Back Testing the Rat Method?

If you don't know where to start, start here! Don't be afraid to ask questions.

Moderator: moderators

Michael Hans
rank: <50 posts
rank: <50 posts
Posts: 15
Joined: Wed Aug 08, 2012 12:22 am
Reputation: 0
Gender: None specified

Postby Michael Hans » Fri Sep 14, 2012 1:49 am

Relativity wrote:Generally speaking, the method is profitable.


It cannot be profitable. Single candle reversals are never profitable long-term, even when you attempt to pick the bottom of a larger time frame, which is all the BuyZone, SellZone attempts to do.


Relativity wrote:I speak from experience : the rat method is more than just logic based. There are certain discretionary parts where EAs cannot really take over, yes. e.g news, market interventions, option barriers... etc.


I speak from a decade of trading experience, and I can tell you that human beings can be just as inept at handling these same market events. These things that you mention don't hinder the Rat. The Rat is not aware of there existence and therefore, the Rat's results will settle in a pattern of distribution around these events over the long-term and thus become irrelevant to whether or not the method itself is sound, which it definitely is not.


Relativity wrote:Give it a go at the EA. But I warn you that the rules aren't really all there in black and white. Looks logical, but it 'works' and it doesn't 'work' too. There are more 'rules' than expected IMO.


TRO, always says that his rules are in black and white. He always states that to read into the rules is the incorrect approach to trading like a Rat, because the Rat is supposed to be color blind.

Rules that disappear when convenient might work for paper trading, but that dog won't hunt when real cash is on the line.

And, yes - I would agree. There are "more rules" than expected, indeed. Just because a small bar pivots on a one bar reversal, does not mean the world pivots with it. A "take what you can" Limit level is ethereal and therefore, there is no mechanism for ever determining and/or calculating your future potential success using the method. A limit level MUST be established, as that is the basis for all realized profit. If there is no underlying predicate for determining when it is time to take money off the table, then there is no underlying method. That simply cannot be argued logically any other way.


Relativity wrote:There's the part where there's a plan A / B / C, 'depending on market conditions'. Watch TRO's youtube videos. Also, think about where does he live... it gives a big hint what timing window is this method more profitable.


Any method is most profitable when the market generates above average ATR per unit of Time. If magnitudes go away, it matters not where one might live, or when they might decide to use any method. Magnitude drives everything in financially traded markets and with the right indicator, there is no hidden secret as to when magnitudes in any time frame are the greatest throughout the trading session.

However, this also exposes a serious flaw in the Rat method. When magnitude per unit of time increases, the 10 pip Stop level has an increasingly higher degree of probability for being struck before any ethereal Limit level that is not defined.

Magnitude can be your friend, or it can be your worst enemy when you don't understand the rest of the pieces that go along with it. Blindly entering a position predicated on a one bar reversal, is like committing suicide. The account (no account) will survive the encounter long term.


Relativity wrote:These are the things that TRO will not say. I understand why he would do that : I think he can't be bothered anymore. Its a good thing actually. Why should he give us everything on a plate? Does he owe us anything? Nope.


That's what I tried telling me for years, but they still assume that I owe them something on a silver platter. That's how people are, very unappreciative of what they do get. They lack the imagination to take what you give them and move their knowledge to the next level on their own. So, they develop an attitude of resentment towards you for your success in those things that they were given, but were unable to develop further on their own.

Been there - done that - ain't going back. I hand pick those I wish to work with these days. It is a much better method for fulfilling my desire to help those who want to help themselves, rather than trying to educate the ineducable.


Relativity wrote:Also, for traders to mature correctly, one should self discover as much as they could to come up with their own trading rules. The discovery process IMO is critical to blood traders to become traders. What TRO did is to give the basic template. That, I thank him for that. Then, I work off it.


The one bar reversal was not given to you by TRO. It is at least 60 years old. That's a fact.

A much better, more well seasoned entry would be the 2B Vic Entry. Google it. It contains a number of well defined "market patterns" that do a decent job of signaling enough of a change in direction, to warrant an entry. It also uses the Reversal Pattern of Candles, to identify potential pivots in the market, like the Rat and like the same pattern found many years ago. However, with 2B Vic, if you overlay his entry protocol with a developed understanding of Harmonics and Harmonic Patterns, you can create a real Trading Methodology that works approximately 78% to 82% of the time. Not bad for a non-system derivative trade logic.

