I guess I should have been a little more clear. I have a opportunity to hang out with some old friends from Chicago and see the series. I wasn't contemplating stopping the overall thread. apparently there are a number of stealth systems builders lurking. lol
Great post and good advice. it's all about the edge but unfortunately the edge can never quite be relied upon in markets. Once all the analysis done, it still pays to be lucky. Point 3 is resolved by measuring everything against a fixed capital.
I would like to hear more about what do you mean by a strategic vision ? I do not want to jump to conclusion but do I smell some forward projecting around here ?
I'm certainly no professional and am interested. However I wanted to review the whole thread first. I only caught up to the recent posts yesterday. I'll catch up the rest in the next few days.
Just a quick note of thanks. When I stumbled upon your postings from your last stint at ET it was a turning point for me in both the statistical appraisal of systems and developing an overall evaluation framework, something consistent and solid. I have read Pardo, Stridsman and Kestner, dusted off old statistics books and started to look at trying to understand a program language. I have avoided trading a system that looked too good to be true (it was! and it would have been an otherwise expensive lesson). Earlier this year I had the confidence to start trading a system which is performing fine. All of these are a direct result of your threads/postings. Some I get, some I get after reading a few times and some I will euphemistically refer to as ongoing study for me to come back to. I bet there are a few out there who are in a similar position. I dream of having two profitable systems never mind perming 5 from 15 for the sake of an illustrative exercise. Its an inspiration as well as an education. This all sounds a bit sycophantic but its just telling it the way I see it. Anyway, all I'm saying is a big Thank You. Best Regards Rob
It's pretty obvious some of you are expert model builders. Please contribute! Here's a historical report that was run from one of the submissions risking only .4% per-trade. Pretty humbling to see someone on this site with this kind of talent.
What software are you using for the MonteCarlo analysis? For the MonteCarlo work I've written my own routines. I don't know of any software that simulates a non-normal trading type of distribution. The fat tails can make a big difference in the overall profit/(loss). You described a very simple way to size your position. If you used this approach with your MonteCarlo testing would it appear to be too conservative and risk adverse? For the trade sizing I think it accurately reflects the type of returns expected in the "real" world. I don't think it was too risk adverse. The MonteCarlo tests in the top and bottom 5% are not realistic because they don't take into account the effects of correlation (which is a big part of my strategy). Would you change this basic position size approach if the market appeared to be more favorable to you? Have you found any way to match position size with market conditions instead of only using account size? For example, if last 4 trades were winners, increase the size of the next trade for example... Another example, if volatility of the market > x and trendstrength > y then increase size... At this level it's assumed you've already made your trade decisions. All this is doing is maximizing the return and reducing the risk based on the account size and models. If you want to vary trade size based on other information it would be passed to this process. For instance if you want to scale in with three separate trades then the three trades will all be used to determine how much risk to put on for each of those trades.
I have a question for you in regard to your correlation and weighted models work. Does each model added trade one instrument such as ES? Or does the model trade an edge across several instruments? Each model represents one stream of trades. As I posted, this could be one model in multiple markets represented by multiple streams or multiple models in one market. What if you have a trading model that trades stocks in the Nasdaq? Would it be appropriate to keep that as one model? Or possibly break the stocks into their perspective sectors and have numerous sector models where you could use your correlation and weighted designs to add each sector model only if improvement is made to overall return and risk? You could use it either way. Instead of looking for many non-correlated models/markets you could just do pairs trading based on two non-correlated models for each security, basket of securities, or market sector. If you had 10 sectors you could then give 10% to each pair and recalculate the pool every so often or you could take the results from the 10 sector pairs and run them through the weighting test to see how much each should get from the pool and allocate funds to each after every trade.