my journal 2

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Rather than automating sytem selection for the basket, have you considered trading your equity curve instead,
pretty much as if the equity curve was an asset in its own right (which it is really).

In simplified terms, if the EC breaks a trendline or some other suitable trigger (DD% maybe), either cease
trading or reverse the signals, or start a basket of systems with a short bias.
Once the EC drawdown ends, restart the primary upside bias basket.

I'd imagine Tradestation can do that, even if you have to program it in C#
I know Ninja Trader won't do it out of the box (as far as I know) but you could program it in C# with NT.

Yes, this is a recurrent suggestion by readers and by the investors themselves. But the way we dealt with this concept is as follows. We discarded it because:

1) we do not do anything that cannot be back-tested and it is too complex to back-test such an approach.

2) my opinion is that if you can't do something right, and cannot see all potential implications, then you should not do it. I prefer doing less and understanding everything and all implications, and your idea would definitely make me go the other way.

3) there is no evidence to suggest that the drawdown comes in "trends". Sometimes it does, sure, but many other times it does not. For example, these are the drawdowns for the present combination (during the last 10 years):

Snap1.gif
 
Forums - Switching between systems using equity curve feedback

I thought you would have looked into it, someone tried the same thing in the
above thread.
I wouldn't know how to code it myself either (I'm a C# noob anyway :) )

Just out of interest, would you think the backtest results attached are worth
live testing, only if you have time and apologies for posting my stuff in your thread.
I know you have greater concerns right now.
I'll remove them if you don't want the thread cluttered or feel its a thread hijack.

Main thing that bothers me is the number of longs compared to shorts,
but it appears to work in backtest at least.
Sharpe and profit factor not great, its the DD and flat curve I like.
No optimisations. 4 parameters. Single asset.
I'd be interested to know what you think if you have time :)
Basic 100k trades, I work out costs after as NT either won't or I don't know how
to backtest from bid ask so the spread is included.
 

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Yes, sure. The only problem is that I can give you a quick opinion, just like I could not undertake the big project you suggested. I don't start something unless i can do it right. But I can give you a general opinion on your system based on my experience. That is quick and easy, given the data you provided.

I would say that it's still not good enough. Very low sharpe ratio and profit factor (that is unequivocal), and low % of wins. A slight change in costs (spread and commissions costs, mainly) could turn your system into an unprofitable one. And let's not forget that the past is better than the future (in other words, we can't expect 100% accuracy in predicting the future based on the past).

The good things are that the sample is pretty large (including different phases of the markets), the trades are many, and if it performs like this in the future, you will make money with it. But, as I said, a slight change in costs and you will lose money, constantly (given the frequency it trades).

Personally, I prefer systems that trade 10% as often and have profit factors and sharpe ratios above 2. Then I combine them together.
 
Cheers Travis, good points, going to try to reduce trade freq. as a starting point,
costs are probably the biggest weakness.

Thanks again, no more hijacks from me :)
 
Travis,

When back testing your systems, what is the maximum % drawdown you would consider before going live with a system?

Sam.
 
Well, this is a recurring problem. I do not purchase stock, so I can only tell you how many thousands I am willing to lose with a contract traded vs the money it makes with that contract.

Let's see... it is not something I look at, but as a guesstimate, I can tell you the relativized (by today's prices) average value for all my 120 systems.

Average profit in the 10 year sample: 34k
Average max drawdown in the 10 year sample: 9k.

So we could say I am using systems that have an average 400% of profit vs drawdown, and viceversa, a 25% of drawdown vs profit.

That is a wise number to look at, but you must not forget the length of my sample and the frequency of my trades, which is an average of 300 per systems, which means an average of 30 per year.
 
To all those rooting for my defeat or for my survival in the markets, I have some news. Today we finally made some money, for the first time in weeks, practically. But not that much, just 1500 dollars. But this gives me some oxygen, and now we're 5k from "uncle point". But let's not forget that last Monday we lost 10k in one day. So, just one more of those days, and it's all over.

Now the only way I can survive is if I have some luck. I need some good results from one of the big systems: silver, copper, gold, oil. If it doesn't happen, it could be bad luck, or more likely that I didn't choose them carefully enough. After all those wins, I was delusional, as always happens to me (cfr. long posts to/from bbmac about automating the selection of systems).
 
Some frustration is devoloping in me, after all this happiness from being here.

I swam all around the island. I spent time with my loving relatives. I had everything my way, for over 10 days.

This is how my childhood was always like: I felt entitled to being happy and privileged. This is due to my relatives, very good ones.

Then came school, and I started meeting dislikable people. My mother wasn't likable either.

