Forex trading system 96 winners

A while agoI used a quote from Winton manager and trend Follower David Harding found in this interview saying:. If you put in stops and run your profits and trade randomly you make money; and if you put in targets and no stops, and you trade randomly you lose money.

So the old saw about cutting losses and running profits has some truth to it. Like the proverbial dart-throwing monkey? It seems so… In effect, Harding is saying that entry points do not matter so much: I once met with a fund manager, who described his strategy as very similar to that random system in the Harding quote.

What was really important to them was the position sizing for each new signal, as well as the exit strategy. The portfolio used for this test is a subset of the one used in the State of Trend Following reportbasically all those instruments that I have data for going back to the start of the test: Since this is a random experiment, I generated multiple test outputsall based on the same parameters, and averaged their monthly returns to create a composite equity curve, which performance summary statistics can be seen below:.

The 2-ATR stop level is somehow an arbitrary choice and I wanted to check whether this bore an impact on the test results. I ran a further test, stepping the ATR-multiple for stop calculation from 2 to Each ATR-multiple set was run times again and averaged to give a composite equity curve. Note how the diversification and rebalancing over several ATR-multiple stop levels have a substantial impact on the Max Drawdown and volatility.

The concept of random entries with trailing stops has actually been discussed before. Note that his study found an opposite result, showing a turn in profitability downwards of random systems after portfolio and parameter values are different thoughso you might want to run your own test to verify this concept for yourself….

Is the ATR value used for the trailing stop fixed at the time of entry or updated while the position is open? Excellent post as usual.

I get exactly the same feeling about entries, they explain a very small part of a TF system profitability. I think that trading with the trend is more than enough. I understood that when I read Mandelbrot. Exits, position sizing and most importantly learning to deal with DD is what counts.

I have had the pleasure to speak with a few of the Market Wizards, they have given me some very useful advice…. It is also curious to know that in the seminars I have attended, entries are among the first and most asked questions. Indeed great post as usual. I came to the same conclusion during one of my back testing analysis.

I fixed the entry point and tested several exit strategies. Then I fixed the exit strategy; and tested several entry points. The excellent exit strategy will always result into a profitable system. Unlike poor exit; it will mostly destroy any entry point strategy.

Thanks for the post. Did your system consider pyramiding entries? That might change results a bit though I guess the overall takeaway will remain the same. This is interesting but not enough information is provided to come to a conclusion.

I would like that you kindly provide the following:. Take simple channel breakout for example. If you fix the breakout days, and change exit days to 15 days, 20 days, or 30 days, you will see the performance difference is not that dramatic. But if you change the breakout days from 20 days, 50 days, days, and fix the exit days, you will see huge performance difference.

Your article only show random entry can have profit. In my opinion, if want to design an excellent system, the entry is the key, just use simple days low as exit and some exit filter high volatility exitthis simple exit is better than ATR trailing stop most of the time at least from my testing because it does a better job to make profit fly. Mirec — trailing stops are based on 2-ATR for the first study and a range of 2 to 10 ATR for the composite curve. Rick I did not compute the exact Win rate as I only output the equity curves, due to the high number of tests and trades.

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Not sure if Buy-and-Hold is the best benchmark for this strategy since it goes both long and short, but it would be worth the comparison. Jing, Agree that entries are not completely irrelevant. The goal of the post was not to show that exits were more or less important than entries.

As Pretorian was saying, not many Market Wizards give advice regarding entries, but rather on position sizing and money management, which — to me — also includes letting profits run as your day exit would. For entries, you can optimize it to fit historical curve, but no one can guarantee this entry will work excellent in future, so excellent entry may be susceptible to curve fitting.

But position sizing, money management and make profit fly are more robust and universal, not matter how markets change, these concepts are very robust. After 20 years, a previous excellent entry rule may not work well but money management and make profit fly always work. Rick I ran a quick test with simple Buy-and-Hold of the same 22 instruments. I normalized the results with the curves in the post for equal monthly returns standard deviation and the CAGR is 5.

You can see the comparative chart there. So actually you have just one stop? Isnt the standart ATR 14 days not 39? Is it so difficult to include commissions in your test? If you can backtest, it should be easy to include a fixed commission rate. Most backtesters have the option already, no need to do anything. There is no way for us to know how realistic are these tests unless there is commission included. Totally agree that the money management is the key….

It is funny concept but indeed the money management is the CEO of multiple trading system. But going back to entries and exit strategies.

In the post; random entry represented multiple entry strategies Note that different strategies not changing only parameters while fixing the exit point. And indeed the result was a profitable system. Meaning selling or holding randomly! The system will just result into losses for sure, which confirms the point of this post. Trend following is based on the concept of letting profit run and cutting losses short; and the only way to do that is by controlling the exit not the entry!

But definitely; I would give importance to both entry and exit in live trading to give me as much as possible of positive mathematically expectancy. And then design a money management system that can give me as much as possible of geometric mean of return. It does not tell what the percentage of traders is who will underperform this average and more importantly the percentage of those who will fail.