But, as you say, it is up to the trader to learn how to put 2 and 2 together. It is also up to the trader learn how to properly discern good information from bad. Far too many novice traders have yet to learn that in the online trading community.


Relativity wrote:So specifically speaking : I don't take the rat rules directly as it is. As much as I wanted and tried, it doesn't work for me. However, I make my own rules + create my variation of the rat method + consider the 'unspoken rules' + take the concept of trading D1 extremes / rat trading / 20 pips from D1 high or low / whatever its called. It does work!


At some point, after having some success in trading, the trader start to question the degree to which something "does work" so they can improve long-term profitability. Growing capital is about optimizing that which "does work" to a point where it works better than what the average or typical trader can produce.


Relativity wrote:So I've made my own EA to test my trade logic. Pretty good. I do give TRO credit for the concept thou.


It is 60 years old. People used to stand out in the Street, before Wall Street turned into what it is today, and did the same exact thing for short-term profits. Only back then, they were reading tapes and shouting orders out the window down to the sidewalk, literally.

The one bar, or up tick reversal is nothing new. Sorry. Try 2B Vic and not how long he's been sharing it. And, not even Victor, is the original idea source behind that.


Relativity wrote:I am aware of MT4 tick data being available, so no worries I am at your side for this one.


Yes. Just Google Birt's Patch, or Birt's EA Review and you will have tick data and an automated process for backtesting in MT4 at your fingertips.

I decided not to post the equity curve of the EA that I built using the Rat Methodology. There's just no point in doing that on this forum anymore. People will willingly walk right off the side of a cliff, even if you show them what hitting the bottom will look like just before they do it.

Anyway, interesting post.

I've got my eye on you.

Please add www.kreslik.com to your ad blocker white list.
Thank you for your support.

Michael Hans
rank: <50 posts
rank: <50 posts
Posts: 15
Joined: Wed Aug 08, 2012 12:22 am
Reputation: 0
Gender: None specified

Postby Michael Hans » Fri Sep 14, 2012 1:52 am

TheRumpledOne wrote:There are no "unspoken rules". Most traders think a system must have entry rules and exit rules. Exits, especially stop loss, have nothing to do with the method or system you are using to enter. Exits are a part of money/risk management.

Ponder that for a while...



Both the entry and the exit are determined by one's understanding of magnitude and its effect on support and resistance. Nail the magnitude and both the Entry and the Exit reveal themselves rather effortlessly.

Ponder that for a while... ;)

Relativity
rank: 150+ posts
rank: 150+ posts
Posts: 364
Joined: Mon Nov 15, 2010 4:19 pm
Reputation: 0
Gender: None specified

Postby Relativity » Fri Sep 14, 2012 5:36 am

Michael Hans wrote:
Relativity wrote:Generally speaking, the method is profitable.


It cannot be profitable. Single candle reversals are never profitable long-term, even when you attempt to pick the bottom of a larger time frame, which is all the BuyZone, SellZone attempts to do.


Relativity wrote:I speak from experience : the rat method is more than just logic based. There are certain discretionary parts where EAs cannot really take over, yes. e.g news, market interventions, option barriers... etc.


I speak from a decade of trading experience, and I can tell you that human beings can be just as inept at handling these same market events. These things that you mention don't hinder the Rat. The Rat is not aware of there existence and therefore, the Rat's results will settle in a pattern of distribution around these events over the long-term and thus become irrelevant to whether or not the method itself is sound, which it definitely is not.


Relativity wrote:Give it a go at the EA. But I warn you that the rules aren't really all there in black and white. Looks logical, but it 'works' and it doesn't 'work' too. There are more 'rules' than expected IMO.


TRO, always says that his rules are in black and white. He always states that to read into the rules is the incorrect approach to trading like a Rat, because the Rat is supposed to be color blind.

Rules that disappear when convenient might work for paper trading, but that dog won't hunt when real cash is on the line.

And, yes - I would agree. There are "more rules" than expected, indeed. Just because a small bar pivots on a one bar reversal, does not mean the world pivots with it. A "take what you can" Limit level is ethereal and therefore, there is no mechanism for ever determining and/or calculating your future potential success using the method. A limit level MUST be established, as that is the basis for all realized profit. If there is no underlying predicate for determining when it is time to take money off the table, then there is no underlying method. That simply cannot be argued logically any other way.


Relativity wrote:There's the part where there's a plan A / B / C, 'depending on market conditions'. Watch TRO's youtube videos. Also, think about where does he live... it gives a big hint what timing window is this method more profitable.