Anyway, despite meeting people who didn't think I had the right to be happy and to have a good time, I could never get rid of this feeling that I was lucky, special, privileged, and that i had the right to be special, happy, and loved and liked by everyone.

That's how I have been feeling during this vacation, once again.

But then, even in my life, I only kept friends who allowed me to feel special. Special in the sense that I could say anything I wanted and that I could be as original as I wanted, for example by saying what is on my mind, unlike most people do. I felt "better", and was brought up feeling that I was "better", that my relatives were "better", and hung around people... I only hung around people who felt like me and basically people who valued me and convalidated this idea that i was special. That I was better in every way, or in almost every way. After school, where this attitude was not successful, I found jobs, work place environments, friends, neighbourhoods, where everyone, one way or another, had to allow me to feel and act the way I felt: special and better than everyone else.

So I still feel this way. This feeling of being better and special pervades me. I know i don't share this with everyone, because I hear what people say about themselves, and I can tell they do not have the same point of view. Actually very few people have my point of view.

Anyway. And then I met the markets. And the markets sometimes make me feel, once again, that I am special, that i can predict what will happen, and have my way, but never for too long. Basically the markets do not think I am special at all, and that is shown by the fact that right now I have zero dollars in my bank account and the equity line is at zero.

Every time I feel... feeling "special" is not a safe way to live and to act. It causes you a lot of problems. You would be more alert and realistic, and have an easier life, if you accepted the idea of being "normal".

But that is one idea I could never swallow in my outside life, so I can't digest it in trading either. I am atheist, but I feel there's a god for atheists as well, who believes in them and watches over them, and considers them special.

I can't get rid of this feeling of being special and better, even though I know that it caused me problems in life and in trading. For example, if you feel "better" you cannot engage in any activity at which you do not already excel, which means you either practice when no one is watching you, or you can't do much, unless the others are always worse than you.

Because, being so convinced that you are better, that you are the best, you cannot accept to do anything where other people are better than you.

Such as playing tennis. I could never play tennis, because I never could start playing it in a place where I was the best. Because i didn't start it early enough.

So my feeling special and better is like magical thinking in trading. Irrational behaviour. I agree. I can't get rid of it. Sometimes it resurfaces. Quite often.

After a win, I say to myself "you see? I am special. The gods love me".

But none of this is right. No one is blessed by the gods. The gods do not exist and all around you there's only relatives and parents who have brought you up with such love, that you felt, being an only child, that you were special.
 
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And then I met the markets. And the markets sometimes make me feel, once again, that I am special, that i can predict what will happen, and have my way, but never for too long. Basically the markets do not think I am special at all, and that is shown by the fact that right now I have zero dollars in my bank account and the equity line is at zero.

After 4500+ posts here over 8 years, how did you ever get to this point?
 
If I was you right now, I would log in to the remote server and do one of the following:

1/ Close all open trades and restart with original position sizing.

2/ Close all open trades and temporarily shut it down completely.

Tomorrow could bring 10k profit, it could also bring a 10k loss.
Start again and gradually scale up to introduce the new capital.
Thats what I would do.
Only you can decide what course of action to take.
 
We could say that the 3 factors contributing to this near disaster were:

1) more leverage
2) worse systems (less picky in selecting them, due to too much success and gratifying capital allocated)
3) bad luck

More leverage
= bad luck = guaranteed to happen when using worse systems

Silly reckless trading.
 
If I was you right now, I would log in to the remote server and do one of the following:

1/ Close all open trades and restart with original position sizing.

2/ Close all open trades and temporarily shut it down completely.

Tomorrow could bring 10k profit, it could also bring a 10k loss.
Start again and gradually scale up to introduce the new capital.
Thats what I would do.
Only you can decide what course of action to take.

I view what you suggest as discretionary activity, so I cannot do that. Everything now is still being done according to a plan established over a year ago.
 
After 4500+ posts here over 8 years, how did you ever get to this point?

More leverage = bad luck = guaranteed to happen when using worse systems

Silly reckless trading.

Your two posts are totally superficial, disrespectful and useless: you lecture me summarily by repeating to me things I have already said and already know, and without bringing any insight. Either put your brain to work, if it ever has done any work, and try to produce some more reasoning and detail it better, write more respectfully, or save this crap for the many superficial threads around here. Those with the smileys. You seem to belong to one of those threads with a lot of smileys. If you cannot produce decent intellectual output, stick to those threads. All it takes is putting effort into thinking and effort into writing. If you are not willing to do it, do not leave your garbage on my thread.
 
I have been giving more thought to a fixed formula for the choosing of which systems to enable thereby removing any human discretion from the decision.

