Independently Non Profitable Systems Enhancing Overall Perfo

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Chris67
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Independently Non Profitable Systems Enhancing Overall Perfo

Post by Chris67 » Tue Mar 23, 2010 1:42 pm

Anybody got any thoughts on using systems that on their own are not profitable but seem to enhance the profitability / risk return characteristics of other systems / baskets of systems ?
Ive been messing around overlaying the Bollinger Counter Trend System on top of a couple of longer term more robust and profitable systems and it definaely enhances the risk adjusted returns - cagr usually stays the same but draw downs eased.
Problem I have is I cannot bring myself to overlay a system that is independently a loser with a left to right downward sloping equity curve in the long term - I really dont know if I'm right or wrong but something is telling me to ignore it ?
I know there has been previous talk in this area and someone talked about the introduction of non correlated systems such as the short component of a long only break-out system - but personally and I guess its a personal thing - I do not see this as being the same ?
Also the trouble with the bollinger counter trend system is the results can vary so widely with small changes in parameters and the only parameters that seem to work are those that effectively turn it into a poorly performing trend following system by setting the exit threshold out at -6/ -7 / -8 which means you really never exit the trade for years ?
Any thoughts anyone
Cheers
Chris

LeviF
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Post by LeviF » Tue Mar 23, 2010 2:47 pm

I have found that taking profits does a better job at reducing drawdowns.

I dont believe there is any accurate way to pick tops & bottoms like is necessary for counter trend systems to work.

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Post by sluggo » Tue Mar 23, 2010 8:14 pm

Among all of the counter-trend systems I've tested in my particular environment (trading a very large portfolio of global futures markets), I'd have to say the Blox presupplied Bollinger Countertrend is in the bottom 10%, i.e. the poorest performers of all.

I find that it is indeed possible to build systems which are both (A) negatively correlated to the returns series (equity curves) of classical trendfollowing; and also (B) profitable when tested standalone. However, all of the examples I've seen so far were programmed from scratch; they weren't presupplied with a copy of Blox software, or downloaded from the Blox Marketplace.

Take a look at the stock trading systems over at Wealth Lab. A large fraction of the good ones are countertrend systems. (Reminder: systems that trade using Limit orders to enter are, by definition, counter trend.) See whether they suggest new ideas or fresh inspirations for you.

Pattern recognition systems might be another area to investigate; the profitable ones I've seen are neither trendfollowing nor counter-trend; they are "indifferent to trend". If such-and-such candlestick pattern forms, enter a buy order, whether "the trend" is up or down. These are uncorrelated to trendfollowing AND uncorrelated to counter-trend trading.

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Post by Rush » Wed Mar 24, 2010 11:51 am

I my testing I found that in order to "enhance the profitability / risk return characteristics of other systems / baskets of systems" neither of the below are essential characteristic of an “additionalâ€

Bud Fox
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Post by Bud Fox » Sun Aug 08, 2010 12:41 pm

I'm currently working on an intra-day trendfollowing system. The basis of the entry is a chart pattern which per se rises the profit factor above 1. At the moment I'm trying to find a suitable exit strategy.

I was also considering to enhance this system with a counter trend-component. Are there any other threads related to this topic in these forums? Or is there anyone who already went down this path and is willing to share some experiences?

sluggo
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Post by sluggo » Mon Aug 09, 2010 8:25 am

Bud Fox wrote:Are there any other threads related to this topic in these forums?
In addition to the "Search" facility found at the top center of each page of the Trader's Roundtable, you might find this other resource useful too. Its Advanced Search version has more flexibility and more options: http://bit.ly/aPLKFZ

Jez Liberty
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Post by Jez Liberty » Mon Aug 09, 2010 3:26 pm

How about that search facility
:wink:
cheeky but quite funny...

Bud Fox
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Post by Bud Fox » Tue Aug 10, 2010 1:35 pm

I just tried to reanimate this thread.

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