Traders' Roundtable

I define a swing trade as one that is designed to capitalize on multi-day trends. A good swing trade might last 3 to 7 days.

Angelo,

I don't want to seem rude but it appears to me that you did not actually go through the process of the test that sluggo outlined. Did you actually run the test or did you just make the assumption that you knew the answer without actually performing the steps of the test as sluggo outlined ...

The recent series of conversations are very interesting as they hit upon what I consider to be one of the major breakthroughs in thinking about trading that I personally made a few years back. Namely that the big picture matters much more than the specifics.

Whether or not you traded using a 300 ...

nickmar's tests above reminded me very much of the research I did for the chapter "Lies, Damn Lies, and Backtests" in Way of the Turtle. Since this is a topic that I had already promised to discuss in detail in a blog entry on my blog site at www.wayoftheturtle.com . I finished that blog entry ...

I've tested using both #1 and a close cousin to #2, namely an exit that was a random number of days between some minimum and maximum. For example, randomly exiting between 20 and 150 days after entry.

I have not tested using a distribution as you outlined in #2 but this is certainly an interesting ...

nickmar,

Excellent idea. Since individual markets are often in different states, trending or not, volatile or not, etc. scrambling the portfolio gives you a better sense of the range of potential outcomes which might occur.

This too is a form of Monte-Carlo simulation and a good addition to the ...

zentrader,

Sorry, I must disagree.

If you take past data and then determine that a certain set of characteristics are sufficient to define that data, you can then proceed to generate new data using those characteristics, I don't doubt that this can be done and that most people be impressed with ...

I'm of the opinion that synthetic data is basically useless. For it to be useful it would have to be more likely to be representative of the future than actual historical trading data. I don't see any rationale for why this might be the case, nor have I ever seen anyone propose one.

The past is all ...

If I remember correctly MT was designed to nullify any serial correlation between adjacent output values.

True randomness results in plenty of lumpy clusters and runs. What are you thoughts on this fear of mine?

Lumpiness does not imply serial correlation. Truly random numbers have both ...

Mark Johnson presented a paper on Monte Carlo Simulations to a workshop a little over a year ago. He subsequently posted the paper to the Austin Association of Financial Traders mailing list. I asked his permission to post this paper here.

Mark was the one to suggest the mechanism we used in ...

Yes, that make sense. I did not realize that you were testing over different years than the Sharp/Basso test.

It looks like if you tested 10 years from 1988 to 1997 there would have been a 100% increase in the acocunt for most of the equity curves which matches the description of the results from ...

One other possibility is that the pseudo-random number generator for whatever simulation software he used did not have an adequate dispersion of random values. In other words, it wasn''t as random as it needs to be for this sort of test.

Computer pseudo-randomnumber genrators that are supplied by ...

You will need to install 64-bit XP to get access to more memory than the normal 2 Gig limit but not to run multi-threading when that becomes available. If you are testing large stock portfolios you will probably want to use 64-bit XP but if you are not then the 32-bit version will be fine.

There ...

The major issue with software that can take advantage of multiple processors is that many tasks are not easily divisible.

For example, take a test of a system over 10 years of data on 5,000 stocks. One might imagine that you could divide the test into 10 parts one for each year of the test. However ...

The problem with patterns as shown here is that you are only getting sample sizes in the 4 to 21 range for the individual patterns. This means most of these high percentage patterns have no statistical meaning. Your margin of error is too high.

Further when you have a computer do searching like ...

Historical simulation can benefit greatly from multi-threading and multiple processor cores since each core could work on a single test in a multi-test simulation.

For the next version of the product, version 2.2, we are targeting improvements which are especially important for stock trading. Since ...

There are an unlimited number of different ways to determine if the market may have started a trend.

A single moving average works, simply checking for the current price against the price some number of days ago works, two moving averages work, three moving averages work, four moving averages work ...

One can certainly make money trading with smaller accounts, however, the issue is one of risk. Trading one contract with a $20,000 account in many markets creates a large risk that you will go bust if the market moves against you significantly. If you are comfortable with this risk and with the ...

We have provisions for accounting for contract rolls in Trading Blox. You can even get this to match your rolling algorithm if you include the contract month as is possible with CSI data.

I should mention that slippage on rolls are generally much, much lower than normal entries and exits, at least ...

This is one of the reasons that we included the stepping feature for just about everything in Trading Blox, so you can see how sensitive your results are to slippage, commissions, account size, etc.

It is also one of the reasons that we let you specify various algorithms for slippage assumptions ...