Are EXIT POINTS more important than ENTRY POINTS ?
Are EXIT POINTS more important than ENTRY POINTS ?
Are EXIT POINTS more important than ENTRY POINTS ?
Eckhardt once said in New York that "If you initiate purely randomly, you do surprisingly well with a good liquidation criterion."
I didn't believe him at first until I did the testings on my own. I found that a fixed duration strategy is able to generate a good looking equity curve.
My back-testings were done in Nikkei and JGB. Just wondering if you guys have similar experience in S&P or other European markets ?
Eckhardt once said in New York that "If you initiate purely randomly, you do surprisingly well with a good liquidation criterion."
I didn't believe him at first until I did the testings on my own. I found that a fixed duration strategy is able to generate a good looking equity curve.
My back-testings were done in Nikkei and JGB. Just wondering if you guys have similar experience in S&P or other European markets ?
-
- Roundtable Knight
- Posts: 2071
- Joined: Fri Apr 25, 2003 3:33 pm
- Location: London
- Contact:
I have never tested for random entries but I am certainly learning that given the same entry points, it is the exits that make the difference.
Take a simple crossover of price over a 100 day moving average and compare it to an identical system which uses a 250 day moving average. And use an envelope of some sort around such averages.
By jiggling the size of the envelope you can reach situation where the entry points for each system are often almost identical for the more successful trades.
But the difference will be found when you look at the exits for a trend trade which actually takes off and keeps on going. During a good strong trend, the longer term average will keep you in there. The shorter term will have you in and out. So there will be more "entries", more trades for the shorter term system. To that extent the entries differ. But on the stonking great trades which win big for the longer term system, the entry date will often coincide almost exactly with an entry for the shorter term system. And it is the exit which determines the profitability of that particular trade.
Take a simple crossover of price over a 100 day moving average and compare it to an identical system which uses a 250 day moving average. And use an envelope of some sort around such averages.
By jiggling the size of the envelope you can reach situation where the entry points for each system are often almost identical for the more successful trades.
But the difference will be found when you look at the exits for a trend trade which actually takes off and keeps on going. During a good strong trend, the longer term average will keep you in there. The shorter term will have you in and out. So there will be more "entries", more trades for the shorter term system. To that extent the entries differ. But on the stonking great trades which win big for the longer term system, the entry date will often coincide almost exactly with an entry for the shorter term system. And it is the exit which determines the profitability of that particular trade.
-
- Roundtable Knight
- Posts: 2071
- Joined: Fri Apr 25, 2003 3:33 pm
- Location: London
- Contact:
Except, gentlemen, that I was not talking about a "reversal system".
My wording was no doubt clumsy, but note my reference to putting an "envelope" around the moving average!
I was referring to a sytem such as the ATR breakout. Or take a BB Breakout: look at 2 std bands around an 80 day average and then, say, 1 std bands around a 300 day or 0.75 std bands around a 400 day. Or whatever. The entries can often coincide - but on a winning trade, the exits will assuredly not.
My wording was no doubt clumsy, but note my reference to putting an "envelope" around the moving average!
I was referring to a sytem such as the ATR breakout. Or take a BB Breakout: look at 2 std bands around an 80 day average and then, say, 1 std bands around a 300 day or 0.75 std bands around a 400 day. Or whatever. The entries can often coincide - but on a winning trade, the exits will assuredly not.
Re: Are EXIT POINTS more important than ENTRY POINTS ?
Not sure I understand. Are you saying flip a coin go long or short and exit regardless after a fixed period of time, say two weeks. Doesent make sense it should be profitable except by luck. Are you saying enter with no trend determination whatsoever?PTCM wrote:Are EXIT POINTS more important than ENTRY POINTS ?
Eckhardt once said in New York that "If you initiate purely randomly, you do surprisingly well with a good liquidation criterion."
I didn't believe him at first until I did the testings on my own. I found that a fixed duration strategy is able to generate a good looking equity curve.
My back-testings were done in Nikkei and JGB. Just wondering if you guys have similar experience in S&P or other European markets ?
-
- Roundtable Knight
- Posts: 2071
- Joined: Fri Apr 25, 2003 3:33 pm
- Location: London
- Contact:
Re: Are EXIT POINTS more important than ENTRY POINTS ?
RedRock wrote:Not sure I understand. Are you saying flip a coin go long or short and exit regardless after a fixed period of time, say two weeks. Doesent make sense it should be profitable except by luck. Are you saying enter with no trend determination whatsoever?PTCM wrote:Are EXIT POINTS more important than ENTRY POINTS ?
Eckhardt once said in New York that "If you initiate purely randomly, you do surprisingly well with a good liquidation criterion."
I didn't believe him at first until I did the testings on my own. I found that a fixed duration strategy is able to generate a good looking equity curve.
My back-testings were done in Nikkei and JGB. Just wondering if you guys have similar experience in S&P or other European markets ?
RedRock, I think that that's what PTCM meant...
Anyways, I wanted to get hands dirty in backtesting and see that's coming out of it. I was testing on Commodities... Random Walk Indicator -Originally Developed by Michael Poulos
Presented in Technical Analysis Of Stocks and Commodities by Michael Poulos (see TASC, January 1992 and September 1992).
RWI -Random Walk Indicator:
* NO STOPS !!!!!!
Short Term RWI uses a Min Period of 2 and a Max Period of 7
Long Term RWI uses a Min Period of 8 and a Max Period of 64
Interpretation:
Long Term RWI of Lows above 1 indicates a sustainable down trend
Long Term RWI of Highs above 1 indicates a sustainable up trend
Short Term RWI of Lows peaking above 1 indicates a price peak
Short Term RWI of Highs peaking above 1 indicates a price trough
Enter long or cover when
Long Term RWI of Highs is above 1 and Short Term RWI of Lows peaks above 1
Enter short or sell when
Long Term RWI of Lows is above 1 and Short Term RWI of Highs peaks above 1.
Results of the test:
Looks like for Random Walk that's not bad
BARLI,
That Equty Curve looks pretty good. what kind of slippage did you incur in the simulation?
I have recently shfited my research to focus on EXIT POINTS instead of ENTRY POINTS. Most of my Ph.Ds friends don't belive this concept. In fact, one guy from Goldman told me this is the wrong way to approach the problem. haha......nice try
Somtimes these PhDs just don't add up to dogshXX. I think that's what happened at LTCM. They tend to overfit historical data, underestimate slippage, and spend 90% of their time to research ENTRY POINTS.
That Equty Curve looks pretty good. what kind of slippage did you incur in the simulation?
I have recently shfited my research to focus on EXIT POINTS instead of ENTRY POINTS. Most of my Ph.Ds friends don't belive this concept. In fact, one guy from Goldman told me this is the wrong way to approach the problem. haha......nice try
Somtimes these PhDs just don't add up to dogshXX. I think that's what happened at LTCM. They tend to overfit historical data, underestimate slippage, and spend 90% of their time to research ENTRY POINTS.