Chinos' Simple S&R FTSE 100 System

[TheBramble]

Which is better?

A system which trades only once every 30 days but with 99% success, or one which trades every 2-3 days with 70% success?

Although the Risk:Reward is better in the former, the latter is preferable - if you're using a sensible risk & money management approach to position sizing.

Your risk is higher, but using the same position size, you will have up to 10 times as many trades each 30-day period of which 7/10 will profit.

Is a system which trading single point achieves (say) 20000 points profit allowing for spreads over the last 4 years, but at the cost of a dip of 1000 points, better or worse than a system which achieves only 10000 points but does so only dipping 100 points?

No. The lower risk system with lower drawdown will always win out over the long run.

 

[TheBramble]

I notice that people seem to have a scepticism about maths, but that I am afraid is what it is.

Moving averages are easy enough to understand

KR - I don't think there's much scepticism about maths - I think that's more correctly directed at MA - of any flavour.

 

[KIMMRUNNER]

I have seen previous postings that seem to criticise maths - as if to say maths based systems cant work under any circumstances.

I think criticising MA is a little like criticising a twin cam system or a fuel injection system in a car engine. The fact that there is one doesnt make it a good engine, neither does the absence make a bad one. It is a component part of many engines.

In any event the weighted moving averages I am using are chalk and cheese to the type used in stohastic or other flavours of TA. They have a similar name, but there the resemblance stops.

 

[jove]

FC

I find this simple system quite fascinating. The five year equity curve looks very respectable. After close inspection of sections of the equity curve against the corresponding price action I have been unable to determine any correlation. For instance the equity curve from the start of 2002 to mid September was relatively flat. The corresponding price action was range bound (300 points) with low volatility for the first 6 months followed by a 1400 point fall in about 6 weeks. The dramatic change in price action had little effect on the equity curve which remained relatively flat until 17/9/02 when it took off posting an increase of about 36% by the end of the year. I thought I would play around with the spreadsheet but the sheet does not recalc after a change in cell values. Is it locked to prevent recalculation?

Jove

 

[Glenn]

Suggest you Press F9 or set the spreadhseet to autcalc.
One will probably do the trick.
Glenn

 

[jove]

Thanks Glenn autocalc did the trick.

Jove

 

[jmreeve]

Just tested this system on some cash index data:
Results below for £10/point £5 commissions


TradeStation Strategy Performance Report - FTSE FetteredChinos UKX.L-Daily (17/07/1998-25/03/2004)

Performance Summary: All Trades

Total Net Profit $56,171.00 Open position P/L $0.00
Gross Profit $203,781.00 Gross Loss ($147,610.00)

Total # of trades 480 Percent profitable 65.63%
Number winning trades 315 Number losing trades 165

Largest winning trade $2,622.00 Largest losing trade ($4,752.00)
Average winning trade $646.92 Average losing trade ($894.61)
Ratio avg win/avg loss .72 Avg trade (win & loss) $117.02

Max consec. Winners 14 Max consec. losers 4
Avg # bars in winners 2 Avg # bars in losers 4

Max intraday drawdown ($13,007.00)
Profit Factor 1.38 Max # contracts held 1
Account size required $13,007.00 Return on account 431.85%

 

[jmreeve]

Results prior to 1998 are not so good:

TradeStation Strategy Performance Report - FTSE FetteredChinos UKX.L-Daily (02/01/1990-25/03/2004)

Performance Summary: All Trades

Total Net Profit $32,357.00 Open position P/L $0.00
Gross Profit $312,184.00 Gross Loss ($279,827.00)

Total # of trades 1,056 Percent profitable 60.80%
Number winning trades 642 Number losing trades 414

Largest winning trade $2,622.00 Largest losing trade ($4,752.00)
Average winning trade $486.27 Average losing trade ($675.91)
Ratio avg win/avg loss .72 Avg trade (win & loss) $30.64

Max consec. Winners 14 Max consec. losers 6
Avg # bars in winners 2 Avg # bars in losers 5

Max intraday drawdown ($31,756.00)
Profit Factor 1.12 Max # contracts held 1
Account size required $31,756.00 Return on account 101.89%

 

[jmreeve]

Making the barrier size equal to 0.5 of the 20 day average true range significantly improves the performance reducing drawdown and increasing %win and profit factor.

TradeStation Strategy Performance Report - FTSE FetteredChinos UKX.L-Daily (02/01/1998-25/03/2004)

Performance Summary: All Trades

Total Net Profit $83,569.00 Open position P/L $0.00
Gross Profit $223,567.00 Gross Loss ($139,998.00)

Total # of trades 440 Percent profitable 67.50%
Number winning trades 297 Number losing trades 143

Largest winning trade $2,946.00 Largest losing trade ($4,924.00)
Average winning trade $752.75 Average losing trade ($979.01)
Ratio avg win/avg loss .77 Avg trade (win & loss) $189.93

Max consec. Winners 13 Max consec. losers 5
Avg # bars in winners 2 Avg # bars in losers 5

Max intraday drawdown ($9,099.00)
Profit Factor 1.60 Max # contracts held 1
Account size required $9,099.00 Return on account 918.44%

 

[FetteredChinos]

great work Jim,

i have toyed with the idea of using ATR for the trigger, and indeed that did form the basis of the original idea in my mind. however, the idea of this system was that i could just quickly check the last few days high/lows and then decided whether to leave the current trade open or stop and reverse. simple and easy was the idea.


still, average win/average loss is pretty pants really, and a bad run of form can have some serious drawdown implications!

still, thanks again for verifying my results.

much appreciated.

hopefully it can trigger some further ideas for FTSE swinging systems.