This is because, what you calculated is not the performance of a specific system but an average of many systems trading many futures contracts. I have seen similar discussions in several forums recently and I have prepared an analysis to illustrate forex trading system 96 winners issues involved:.

Michael, Apart from a few teething issues, website seems to be running fine now — thanks. Note that the exponential moving average smoothing constant in Trading Blox is calculated in a different way from the more specific Wilder ATR moving average such that: Swing trade stocks 2016 omission is actually a choice to avoid making assumptions on commissions and slippage amounts, which is variable for every trader based on how to win on a cold craps table, broker, market, etc.

I agree that not much information was provided to do this, though. I purposely ran many tests to calculate an average to detect the tendency of such systems.

Same concept goes for the use of multiple instruments — as I was saying in a diversification post:. This is the way I see diversification: All that is left is to collect the small edge from all the instruments via your preferred trading strategy ies.

Hi Jez, excellent post. Thanks for posting it. Since you posted the average returns of the multiple tests in both cases, I was wondering if you could give some numbers on what were the worst cases, and best cases, or a chart with all the various performances of each run, for each case, in order to see how consistent is the return over time with a make a money mojo bag test and an average.

Alternatively, just to understand what is the worst and best drawdown and returns you found in your tests would be also useful. Thanks again for your work! This is a very interesting statement but it needs to be proven, I think you have already agreed to that.

I also think, as others have already commented, that you should include commissions in your studies. You can use IB commission levels as representative. This is important because as I have demonstrated recently in a response to an article by Bespoke Group about the performance of a simple system based on buying on the close — selling on the open of next day, for SPY, total ruin is possible due to commissions only, although studies without commissions show spectacular returns.

You can find the study here: Michael, I do not understand your point about averaging.

To me, averaging a random process is absolutely necessary to squeeze out the randomness and detect the central tendency and other aspects such as dispersion, etc. Without averaging many random runs, but instead relying stock market classes for beginners one random run, there is no way to understand how much randomness played a part in the results achieved, just by looking at the results.

This is why I think it is vital to average when running random tests. If you think about it, this is exactly the same concept as when you run a test of a strategy on one single instrument: A back-test on many trades will allow to determine the tendency of that market-system. I just said it may be misleading in some context. I will give an example:.

Let us say that in a possible parallel universe there are only 4 fund managers with the following average yearly returns:. What is the meaning of saying that the average yearly return of managers in that world is 3. Even if we state the standard deviation of Along with the good tests you did I believe you should advice from professionals on the binary options trading calculate the number of systems that fail forex trading system 96 winners the average because when you use random entries, you get many possible systems based on the tossing sequences obtained.

Should we assume that the returns are normally distributed? I have not seen such study. What about if the distribution is skewed and a large percentage of those systems fail? Maybe systems that were lucky enough to have the right tossing sequence were profitable. That depends on the size of trades and of stop-losses. I do not know the answers. This is why I asked. I did not question the use of averages and standard deviations.

I question the shape of the distribution of the returns of the many possible systems the tossing a coin generate for the specific data you used. The same burst of activity at the Trading Blox Forum 4 years ago, which created the code you ran for this blog entry, actually tested THREE recall option missing in outlook 2007. On randomly chosen entry date, enter in the direction of a classical trend detection indicator such as MACD etc.

Then exit at a random exit date. By the way, some of the charts of these results on the Blox Forum are awesome! Thanks for the pointer on these TB threads. Well, the code for these other random systems was not too difficult to write and it is good in a way though, as this additional testing will not have been impacted by the hindsight knowledge of the results from my predecessors. My next tests are also slightly different 1: MA cross-over entries and random exits, 4: MA cross-over entries and target profitsso hopefully they will complement the findings on these TB threads.

The one that seems to overlap is MA entries with random exits, but in my test the return is so small compared to the volatility that I cannot see much statistical significance in the results. Rick, there were three conclusions not 4 as que significa ask en forex typed.

Among the many useful Blox Forum posts on the topic, here are three specific messages by 3 different authors, that contain test results which support the live schedule for binary options bv conclusions above. Please take a few minutes to surf around the Forum, looking at old threads and old topics. There is quite a bit of great stuff there, waiting to be re discovered.

Heck, you may even decide to join. I think the positive bias some people got may be attributed to several factors, including not properly rolling contracts. I see conflicting reports and low returns. In C2, it is claimed that pure random entry exits were profitable only 2 times out of They used an ADX burst and other entry methods to fix that.

These posts prove nothing, save the fact that in most cases exhibit a wrong approach. I also sense some desperate attempts to prove something is working the reason for which are not very clear.

Jez did forex 5nitro+ plus use commissions and never stated how many runs are unprofitable out of the he ran.

Your choice of averaging monthly returns over multiple random realizations actually BIAS the volatility and hence the drawdown statistic DOWNWARD significantly. This is just simple statistical artifact. As an illustration, I performed a simple simulation. We sample it for months. Then we repeat the sampling times. What you did basically was to average the each month return based on sampling.

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This gives averaged monthly returns. This averaged return, will still have the same mean value of the strategy. However, the volatility is greatly reduced by the averaging process.

