cunparis

This pattern only seems to work in current market conditions. I've tried on 10+ different stocks and it seems to work well on 3 of them and the rest are profitable but not worth trading. So it seems to work on a certain type of stock. I have no doubt that if market conditions change that it'll probably stop working. I've done some forward testing by reserving the past 3 months and excluding them from the optimization & backtests. it forward tests fine so I'm sure I'm not curve fitting. My plan is to trade this, first on sim, and then with a small amount (say $100 risk) and then slowly increase the position size. If I get a behavior that's inconsistent with the past then I'll re-optimize for the most recent 6 months or so and compare the optimal results. If a slightly smaller target or bigger stop is needed then I can make that decision. any change in market conditions should be gradual so I think it won't just stop working right away (like it would if curve fitting indicator parameters). Plus running the strategy on a basket of 3 stocks will help to spread the risk and detect any problems. The strategy is profitable with SPY but not as profitable as some of the stocks but it's good to know it works with SPY that makes me more confident. It's all pretty exciting. I gave up automation a year ago but that was because I was using indicators. Now that I'm indicator free things make a lot more sense and I feel it's more robust. Thanks for the tips on the S&R, I'll try to code that up and see if I can improve results.

After doing lots of testing and running the optimizer to find the idea stop & target, both as a percentage of the average daily range and as a fixed percentage of the amount invested, my conclusion is that the fixed stop & target works much better. I agree using S/R levels would be good but I'm working on an automated strategy and determining the S/R levels programmatically isn't easy to do.

I forward tested it like this: I reran the optimization up until 3 months ago. I then took these values and tested them for the next 3 months. Results were similar. in fact the optimal values for target & stop for the period up until 3 months ago and the period including the past 3 months are the same. I'm optimizing with 1.5 years of data. Prior to that the optimal values are different. In mid-2007 the markets become more volatile. can you suggest a way to not use fixed amounts? I've tried using percentages of the daily range but that did not work as well as the fixed amounts. Thanks

Hi, thank you for your reply. I agree about the past & future. I guess I am betting that it "won't stop tomorrow". Yes, it's about what to expect on the target & stop side. The reason this could stop working is due to volatility. What if the moves get bigger and the stop is hit more often? or the volatility contracts and the moves get smaller and the target is not hit? I've tried using range based targets and stops but I haven't found anything nearly as profitable as constant target and stop targets. there aren't really any outliers. It either hits the target or the stop, so all the wins are the same size and all the losses are the same. that's what I like about it, it's really simple. I think I can do better trading the price pattern manually, mainly cause I can exit with a small profit instead of taking a loss, but I like the idea of automating it so that I can do discretionary trading with other methods.

I took a price pattern I was trading manually and programmed it into a strategy using tradestation. It doesn't use any indicators, just price & volume. I then ran the optimizer on it and had it find the optimal profit target and stop loss. My strategy report has almost 1k trades over the past 2 years. The profit factor is 1.90. Drawdown is acceptable (less than 10% of the gross profit). I'm curious if this is considered "curve fitting"? In the past I've written strategies using indicators and they worked for a month or two and then died. So now I'm focusing on price and volume and I'm avoiding indicators. But I still like to optimize for the target & stop loss. Looking for experience here. Thanks.

Usually one would find this sort of thing on the p2p networks but I have not found it.

Can you explain why? I've noticed this too. In my case with simulator I let my winners run. When I went to real money and then I found myself cutting winners short. I didn't want to risk losing the money I had made. So to combat this I went back to simulator and made a rule that I don't touch my trade while it's open. Either my target is hit or my stop. I practiced this on sim until it became normal. Now I'm on real money and I get the urge to close out a trade early but I leave it open and I detach myself emotionally as much as possible, even as I watch a profit turn into a loss. How can I do that? Because I've practiced my method enough that I know it's profitable in the long run and that trying to avoid losers will only make me miss winners. I share that just as something for people to think about, and I'm curious if you can share your experience as to why it's hard to trade real money the same as a demo account. Thanks

Are you profitable with your paper trading? Are you using paper or a simulator? If you want to trade real money, forex has a big advantage in that you can trade micro lots and risk a few cents per trade.

