Craigaudio's ER2 Buyzone Strategy

trading strategies and money management discussion, code, results

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Ken_S
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Postby Ken_S » Tue Dec 18, 2007 3:12 am

Edward and all,
We can debate the value of Backtesting forever. For me, its not the Holy Grail but the first step in validating a method. It gets me in the ballpark of where to go next with a methodology. For example, after testing a number of symbols, wait for a larger move initially before entering the trade offers more consistent results. I think it would have taken me along time to see that in forward testing. Besides, I setup a backtest, start it, go to bed, and see the results when I get up in the morning, so my computer does all the work.

My original post, or any others, never said the Buyzone doesn't work for ER2. Maybe I should have said "In my opinion", the equity curve didn't look good, although it was profitable. Although I wrote it, so I thought in my opinion was implied. As stated, I didn't even code it for the reversal trade which like today would have cut the loses almost in half, so that's 10 ticks unaccounted for. I can see potential ways to improve the system by implementing a trailing stop once a profit target is hit or using a pivot point determined by the buyers and sellers as a stop loss. Just some ideas.

As far as one minute backtesting resolution, I just don't see that limitation. Mind you, I'm not trading with TS, but a custom application. I only use TS to scan for what symbols fit the pattern I'm trading. The chart below shows the strategy at work trading within the same minute. I don't care what minute or second is stamped on the tick as long as they are in the correct sequence. I've heard of IB lumping together a bunch of ticks in their data feed, so maybe that's what you are referring to....the ticks within the minute not being in the correct sequence with TS. Although this isn't an exact science and my historical results are consistent with my realtime results so far, so I'm not too concerned about it.

All the best,
Ken
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Ali Son
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Postby Ali Son » Tue Dec 18, 2007 10:00 am

Thanks for posting KenS and opening this line of inquiry.

Ken_S wrote:Edward and all,
We can debate the value of Backtesting forever. For me, its not the Holy Grail but the first step in validating a method. It gets me in the ballpark of where to go next with a methodology. For example, after testing a number of symbols, wait for a larger move initially before entering the trade offers more consistent results. I think it would have taken me along time to see that in forward testing. Besides, I setup a backtest, start it, go to bed, and see the results when I get up in the morning, so my computer does all the work.

My original post, or any others, never said the Buyzone doesn't work for ER2. Maybe I should have said "In my opinion", the equity curve didn't look good, although it was profitable. Although I wrote it, so I thought in my opinion was implied. As stated, I didn't even code it for the reversal trade which like today would have cut the loses almost in half, so that's 10 ticks unaccounted for. I can see potential ways to improve the system by implementing a trailing stop once a profit target is hit or using a pivot point determined by the buyers and sellers as a stop loss. Just some ideas.

As far as one minute backtesting resolution, I just don't see that limitation. Mind you, I'm not trading with TS, but a custom application. I only use TS to scan for what symbols fit the pattern I'm trading. The chart below shows the strategy at work trading within the same minute. I don't care what minute or second is stamped on the tick as long as they are in the correct sequence. I've heard of IB lumping together a bunch of ticks in their data feed, so maybe that's what you are referring to....the ticks within the minute not being in the correct sequence with TS. Although this isn't an exact science and my historical results are consistent with my realtime results so far, so I'm not too concerned about it.

All the best,
Ken

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Postby goodyy01 » Sat Dec 22, 2007 1:07 pm

Dear Traders,

followed this thread with interest.

I want to start with buy zone too, but I do not have the money to try it with stocks and I have been focused so far on futures only (E-Minis).
Backtesting would give a first info on how to best set the ranges.
Is the code for the auto strategy buy zone for futures available? If so, would it be possible to repost or share here again?

Many thanks and a merry Christmas and good luck with trading in 2008.

Goody

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Postby eudamonia » Mon Dec 24, 2007 4:22 am

Ken_S wrote:Edward and all,
As far as one minute backtesting resolution, I just don't see that limitation. Mind you, I'm not trading with TS, but a custom application. I only use TS to scan for what symbols fit the pattern I'm trading. The chart below shows the strategy at work trading within the same minute. I don't care what minute or second is stamped on the tick as long as they are in the correct sequence. I've heard of IB lumping together a bunch of ticks in their data feed, so maybe that's what you are referring to....the ticks within the minute not being in the correct sequence with TS. Although this isn't an exact science and my historical results are consistent with my realtime results so far, so I'm not too concerned about it.


Ken,

Obviously having the reversal trade trigger when the first trade hits its stop is a critical component of this methodology.

I wasn't trying to start an argument, just state the facts. If you can't see why having your ticks out of sequence within the minute is a problem then I can't possibly help you see it any clearer. All I can do is reiterate that this is a MAJOR flaw in TradeStation's back testing and that's not conjecture it's simply a fact.

If your average net profit is in terms of ticks (not points), then it is absolutely crucial that you account for every "minor" difference between your back testing and reality. Only real trading counts!