Any method is most profitable when the market generates above average ATR per unit of Time. If magnitudes go away, it matters not where one might live, or when they might decide to use any method. Magnitude drives everything in financially traded markets and with the right indicator, there is no hidden secret as to when magnitudes in any time frame are the greatest throughout the trading session.

However, this also exposes a serious flaw in the Rat method. When magnitude per unit of time increases, the 10 pip Stop level has an increasingly higher degree of probability for being struck before any ethereal Limit level that is not defined.

Magnitude can be your friend, or it can be your worst enemy when you don't understand the rest of the pieces that go along with it. Blindly entering a position predicated on a one bar reversal, is like committing suicide. The account (no account) will survive the encounter long term.


Relativity wrote:These are the things that TRO will not say. I understand why he would do that : I think he can't be bothered anymore. Its a good thing actually. Why should he give us everything on a plate? Does he owe us anything? Nope.


That's what I tried telling me for years, but they still assume that I owe them something on a silver platter. That's how people are, very unappreciative of what they do get. They lack the imagination to take what you give them and move their knowledge to the next level on their own. So, they develop an attitude of resentment towards you for your success in those things that they were given, but were unable to develop further on their own.

Been there - done that - ain't going back. I hand pick those I wish to work with these days. It is a much better method for fulfilling my desire to help those who want to help themselves, rather than trying to educate the ineducable.


Relativity wrote:Also, for traders to mature correctly, one should self discover as much as they could to come up with their own trading rules. The discovery process IMO is critical to blood traders to become traders. What TRO did is to give the basic template. That, I thank him for that. Then, I work off it.


The one bar reversal was not given to you by TRO. It is at least 60 years old. That's a fact.

A much better, more well seasoned entry would be the 2B Vic Entry. Google it. It contains a number of well defined "market patterns" that do a decent job of signaling enough of a change in direction, to warrant an entry. It also uses the Reversal Pattern of Candles, to identify potential pivots in the market, like the Rat and like the same pattern found many years ago. However, with 2B Vic, if you overlay his entry protocol with a developed understanding of Harmonics and Harmonic Patterns, you can create a real Trading Methodology that works approximately 78% to 82% of the time. Not bad for a non-system derivative trade logic.

But, as you say, it is up to the trader to learn how to put 2 and 2 together. It is also up to the trader learn how to properly discern good information from bad. Far too many novice traders have yet to learn that in the online trading community.


Relativity wrote:So specifically speaking : I don't take the rat rules directly as it is. As much as I wanted and tried, it doesn't work for me. However, I make my own rules + create my variation of the rat method + consider the 'unspoken rules' + take the concept of trading D1 extremes / rat trading / 20 pips from D1 high or low / whatever its called. It does work!


At some point, after having some success in trading, the trader start to question the degree to which something "does work" so they can improve long-term profitability. Growing capital is about optimizing that which "does work" to a point where it works better than what the average or typical trader can produce.


Relativity wrote:So I've made my own EA to test my trade logic. Pretty good. I do give TRO credit for the concept thou.


It is 60 years old. People used to stand out in the Street, before Wall Street turned into what it is today, and did the same exact thing for short-term profits. Only back then, they were reading tapes and shouting orders out the window down to the sidewalk, literally.

The one bar, or up tick reversal is nothing new. Sorry. Try 2B Vic and not how long he's been sharing it. And, not even Victor, is the original idea source behind that.


Relativity wrote:I am aware of MT4 tick data being available, so no worries I am at your side for this one.


Yes. Just Google Birt's Patch, or Birt's EA Review and you will have tick data and an automated process for backtesting in MT4 at your fingertips.

I decided not to post the equity curve of the EA that I built using the Rat Methodology. There's just no point in doing that on this forum anymore. People will willingly walk right off the side of a cliff, even if you show them what hitting the bottom will look like just before they do it.

Anyway, interesting post.

I've got my eye on you.





Thats why I don't exactly want to post in kreslik anymore. Not to offend anyone here, but I am indeed having a hard time expressing certain ideas I had been working on for a long time :

-There are certain patterns in the market, depending on which timeframe is in question.
-Key timeframes to work on are M1/M5/M15/H1/D1/W1. IMO M30 and H4 are difficult to use.
-Each timeframe has an certain effect on other timeframes.
-Certain timeframes, statistically speaking are watched / used by others more often, what I call 'global majority effect'; H1 / D1 / W1. If the belief of this majority is huge enough, there must be some way to quantify it.
-Other than bar by bar statistics, why not bar to bar statistics?
-If a trend is really so called to be 'higher high and higher low' and 'lower low and lower high', this means on the minimal, the dynamics of at least 2 bars is to be quantified. Sometimes even 3.