Thanks for the feedback. I did a lot of forward testing this weekend. What I found was that performance going forward was pretty good until the past few years. Then even if I reoptimized it didn't walk forward well. i think it's due to changing from bull to bear and from the increased volatility. At this point I have doubts about the predictive capability. I'm going to give it a few more goes. I'm using a moving average difference for the main signal, so that's 2 rules. Then I added an upper & lower threshold, that's 2 more. I think that's too many. The reason is in some of the optimizations (3-4 years, 100+ trades) I'd have moving averages like 5,6 and other times 7,5. This didn't make sense because having a faster average slower than the slow (inverting them) would effectively inverse all the signals. So I got suspicious. I think I need to find a way to make an indicator without using 2 moving averages. It's too much curve fitting I think. any ideas?

I have developed 3 indicators that each test profitably. I've determined the optimal parameters by optimization (periods, thresholds, etc.). I do not expect to get the same results in the future, but I prefer to use the optimized values rather than some arbitrary values. My question is this: I'm now working on combining these 3 into one signal (short, flat, long). I've tried two different approaches to do this: 1 - I use the optimal parameters that I determined on each indicator individually 2 - I re-optimized all parameters together. #1 seems to be more realistic, with the acknowledgment that the performance will not be the same as the backtests, due to the performance of each system not being the same. This I know. So the final results will probably not be as good. #2 - Seems to be more optimal, with an even stronger acknowledgment that the results will not be as good as the backtest. However there is a greater risk of curve fitting due to the increased rules and degrees of freedom. In defense of the optimization I will say that lots of attempts produced unacceptable results so I believe that if optimization finds something good say PF > 3.0 then it's very likely to be positive in forward testing even though the PF will most likely be less. I'm curious what people think about these two approaches. I am currently forward testing both #1 & #2 but since they trade on daily charts and not very often, it will take a while to have something meaningful. I've developed systems that have held up and systems that have fallen apart. I understand the limitations of backtesting and automation. So I prefer not to debate that but focus on which approach would be more optimal (and not necessarily more realistic).

I've played with writing a volume splitter for both NT and tradestation. I found the same problem as you for NT, you don't have bid/ask information. You can write code to do this yourself in real time by comparing the close price (update on close = false so you get each tick) to the previous close price and you know if it was an uptick or downtick. For tradestation it has upticks and downticks so you just have to look at the volume and put it in the appropriate bin. It doesn't work historically either since you have to process each tick.

I used my own attempt at this for a while but in the end I couldn't find an edge. Sometimes the 1 lot traders would actually go short right at the top and the large traders would follow. Other times the small traders would be on the wrong side. My final conclusion was that just cause someone is trading size doesn't mean they're on the same side of the market as me. For example, I'm long on a trade that should last 10 minutes and some guy decides to dump his 1000 contracts right now. That doesn't mean he thinks the market is going down in the next 10 minutes. Overall I just couldn't find an edge with it. And the fact that it doesn't work historically was a pain. I find analyzing all the volume gives the true picture. It evens out all the 1 lot votes and 1000 lot votes and gives me the total vote. Naturally the larger traders get a bigger say due to their size so in the end I think it works out like it should. I could be wrong about all that and if so i'm definitely interested in learning more about the volume splitter.

Thanks for posting the COT indicators, even if it's not possible for the volume splitter. I didn't know that this was available for tradestation. I'm curious how the indicators get the data? Is it from tradestation? I've been downloading it myself and putting it into a lookup function. A bit cumbersome and not very fast when doing calculations.

How/Where did you see the videos? I'd love to see them but it looks like you have to buy their software. I'm trying to program in some of their signals into tradestation. I'm curious how people are using this volume splitter. I'm not sure which trader group to follow, sometimes smaller traders lead and other times the big traders lead. So far I'm not finding any one group better than the others. The fact that it's real-time only does make it difficult to analyze things. As for an NT version, it shouldn't be difficult to write. The code is quite simple really. Ask on the NT forums.

