Although the cheetah is the fastest animal in the world and can catch any animal on the plains, it will wait until it is absolutely sure it can catch its prey. It may hide in the bush for a week waiting for just the right moment. It will wait for a baby antelope, and not just any baby antelope, but preferably one that is also sick or lame. Only then, when there is no chance it can lose its prey, does it attack. That, to me, is the epitome of professional trading - Mark Weinstein.
This post will have nothing to do with the title but I really liked that quote and has to fit it in somewhere!
There was another tweak I made to the system over the weekend that added a few percent to the results, that I haven't yet mentioned here.
All this time, I had the box in the TradeSim Preferences window "Accept partial trades if inadequate capital", unchecked. This only came to mind when I was thinking about this week's buy orders. After buying 9 stocks, each with a parcel size of about $4,500-4,700 (worked out from fixed percent risk), I would not actually take the 10th trade because i would fall sort of the required parcel size by a few hundred dollars. Then I thought why not take the trade anyway. But that hasn't been backtested. So I ran the tests again, to quantify the benefit (if any).
As suspected, the profit results were greater, by 3-4%p.a. over the various timeframes. Drawdowns were not affected significantly, about 1% higher. I'm happy with that. Number of trades increased by about 20%, naturally, so instead of 149 trades in the 6 year test, there were 179 trades. And instead of 84 trades in the 3.5 year test, there were 101 trades.
So now, the method will allow me to clean up the account if I don't have enough cash to take the full sized trade. This means that my money is in the market more often, which is a more efficient use of trading capital. And 3-4%p.a. is nothing to scoff at. Over a number of years, due to the effect of compounding, the increase in profit is quite substantial.
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2 comments:
Gday Nizar,
Thanks for creating this blog looks like it will be interesting to keep track of.
You definetely have progressed with your trading.Its got me beat some of the terms your now using.lol.Im especially looking forward to your live trades will be great to keep track of what your doing and how you are going.
Ive been thinking about looking into mechanical trading more myself maybe this could be the spark I need so thanks for all the info you have here on your blog it will come in really helpful to see where u have been doing your research,books read etc.
well mate ill be lurking around so ill say hi every now and then and keep a track of how you are travelling on this traders journey.
One question are u going to use end of day stops and exit at the opening of the next days trading or have market order stops??Im still in 2 minds about the best way to tackle this.I personally use end of day stops as Id prefer to see how my stocks close first at the end of the day and not get stopped out during a days trading.Often it seems to me you will get stopped out during trading when there is alot of tails on candles that usually signal a bottom and id hate for my stop to be hit and then close above my stop and that is the bottom of a stocks pullback.
Have u done any system tests to find which stop is more profitable over the long run???
Best of luck with it all I hope it all comes out succesful for u.Ive got no doubt it will be a success with all the work and planning you have put in too it.so go and make some serious $$$$$$
it must have been hard to stay out of trading for a while whilst u were away developing your system.
cheers Glen(shinbob)
Hi Glen,
It's been ages!
I hope things are well with you.
To answer your question.
Well, firstly, my system was built using weekly timeframes. So a scan is run weekly and then buy/sell decisions are made from the results.
So if one of my positions hits my stop, then I will exit on the next bar (week).
I agree wholly on what you say about tails.
Let me explain what I meant by market orders. A market order is one of the options on TradeSim that tells the program to buy or sell using a price generated by a random algorithm, which will generate an entry price between the low and high prices of the entry bar. And yes that was in english! lol.
You see, you can tell TradeSim to always enter/exit at the open of each bar by choosing Default order instead of market order. But this would mean that in actual trading, in order to replicate the process that was used in backtesting, I would have to buy and sell Monday's opening price.
I wanted to incorporate more flexibility into the system. Market orders allows me to buy or sell anytime during the week, between Monday's open and Friday's close. The slippage is the difference between the actual entry price that you paid, and the opening price of that bar. This is why when I run several simulations using the exact same criteria (with trade ranking), and i have selected market orders, the results are different because even though the exact same trades are taken on the same bar. System 1 might have bought the stock at Tuesdays close, the low of the week, and System 2 paid the high of the week, say, Friday open.
So, because I backtest with this flexibility, I can also afford this luxury during trading. You would imagine its pretty hard to buy several stocks at their opening prices.
I hope you enjoy the blog. There is already alot of information on here. The list of books on the right hand side should be a good start.
Thanks for dropping by.
Nizar.
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