Sluggo went about looking at the oft quoted saying that entries don't matter it is the exit and trying to see if that was true. Based on his work and posted code one can see that entries do matter too. In fact we have both cases working well:
Case 1: random entry, good exit
Case 2: good entry, random exit
As I said this got me thinking and one part I noticed is that the entries are trend following in Sluggo's work and the exits in previously published work are trend following too, eg let profits run if we randomly pick the right direction and cut losses if we do not. Thus, I think we are just testing if trend following either implemented by entries or exits work.
To test this I modified the random-entry random-exit blox/system that Sluggo provided and created my own portfolio manager blox that basically filters instruments by a set of moving averages (code attached). Some may think this is the same as the 2MA system entry of Sluggo - but I think not. I still keep a random delay on the entry and of course random number of bars before the exit. In examining some trades this leads to some really bad trades, eg entries the day before a cross over to the opposite direction would occur and then watching a market move 20 days in a row opposite your position You can say between this delay and the short holding period this is a sub-optimal trend follower that just cuts out random sections of the trend move.
Now I have not mastered the image capture etc like Sluggo so you'll have to read more text. I ran a 10 commodity portfolio (includes S&P and BP which are not trend friendly), 50 test runs, $100 slip/comm for 10 years of data etc. The trade direction filter I used in the portfolio manager was a 1/200 moving average. Nothing too magical at all.
- 10 yr avg CARG ~3.2%
42 out of 50 runs profitable
Max CAGR 10.5%
Min CAGR -2.2%
Be interested in hearing other people's thoughts on my opinion that we are all just testing trend following and not per-say any true entry or exit criterion. Or at best we are testing a joint hypothesis.
Thanks to all that contributed code and ideas that this post was build off of!