FC

 

[jmreeve]

I think the system needs a stop loss and also a filter to prevent it entering trades in a strongly trending market.

That should help with avg win/ avg loss.
Will investigate if I get time.

 

[a0-0b]

Better?

I was playing with the spreadsheet and noticed that comparing todays average against that from two days ago seems better!
Also tried add a stop loss but it didn't seem to make much of an improvement - trend/trade filter sounds good though.

 

[jmreeve]

Looking at the MAE plot, the system doesn't work well with a stop loss as almost all trades get taken out with a grater loss than if they had been left to run.

Entry on a stop helps the system significantly (though slippage then becomes an issue) The results below are for entry next day on a stop that is 0.05 * ATR above the close if you go long or 0.05 * ATR below the close for going short.

Slippage and commission is increased to £15/trade to allow for the use of stops. The results are clearly improved but I will need to test it using futures data. Test results below are 1998 to present with cash index data.

The largest loosing trade still needs some work.

TradeStation Strategy Performance Report - FTSE FetteredChinos UKX.L-Daily

Performance Summary: All Trades

Total Net Profit $161,008.87 Open position P/L $372.60
Gross Profit $276,682.06 Gross Loss ($115,673.20)

Total # of trades 429 Percent profitable 69.70%
Number winning trades 299 Number losing trades 130

Largest winning trade $3,721.20 Largest losing trade ($5,032.10)
Average winning trade $925.36 Average losing trade ($889.79)
Ratio avg win/avg loss 1.04 Avg trade (win & loss) $375.31

Max consec. Winners 14 Max consec. losers 5
Avg # bars in winners 3 Avg # bars in losers 6

Max intraday drawdown ($8,309.90)
Profit Factor 2.39 Max # contracts held 1
Account size required $8,309.90 Return on account 1937.55%

 

[jmreeve]

I think way this system works is along the same lines as the concept behind value area. The results below use a volatility barrier with volatility calculated in the same manner as for option pricing. i.e the std deviation of log price changes.
This appears to be a better volatility model than using ATR.

There may be better ways of calculating the day balance point instead of H+L/2 along the same lines.

So here's the latest cut now up to nearly 3000% return on draw-down

TradeStation Strategy Performance Report - FTSE FetteredChinos UKX.L-Daily

Performance Summary: All Trades

Total Net Profit $197,630.03 Open position P/L ($303.90)
Gross Profit $313,868.03 Gross Loss ($116,238.00)

Total # of trades 549 Percent profitable 70.31%
Number winning trades 386 Number losing trades 163

Largest winning trade $4,599.20 Largest losing trade ($4,956.40)
Average winning trade $813.13 Average losing trade ($713.12)
Ratio avg win/avg loss 1.14 Avg trade (win & loss) $359.98

Max consec. Winners 14 Max consec. losers 5
Avg # bars in winners 2 Avg # bars in losers 4

Max intraday drawdown ($6,745.21)
Profit Factor 2.70 Max # contracts held 1
Account size required $6,745.21 Return on account 2929.93%

 

[FetteredChinos]

ok guys, fancy trying out this one?? its getting closer to the method i do actually trade.....

for a Long Position to be triggered, today's high is less that the minimum high of the previous 2 days' highs.

for a Short Position to be triggered, today's low is greater than the maximum low of the previous 2 day's lows.


as before, its a simple stop and reverse system, waiting for the opposite signal each time. I haven't got my spreadsheet details to hand, but i think it returns approx 10-15% more than my "pivot" based system, and with smaller drawdowns and with a win rate of 70%...

if you fancy playing around with those paramters, then by all means do so.

Jmreeve, would you mind verifying my results with another of those tradestation reports??

have a good weekend all

FC

 

[jonnyy40]

I'm thinking of setting up my own 'we test your system for you' website.Or a version of Tradestation that reports any system more than x% winning/y% profitable and let the best systems come to me.

 

[Rognvald]

J40
Too late I'm afraid unless you can do better than this
http://www.trade2win.co.uk/boards/showthread.php?s=&threadid=9248

 

[jonnyy40]

I asked before how many members of t2w were system sellers.I didn't expect an answer.If someone does come up with a wonder system it won't be wonderfull for long.Al Qaeda will crash the markets.

 

[jmreeve]

FetteredChinos

for a Long Position to be triggered, today's high is less that the minimum high of the previous 2 days' highs.

Are you buying at the close as with the previous system?

Re: the pivots reversal system. Please note that the results that I have posted were created on cash index data and are probably not that accurate. I would not recommend trading the system as described but it looks worthy of some more development.

 

[FetteredChinos]

yup, buying/selling at the close...

im my experience, its always better to buy at the close. if u have a look at most breakout strategies (ie those that break yesterdays high/low) if the high is broken, about 60-70% of the time, it goes on to close above the breakout point.

since this strat is selling high, buying low, it makes sense to wait for the breakout to continue.

does that make sense?

FC