Good luck with your endeavors.

Edward
Eudaimonia (pron.: you-die-moan-e-a) (Greek: εὐδαιμονία) is a classical Greek word commonly translated as 'happiness'. The less subjective "human flourishing" is often preferred as a translation.

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Postby vittorio » Mon Dec 24, 2007 10:59 am

I wasn't trying to start an argument, just state the facts. If you can't see why having your ticks out of sequence within the minute is a problem then I can't possibly help you see it any clearer. All I can do is reiterate that this is a MAJOR flaw in TradeStation's back testing and that's not conjecture it's simply a fact.


Edward ,
I am a Ts user and i am trying to understand ....

Had you backtest in NeoTicker's environment ?
If yes, how are the results ?

To the scope to discovery the difference between
the back testing and reality (in TS's env.)
i will try the following test:
ER2.D on a 1 tick chart
- in realtime i will count the number of ticks i receive
for day x
- offline i will recount the TS historical ticks for the same
day X

For "historical" data maybe that tradestation reconstructs the
tick bars using an algorithm..that not reflecting the same
real time flow of prices.

What is your opionion about this test ? Is it significative ?
Anyway I believe that the number will be different
and maybe will be different in NeoTicker's environment also.

Thank you.

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Postby BlackJack » Mon Dec 24, 2007 5:45 pm

Hi Vittorio,

Watch for redundent ticks. In ts2ki this was a feature that could be set to display redundent ticks or not to display them. I have not been able to find this feature in TS 8+. It may be there but I have not been able to locate it.

With TS supplying the data - in real time they could be supplying all ticks including redundent ticks or not - and likewise historic data could include or exclude redundent ticks. Both real time and historic need to either include or exclude redundent ticks for the tick count to even be close.

Also, as we found with eSignal, what time stamp was on the data was dependent on which server farm you were connected to. The real time server farms were not time synchronized. And the historic data server time was different from either real time server farm. One could have 40k of real time ticks and download historic data for the exact same time frame and end up with 60k - 70k ticks. Cross loading data from one eSignal account to another account could produce the same sort of results.

So what you get is going to be very dependent on exactly what and how TS is serving up the data. And with TS my money is on screw up.

BJ

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Postby eudamonia » Mon Dec 24, 2007 10:17 pm

vittorio,

I think BlackJack mentioned a couple of crucial points that might answer some questions for you.

The real answer to all of your above questions is I Don't Know! I don't really care either. What counts is that in REAL TIME I have made money with the method for the past 9 months.

Interestingly enough my backtesting in NeoTicker confirms my real time results (i.e. it is correct). Also interestingly enough Craig's "eyeball" backtesting was amazingly accurate (and you can see the results at the beginning of the thread). So my money also is that TradeStation's backtesting is not accurate. Why? Because there is no timestamped ticks! NONE! They are algorithmically reconstructed after the fact. Whereas NeoTicker simply records the REAL data as it comes in. No re-constructive surgery required!

The simple scientific fact why TradeStation does not work for this type of backtesting is lack of precision! Do you remember when the first generation of Pentiums couldn't calculate that 10th decimal place (it kept rounding it). It was a disaster! Seemingly small errors like this repeated over thousands of iterations make substantial miscalculations (the darn computers couldn't do math). The same thing is true with your Backtesting. If you are off an average of even a fraction of a tick on each trade that will mean the difference between a backtest that shows a positive outcome and a negative one.

Edward
Eudaimonia (pron.: you-die-moan-e-a) (Greek: εὐδαιμονία) is a classical Greek word commonly translated as 'happiness'. The less subjective "human flourishing" is often preferred as a translation.

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Postby BlackJack » Tue Dec 25, 2007 9:05 am

Hi Vittorio & Edward,

IMHO the only way to really test any strategy is in real time with real data but not necessarly with real money at stake - a demo account, if the data feed is the same as a real account, will do just fine. Or get a real money account and play a mini lot - a buck a pip is not a lot to pay for the lesson.

IMHO all backtesting can do is show you that your strategy needs work before its ready for primetime.

BJ

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Postby eudamonia » Tue Dec 25, 2007 9:40 pm

BJ,

I agree 100%. Only real trading counts.

Edward
Eudaimonia (pron.: you-die-moan-e-a) (Greek: εὐδαιμονία) is a classical Greek word commonly translated as 'happiness'. The less subjective "human flourishing" is often preferred as a translation.

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Postby TheRumpledOne » Wed Dec 26, 2007 1:57 am

"Or get a real money account and play a mini lot - a buck a pip is not a lot to pay for the lesson."

At www.efxgroup.com you can trade in MICRO lots. So ifyou really want to "test" in real time with real money, a dime can't hurt you too bad.
IT'S NOT WHAT YOU TRADE, IT'S HOW YOU TRADE IT!

Please do NOT PM me with trading or coding questions, post them in a thread.

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