I'm curious part of the event driven APIs you find more suited for the volume work. I ask because I am currently using tradestation and I can't think of anything NT provided for the bid/ask that TS doesn't. The advantage I see of NT's event driven API is that you get call backs for order state changes and executions. But this is the only "event driven" thing I've used with NT.

I was wondering about this cause I sometimes see 1000 contracts on the ES T&S window and I was wondering if there were 1000 contract traders or if it was a sum of several trades. But at the same time I have a lot of 1 contract trades so if it were doing snapshots then wouldn't all the 1 contracts get combined?

Thanks for the explanation, it makes sense to me that it flattened out but did not turn down. I'm curious, for ES, what is the best trader size to follow? Yesterday I followed three groups: 1,1 100,199 200,9999 it was interesting that there was a difference between 100-199 and 200+. It appeared the 200+ traders seemed to be a bit early around the turns. I suspect it's because when you're trading 200+ contracts you must sell into increasing prices and buy from decreasing prices and also that it was their activity which turned the market.

Try 3/10 and 3/7 My message is too short so I write this.

They are surprisingly close. Maybe faster ma periods would make for less lag. Also the EOT indicator doesn't lead as much as I initially thought.

Any ES tick chart would be great for me, if you can put EOT + VS MACD4 on the same chart that would be great. I hear good things about EOT and their chat room. I'm considering giving them a try.

I was playing around with this although I used simple MA instead of EMA. It reduces the lag a bit. I'm monitoring 1 contract traders, 100-199, and 200+. It's interesting to see how each group reacts differently. Sometimes the 200+ group starts buying into the down trend (it was the case today). They were way early. Then 100-199 started buying. Finally the 1 contract players. Sometimes the 1 contract players seem to be first however, and sometimes the 100-199 move in a different direction than 200+. It'll take a lot of time and observation to learn how to use this info but I think it has a lot of potential.

Thanks Richard for your reply to my last post. I changed my setting to 100 and I'll keep increasing it to experiment. I looked up your prior post that you referred to. I have studied the chart and I'm seeing something different than you so I hope you can elaborate a bit. You say that price pulled back but the big traders kept going in their direction. From what I see the big traders did participate in the pullback and the smoothing effect of the MACD makes the macd line flatten out a but it doesn't pull back. To use this as an entry I think we need less lag. I'm seeing a lag of up to a couple bars. If anyone has the EOT version, I'd love to see some comparisons between the v4 and the EOT indicator to see if the EOT version really leads price as seen in the video or if the example used in the EOT video was a rare case.

I'm testing out the VS_MACD4. Took me a while to understand the code. I set it to use 25 for the min block size, I thought 100 seemed hi. I figured I'm trading 1 contract so if someone is trading 25 they must know more than I. After studying the Time & Sales window I think that's true for the majority but not for all of them. My only "issue" is the lag caused by the MACD. From what I see on a tick chart, it follows price pretty closely but lags behind it. In the EOT video the guy was bragging about how it leads price. The video was too small to see what timeframe he was using but in the video it does seem to lead price. I'm curious if anyone has noticed this and if anyone has some ideas to eliminate some of the lag. I'm using 200 & 600 tick charts. Thanks to the person who coded it. I think this has a lot of potential.

I had a few things done and tradestation crashed and the stupid thing lost everything I've done since my last backup which was Friday. (What a POS!!!). At least Ninjatrader kept the source code in ascii files on the PC so they could never get corrupted. Anyway, the stuff I made was simple so I'll redo it and if there is interest I'll post what I come up with...

I think you have to wait until NT7. I posted my attempt at porting bettervolume to NT in the NT forums, search for the thread "Better Volume Beta", go to the end of the thread to see the recent posts. Maybe someone will be able to figure out how to do it with NT6.5.