fighting the randomness: healthy system vs. tradable system

trading strategies and money management discussion, code, results

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fatdog1
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Postby fatdog1 » Tue Jun 20, 2006 9:32 am

Hi Mikal,

"If you come up with a healthy system that uncovers some market inefficiency (like buying the exact bottoms and selling the exact tops ), then it's splendid. But now imagine the market you will trade this system on will be a non-volatile, non-liquid market with tiny swings and feeble vitality in general.

Yes, you will be able to catch all the swings perfectly, so the mathematics behind your idea works correctly and the little nerdy scientist inside you claps his hands."

Ok, help me figure out a way to make this system both mechnical and profitable and healthy.

Here is a 60 minute GBPUSD with a buy at 1.8410 and a partial sell at 1.8440 with a final target of 1.8477.

Not random. Plenty of room to make money. It is also possible to further reduce the risk if the buy is entered with a buy stop once the price reaches the dark blue line and reverses in the right direction.

I can see this. Question is can someone make a program that can see what I see.

BTW, this trade is next to impossible in the currency futures market since the futures seem to trade by appointment only.

Great thread,
FD1
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michal.kreslik
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Postby michal.kreslik » Tue Jun 20, 2006 10:47 am

fatdog1 wrote:I can see this. Question is can someone make a program that can see what I see.


fd,

if you can see objective truth, then it can be automated without any question.

fatdog1
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Postby fatdog1 » Tue Jun 20, 2006 1:10 pm

Mikal,

I can see objective truth with the way I trade.
I just cannot come up with a math formula to explain it.
That is the reason I started the strategy based on chart pattern thread.
Can you help me come up with a math based formula to be able to code this?
I would appreciate it.

FD1

fatdog1
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Postby fatdog1 » Wed Jun 21, 2006 7:12 am

Hi Mikal,

I posted a message on the other thread to continue the subject.

Thanks,
FD1

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michal.kreslik
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Postby michal.kreslik » Wed Jun 21, 2006 9:10 am

Great, fd. I'm sorry for not having enough time to recast the strat to code yet, but it's still in my "queue" :)

What about asking Avery to have a look at it?

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Postby fatdog1 » Wed Jun 21, 2006 9:50 am

Avery said he would look at it when he got back from the ranch.
We were going to try to add a condition to the DarvasBox code that
it would only take breakout longs if there was a momentum candle before the congestion area. Same with breakdown shorts having a momentum down candle before the congestion area.
Thanks Mikal

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Postby twalker » Fri Oct 13, 2006 8:12 am

I won't even backtest it until I have my commissions and slippages in place.


Just read through this thread and following line interested me. I run systems on TS but I execute the signals manually for most products. I trade a lot of commodities and find it too difficult to automate orders in these markets. I run FX futures and Equity Indices fully automated.
Over time I have found it possible to generate +ve slippage in many products and even the ones that have negative slip end up with less than I would have bargained for. As an example, I run systems in crude oil that fall apart if there is more than 4 ticks/lot/side and trade it in 50lot clips. after running this for a long time I net off with average 0.8tick slip. Sometimes it is possible to profit from a narrower edge than you may think if you can get the execution right.
Good trading.

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michal.kreslik
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Postby michal.kreslik » Fri Oct 13, 2006 9:41 am

Good for you, twalker :)

Seems like the FX brokers are much more thievish than the commodity ones :)

Michal

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Postby twalker » Fri Oct 13, 2006 11:00 am

The automated stuff I run through TS brokerage on FX futures gives me 1-5 ticks slippage. I average about 1.5ticks/lot on BP trading at high volume periods of the day. That is not too bad when considering the cash spread is 3 ticks from a lot of people.

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Postby jhtumblin » Fri Oct 13, 2006 7:37 pm

I am glad that you are getting lower slippage than most would expect. What I am referring to though is the ability to profit with a very generous slippage in place. Once again I primarily swing trade. It is not uncommon for me to take 5-7 pips off the entries and exits in my strategies to see if they still profit. I know that using efxgroup I only pay comission, but when my systems turns a profit for the past couple of years with that very liberal slippage in place, while still meeting my other standards, then I know I have a good one on my hands.

Now on the other hand this would not be a very methodical way to develop a scalping system. No scalper I know of could place an order with that kind of slippage and still profit consistently. I hear TRO tout all the time about "pulling the trigger without hesitation" because it is of utmost importance in the way he trades. I however, enjoy the ability to miss the mark and still profit.

Twalker, you may be exposing a type of market inefficiency, or you may be getting great fills, or maybe neither. Either way you are profiting and that is the great thing about it. I just hate it for newcomers that create a system, think "hey this thing makes money, i'm all set" and then they run the system and find out they actually lose because they don't factor in adequate overhead.

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