Operating under the assumptions:

a. That you currently consider that an enabled systems combo to have failed when 200% of max historical relativized drawdown has been reached.

b. That money management of the enabled systems must accomodate this failure point always being above the known 'uncle point'
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Incidentally even if a. is above b. , as described above, should a. be hit (or even 200% of max historical un-relativised drawdown as has been the case with the current systems enabled combo) the odds would still be stacked against the combo recovering the drawdown and achieving a new account hi/ending the drawdown period as it is likely that there would be insufficient 'wiggle room' between a. and b. to accomodate further volatility - as you are finding now - with only an effective 5k cushion before the uncle point (correct as of yesterday's close per one of your posts above.)

This fact alone points to a. being unustainable even if it remains above the 'uncle point.' In such a situation and using the current situation as the case in point even if the drawdown remains above the uncle pointthe equity line could meander around below the last a/c hi for some considerable time, meanwhile it is a case of 'living on a knife edge' and/or 'death by a thousand cuts.'

Whatever the case, lets say the current drawdown lasts another month, this metric too exceeds the known maximum historical drawdown duration for the current systems enabled combo - pointing again to the fact that the combo has ceased 'to work.' Such a prolonged drawdown time (particularly if repeated from time to time) might also render impatience in the investor (s) at a lack of progress.

Moreover, it is interesting (per one of your recent posts) that during the current drawdown none of the currently enabled systems reached the 200% of max historical or max historical relativized drawdown but it was just that they all (most) lost simultaneously - suggesting more strongly that the Eur correlation of the 120 system portfolio as a whole (?) or at least the current enabled systems combo is too strong.

Anyways, this issue of known/currently unknown correlations is another subject and one which we have touched one before (LCTM - effectively placing the same bet over and over - as opposed to a more 'hedged' portfolio. ) It is however an issue that you seem to deem less important than I, so I won't expand on it further.

There are 2 options in respect of the above;

i. Enable all systems ...with 120 systems known to be profitable during the 10 year back test, this is the 'purest' way of ensuring that no choosing or a formula for enabling systems (pre-detremined and fixed or discretionary can play a part in the overall longe term success of the venture. Of course money management would have to be adjusted re trading volumes etc to accomodate the trading of all systems and the200% max historical relativized drawdown would always have to be above the uncle point choice. This said should all systems (most) lose simultaneously as has happened with the current enabled systems combo this would be problematic notwithstanding this contingency. (this again goes to correlation issues within the system portfolio.)

ii. Automate the choice of which systems to enable, and when, per a pre-determined fixed rule set. ....this is the $64,000 question, and I was even considering (without knowledge as to how easy it would be) - as an example whether this could be done following say a bearish or bullish engulfing candle close on the daily t/f (on the basis that these generally follow thru) - ie enable all systems that trade in that direction/multi direction afer such a close on the relative instrument...In this way the choice of enabled systems combo is always more directly related to current market and a known hi probability repeating market pattern -as opposed to any combination of 1 or more of the 8 x factors (per your post #2934) which are related to the back tested (and limited forward tested data.

However it is done, (and I am making the assumption from your posts here that you have accepted the need to do so,) even 'automating' it could result in a bad/unlucky choice of fixed rule set, so I would favour trying to tie the rule set into current market action per a simple rule (s) as described in the example discussed above.

Should the uncle point be reached with your current investor (s,) / this current systems enabled combo, I would encourage you to conduct a SWOT analysis on your project (Strengths, Weaknesses, Opportunities and Threats) - when your energy levels etc.. recover. It may help you to move on to the next phase of it with a clearer mind.

G/L

BBmac.
 
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I view what you suggest as discretionary activity, so I cannot do that. Everything now is still being done according to a plan established over a year ago.

I think I can see your viewpoint.
At this moment in time you disregard the qudrupled capital drawdown issue and
view this exact point in time as if you are starting from scratch with 4 times the
capital you started with in July 2010.
As such the drawdown has to be traded through.

If that is the case, then in all fairness it is a reasonable point of view.
The main restriction would appear to be your backers uncle point, not you or your system.
Basically their uncle point is unrealistic given the level of current risk per trade.
Your backers uncle point is still based on a quarter of current risk.

My original thought of going back to the original position sizing was that you
could satisfy the risk tolerance of your backers until a profit cushion is rebuilt
allowing position size scaling.

On another note, I agree that reducing position size at this point would be discretionary.
In that case quadrupling position size was discretionary as well.

As stated previously, I can also see your point of view:
At this exact point in time as if you are starting from scratch with 4 times the
capital you started with in July 2010.

That may just be a massive assumption on my part though?
 