I've made a lot of mistakes, but at least my research and trading is indeed getting somewhere. Given the honesty, I realised its hard to push and share some of ideas such as these here or even anywhere. I think these are indeed valid questions/issues to any trader.

Image

Image

No offense, but my answer at Mathsnerds.com never got answered. I guess I really have to do the work myself :

I have 120 rows for Y axis. The number of columns for X axis can be unlimited.

Say there is only 1 column of data. The data can be either positive or negative. The data can form a wave that looks like an unknown number of series of sine waves if there is a mix of positive and negative values. Sometimes it only has all negative or positive values, but a waveform is there.

Any suggestions what kind of statistical analysis I can do when number of columns for X axis is more than 20? Some kind of filtering to bring out the frequency band of interest?


Image

Michael Hans
rank: <50 posts
rank: <50 posts
Posts: 15
Joined: Wed Aug 08, 2012 12:22 am
Reputation: 0
Gender: None specified

Postby Michael Hans » Fri Sep 14, 2012 11:26 pm

Relativity,

This is StealthTrader. I use Michael Hans, and various other handles for a good reason. You attacked SignalBender a while back ago and I lumped you into the same bag with the rest of the mental degenerates in the online trading world, as being incompetent and unfit for a career as a real Trader.

Clearly, I was wrong. While, I did not appreciate the piling-on mentality tha that you engaged in on Kreslik against SignalBender (me), I do have to say that this post of yours is something I found very impressive. Not because of its technical scope, but because of the heart that you obviously put into it.

I can clearly see that you are genuinely searching for answers about what causes the market to behave the way it does and you have clearly spent a considerable amount of time trying to develop a framework within which you can rely upon the trade decisions that you make on a daily basis.

It is obvious that you do not mind thiking outside the box in search of viable and reliable answers. Your thoughts specifically regarding the need to focus on Multiple Time Frames while also retaining an out of the box mental approach to research, is something that reminded me of myself, many years ago.

All I can say is that you are not far from the truth about the technical (data driven) reasons behind the ability to predict the market's next move with a high degree of confidence. Your statements about "What is the real chart?" and "What if other charts are actually moving the chart you are watching?" - are perfect examples of someone willing to move conventional thinking and tradtional mores about trading out of the way long enough to see beyond the horizon of common knowledge.

You really are getting close to someting special and I just wanted to take this moment to congratulate you for sticking with it and leaving the box of convention behind in the dust where it belongs.

I have not seen a heart felt, intelligent, insightful, imaginative and on the right track post like that in years.

You are so incredibly close, that I can taste your future success myself!

Keep going and keeping thinking about the relationships between exactly what you said: Other than bar by bar statistics, why not bar TO bar statistics? That's huge and THAT is your key to opening up a whole new world of technical indicators that are light years ahead of what you know about right now.

Congratulations on your thought process and keep up the good work. Every successful trade begins with successful Research.

StealthTrader

Relativity
rank: 150+ posts
rank: 150+ posts
Posts: 364
Joined: Mon Nov 15, 2010 4:19 pm
Reputation: 0
Gender: None specified

Postby Relativity » Sat Sep 15, 2012 2:03 am

Michael Hans wrote:Relativity,

This is StealthTrader. I use Michael Hans, and various other handles for a good reason. You attacked SignalBender a while back ago and I lumped you into the same bag with the rest of the mental degenerates in the online trading world, as being incompetent and unfit for a career as a real Trader.

Clearly, I was wrong. While, I did not appreciate the piling-on mentality tha that you engaged in on Kreslik against SignalBender (me),


I didn't exactly attack you on purpose. I didn't even know whatever I said was considered and percieved by you as an attack. Nevertheless, if you say so that it is an attack, I must extent my apologies to you right now. Lack of insight and maturity got the best of me, but I am different and better today.

I've found that sometimes its better to just shut up and don't talk, in view of unintended offenses like this one.

Michael Hans wrote:I do have to say that this post of yours is something I found very impressive. Not because of its technical scope, but because of the heart that you obviously put into it.