Consequently, the drawdown figure is reduced also. The picture shown in the following link highlight my point. The black bold line is the resulting equity curve from the averaged monthly return. Indeed, for the averaged monthly return, the sample average is 1. Of course, the strategy you are testing do not produce monthly returns that is normally distributed. However, the impact of averaging randomly produced monthly returns on BIASING the drawdown downward is still valid.

In light of that issue, I think the Performance Stats which remain valid are CAGR and Average Monthly Rtn. For the risks measure, I suggest you calculate the average of maximum drawdowns of each sampling. It will also be useful to get the distribution of the drawdowns, e. When I came across this post I went back to my copy of the complete turtle trader and looked up the mechanics of this technique. Coincidentally, a post was created on the TB forum a few days ago, discussing a very similar issue maybe started by you under a different avatar: Making averages could be misleading.

Sometimes it is best to visualize all colored equity curves in one picture to see the robustness. Do you have something of this sort. Agree, averages could be the tree that hides the forest although I really wanted to test for a central tendency here — unfortunately I do not have these multiple equity curves available — sorry. Hi Jez, It appears that the trailing stop distance of 2 x ATR was arbitary.

The comparison against the mix of stop distances shows that 2 x ATR is better than a mix between 2 and 10 x ATR. Has anyone run the same test with suitable sample sizes to compare the performance of 1 x ATR vs 2 x ATR vs 3 x ATR etc to try to pinpoint the optimal trailing stop distance?

Paul, Not that I am aware of, but that would be a good idea for a next post! I did do something similar with Profit Targets a while back though: I was wondering if you would be able to supply a simple bell curve of CAGR and MAXDD. I would like to see where the range and majority of the CAGR and MAXDD lies. The methodology I used for this test was actually to average all the random simulation iterations on a monthly basis ie to simulate re-balancing instead of running all simulations on their own and averaging their end results.

Hi, I am having trouble working out how you use the ATR. When I look at an ATR indicator, the figure is something like 0. Stuart, Usually an ATR-based stop is just a way to place the stop price N number of ATRs from the entry price.

ATR value sounds low but it depends on the period used to calculate it ie an ATR 5 on 1-min bar will be much slower than an ATR 20 on daily bars.

Otherwise calc looks good. Being new to trading i am a bit puzzled with these stops. Does adapting the trailing stop daily mean setting a new order each day with a new trailing stop? So, you create each day a new high from which to the trailing is done. I suppose the stop and trailing stop also meant in this text is always 2 ATR?

Or is this only the initial stop? Thanks for your help. Jez, thank you very much for this information. I understand u probably place new orders daily, but keep the stops in place in case the price dropped, and u raise the stops in case the prise rose. How about doing this on a monthly basis?

I think this is more understandeable then options and futures. You can never loose more than you invested either. What is your idea about trading such products? Thanks for your information. I think your site is very informative and inspiring to people new to the business like myself: You can use these tags: Notify me of followup comments via e-mail. Sy blog, Systematic Trading research and development, with a flavour of Trend Following. Past performance is not necessarily indicative of future results.

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The ideas expressed on this site are solely the opinions of the author. The author may or may not have a position in any financial instrument or strategy referenced above. Any action that you take as a result of information or analysis on this site is ultimately your sole responsibility. Sy blog — Automated trading System — Sitemap — Powered by Wordpress. Sy blog — Au tomated Tra ding Sy stem. Wisdom Tradinga Futures Broker who can Execute your Trading System and provide access to Global Markets and CTA's — all at great rates.

Sy recommends CSI Data. Thanks for your effort. I would like that you kindly provide the following: Simulation was friction-less no commission, no slippage Not sure if Buy-and-Hold is the best benchmark for this strategy since it goes both long and short, but it would be worth the comparison.

How many trades were there on the average per run? I have seen similar discussions in several forums recently and I have prepared an analysis to illustrate the issues involved: Same concept goes for the use of multiple instruments — as I was saying in a diversification post: I will give an example: Let us say that in a possible parallel universe there are only 4 fund managers with the following average yearly returns: These three test results suggest some conclusions: The entries are rule-based.

In the second link, they are talking about a trade direction filter. Unless I missed something, there are no cases of random entry. None of your 4 conclusions appear to be derivatives of those links. Among the many useful Blox Forum posts on the topic, here are three specific messages by 3 different authors, that contain test results which support the three conclusions above C1: In C3, I think the claims are wired.

The input data are first filtered using moving averages. The take away is valid. However, I would like to emphasize one defect in the study as already pointed out by Michael.

But what if you wanted to use this strategy on a stock instead? Great post — look forward to hearing from you. Leave a Comment Cancel Name Mail Website XHTML: Free Updates By Email: Trend Following Wizards performance A trick to reduce Drawdowns Trading Blox review Better Trend Following via improved Roll Yield e-ratio: How to measure your trading edge in 4 easy steps A practical Guide to ETF Trading Systems Which CTAs REALLY provide alpha and HOW do you calculate it?

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