages useful posts... or real traders for that matter... it's geared towards £1pp trade cable off a 5 minute chart with a trillion indictaors types (of both traders and posts)

Point taken. And, broadly speaking, I completely agree with you. However, there's nothing wrong (is there?) in having a site that's geared towards newbies? We all have to start somewhere and it's not T2W's fault that most newbies start with forex, trading £1p/p using indicators. Whatever role T2W has in helping them, it's not our place to tell them what they should or shouldn't do.

That and charlatans and spam

We are aware of the need to address this. Also, I accept the criticism that we could have done more - and sooner. However, with the recent FAQs that address this very issue, I believe T2W now has the most comprehensive resource available on the net to prevent newbies from falling prey to scammers. I'm sure there's more we can / should do and we welcome any and all suggestions on this front.

That is a cultural issue and I don't envy your job in trying to fix it but that is where you need to look, not the lulz!

This is where we disagree. For the reasons given in my previous posts, lulz is as issue. Take away the lulz and allow the cream to rise to the top and the perceived quality of contributions to forums across the site will rise. I'd put money on it. The argument that T2W is only good for the lulz - ergo I'll dump loads more of it on the site - is totally fallacious and really quite damaging. It reinforces the false perception that there's nothing of quality to be found anywhere. There are loads of excellent threads - and not just golden oldies from the dim and distant past. Here are two current ones - both of which have been in pole position in recent weeks on the 'Featured Discussions' section of the T2W Homepage:

Quality thread No1
Quality thread No2


Tim.

 

[the hare]

How are those people expected to make any reasoned judgement of how to go about it with some prospects of success....

I suppose, the same way as the rest of us. You keep kissing frogs until one turns into a prince.

There are cognitive bias's that simply prevent people from making reasoned judgments, and I dont really think that those those bias's can be removed without a lot of work.

You probably wont agree with me, but sites such as T2W are the reason why a lot of those bias's and unrealistic expectations exist. Forums are part of the problem, not the solution, and there isnt a single trader of my aquaintance who thinks otherwise.

The pappa smurf thread is a great example. I could teach a chimpanzee how to trade, but do you honestly believe that a single participant on that thread would listen to anything I have to say ? The main reason that they wouldnt is because they have an expectation that they can make a hundred pips a day. They have an expectation that they can achieve a high strike rate. They have an expectation that they'll never experience a drawdown (or even a losing day). They have an expectation that they can make money working part time.

Where did these deranged souls get these expectations from ? Well, you cant blame T2W explicitly, but you have to admit, the vast majority of the sites content reinforces exactly these types of unrealistic expectations. We have even seen the ridiculous situation where T2W advisors are advertising 100% per month returns (lets not even mention the last ponzi scheme that ended in tears)

The reality is that you area commercial business exploiting the fact that there are people interested in trading. The truth probably hurts but If you really wanted to assist new traders, the kindest thing you could do would be to close the site.

In such circumstances, Its a little unfair to expect a handful of members to take time and effort to provide a rational argument against the claims of vendors when the sites management have created (in the words of one T2W vendor) a marketers paradise

 

[barjon]

There's a lot of truth in what you say, hare, but if I can remind you of the aim of T2W which remains unchanged.

Our aim is simple, we want to unite and support active traders across the globe. To this end we provide a range of facilities to enable our members to communicate with one another, share their knowledge and express their views. Furthermore we seek to provide educational and thought provoking content to help better educate our members in their trading lives.

All T2W can do is to provide the vehicle for this and try to keep things in line with the aim. At the end of the day it relies on the members, not T2W per se.

jon