I can clearly see that you are genuinely searching for answers about what causes the market to behave the way it does and you have clearly spent a considerable amount of time trying to develop a framework within which you can rely upon the trade decisions that you make on a daily basis.

It is obvious that you do not mind thiking outside the box in search of viable and reliable answers. Your thoughts specifically regarding the need to focus on Multiple Time Frames while also retaining an out of the box mental approach to research, is something that reminded me of myself, many years ago.

All I can say is that you are not far from the truth about the technical (data driven) reasons behind the ability to predict the market's next move with a high degree of confidence. Your statements about "What is the real chart?" and "What if other charts are actually moving the chart you are watching?" - are perfect examples of someone willing to move conventional thinking and tradtional mores about trading out of the way long enough to see beyond the horizon of common knowledge.

You really are getting close to someting special and I just wanted to take this moment to congratulate you for sticking with it and leaving the box of convention behind in the dust where it belongs.

I have not seen a heart felt, intelligent, insightful, imaginative and on the right track post like that in years.

You are so incredibly close, that I can taste your future success myself!

Keep going and keeping thinking about the relationships between exactly what you said: Other than bar by bar statistics, why not bar TO bar statistics? That's huge and THAT is your key to opening up a whole new world of technical indicators that are light years ahead of what you know about right now.

Congratulations on your thought process and keep up the good work. Every successful trade begins with successful Research.

StealthTrader


Thanks of your many compliments. You are right that I am clearly something on special right now.

I suppose this will be my final post on kreslik, regarding my work/research and what I've clearly found.

I had been trying to get the best zigzag indicator that will describe market movement :
-without complicated formulas and simple to use
-allow isolation of commonly found patterns, so that statistics can be done easily

I've done it using the basic TCD formulas. With this, all I have to do now is to gather the statistics of the waveforms via fibo ratios. Such a framework is so critical, which is something I've seen lacking in many forms of wave analysis. Exceptions are Duane Archer / James Bickford for GWT, Masterforex-V for MF WA, Ray Barros for Ray Wave, but IMO their work can be relatively difficult to get access upon and understood.

Then 'prediction' is no longer a fantasy, once such PA is correctly quantified and mapped out.

With this, wave theory is no longer theory. It can be practical.

Image
Image
Image

Please add www.kreslik.com to your ad blocker white list.
Thank you for your support.

User avatar
newscalper
rank: 1000+ posts
rank: 1000+ posts
Posts: 1068
Joined: Tue Oct 19, 2010 5:58 pm
Reputation: 0
Gender: Female

Postby newscalper » Mon Sep 17, 2012 1:33 pm

'Michael': If there's no point posting on this forum anymore WTF do you keep coming back with the same old yada yada yada 'I'm great, TRO sucks' yada yada yada. Do you have 'issues'?

Post something of substance or stfu.

One thing you NEVER do in business to a potential client is dis the competition, it makes you look weak.

paweldobkowski
rank: 150+ posts
rank: 150+ posts
Posts: 444
Joined: Mon Dec 27, 2010 12:12 am
Reputation: 0
Gender: None specified

Postby paweldobkowski » Mon Sep 17, 2012 7:15 pm

michael!
Good to see you!

you never contacted my attorney
what went wrong?

paweldobkowski
rank: 150+ posts
rank: 150+ posts
Posts: 444
Joined: Mon Dec 27, 2010 12:12 am
Reputation: 0
Gender: None specified

Postby paweldobkowski » Mon Sep 17, 2012 7:23 pm

michael!
Good to see you!

you never contacted my attorney
what went wrong?

sorry for double post

paweldobkowski
rank: 150+ posts
rank: 150+ posts
Posts: 444
Joined: Mon Dec 27, 2010 12:12 am
Reputation: 0
Gender: None specified

Postby paweldobkowski » Mon Sep 17, 2012 7:24 pm

michael!
Good to see you!

you never contacted my attorney
what went wrong?

damn sorry for triple post

paweldobkowski
rank: 150+ posts
rank: 150+ posts
Posts: 444
Joined: Mon Dec 27, 2010 12:12 am
Reputation: 0
Gender: None specified

Postby paweldobkowski » Mon Sep 17, 2012 7:35 pm

mehcial!
Good to see you!

you neevr coactnetd my atnreoty
waht wnet wrnog?

___________________________

you can still read it right? awsome.

Please add www.kreslik.com to your ad blocker white list.
Thank you for your support.


Return to “beginners forum”