Looking at it from the investor (s) point of view say that 160k margin introduced had been day 1 and no profit cushion of +37k existed, the current peak-valley drawdown was 38k (ish) which represents a % drawdown of 24% ..this is clearly around their current tolerance level.

G/L
 
Looking at it from the investor (s) point of view say that 160k margin introduced had been day 1 and no profit cushion of +37k existed, the current peak-valley drawdown was 38k (ish) which represents a % drawdown of 24% ..this is clearly around their current tolerance level.

G/L

True and I agree, I don't dispute that, although it looks as if I do.
I know Travis has said the uncle point is 42k DD at current size.

What I am driving at by saying it is unrealistic is that current market conditions
are far from normal.
Travis has said this system basket is largely dependent on an EU/ES correlation,
if both fall, this kind of drawdown happens.

Thats why I suggested reducing size until all this current EU contagion fear has
subsided (at least until next time...but thats a different story).
Currently this whole exercise hinges on the euro bailout fund, leverage, German backing etc.
Far from normal conditions...

Thats why I think reduced size would be safer rather than risk binning the whole
project due to these conditions.
At least with reduced size a plan to avoid EU/ES correlation break can be worked on in the interim.
 
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I understand what you say but it would be a discretionary intervention which is something Travis understandably wants to avoid given that his whole project of automation is in large part motivated by his experience with discretionary trading. Such an intervention/change requires a subjective/discetionary intervention if not included in the original plan.

We can all have opininions about when the prevailing enabled systems combo has actually 'stopped working' to any useful degree given the balance of probabilities, and some may argue (me amongst them) that it probably already has but Travis's definition holds and as he says in a previous reply to one of your posts he is sticking with 'the plan' (of which that is a part,) that was devised and initiated over 1 year ago. He will be proved right or wrong by doing so.

The question about whether any enabled systems combo has 'stopped working' if it reaches 200% of actual un-relativized max historical drawdown (which I thnk it has already, but not 200% of relativized yet) and reaching 100%+ of actual longest drawdown duration (in days) if it has done already (?) / does should probably be addressed given this experience, one way or the other..

G/L

True and I agree, I don't dispute that, although it looks as if I do. I know Travis has said the uncle point is 42k DD at current size.

What I am driving at by saying it is unrealistic is that current market conditions
are far from normal. Travis has said this system basket is largely dependent on an EU/ES correlation, if both fall, this kind of drawdown happens.

Thats why I suggested reducing size until all this current EU contagion fear has
subsided (at least until next time...but thats a different story).
Currently this whole exercise hinges on the euro bailout fund, leverage, German backing etc. Far from normal conditions...

Thats why I think reduced size would be safer rather than risk binning the whole
project due to these conditions. At least with reduced size a plan to avoid EU/ES correlation break can be worked on in the interim.
 
I understand what you say but it would be a discretionary intervention which is something Travis understandably wants to avoid given that his whole project of automation is in large part motivated by his experience with discretionary trading. Such an intervention/change requires a subjective/discetionary intervention if not included in the original plan.

We can all have opininions about when the prevailing enabled systems combo has actually 'stopped working' to any useful degree given the balance of probabilities, and some may argue (me amongst them) that it probably already has but Travis's definition holds and as he says in a previous reply to one of your posts he is sticking with 'the plan' (of which that is a part,) that was devised and initiated over 1 year ago. He will be proved right or wrong by doing so.

The question about whether any enabled systems combo has 'stopped working' if it reaches 200% of actual un-relativized max historical drawdown (which I thnk it has already, but not 200% of relativized yet) and reaching 100%+ of actual longest drawdown duration (in days) if it has done already (?) / does should probably be addressed given this experience, one way or the other..

G/L

I totally agree with this. He can't intervene in anyway shape or form. I think the only downfall to the system is leverage and i think Travis will learn from this. I don't believe he made any mistake other than believing the investors would be able to handle a 38k drawdown. The investors understood the drawdowns, but probably couldn't handle them. Next time maybe he'll lower the leverage way below something they say they can handle.
 
Great. Six interesting posts by 3 different users. Unfortunately I won't be able to read them, study them, and reply to them before the end of next week. This is the last part of the vacation, the part where my friends are arriving to visit me, and it's practically impossible for me to keep up with the systems and the journal at the same time.

I will leave you for a week, but not before posting these last two pictures of the present situation:

dolphins.gif

rocks.gif

First time I ever saw dolphins. Especially I would not have expected them here.

I also have to add that yesterday there was a recovery of 1500 dollars and today another 1500 dollars were made. So right now we're still in the game, and 7k away from uncle point. Hopefully next week there won't be another monday with losses for 10 thousand dollars, like this last one, or it will still be all over, in just one day.
 
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