To design this system I used ASX data for around 500 stocks from January 1999 up to the end of 2004. The initial ideas were coded and then optimised. The buy signal is made up of 2 variables and the exit is a simple ATR trailing stop plus a simple, rarely triggered, profit exit.
I optimised the variables, fixed them and forward tested up to September 2009. The whole exercise was completed over a weekend. It's not a question of what time-frame to use, trading is about what works for the trader.
The security profit distribution shown below has the top 50 winning trades excluded to see if there are any big winners impacting on the results. I excluded the top 50 since there were over 1000 possible trades over the 10 year period.
Yearly profit is shown below ($500,000 capital kept constant) again with the top 50 trades excluded.
Yearly profit without trades excluded.
I am ranking the trades, not so much to improve the performance of the system, then to stop me wondering which stock to pick out of the handful presented.
I also did some runs where I started the system up at the beginning of every year from 2000 through to 2009. There are some difficult startups based on these runs, but nothing that a trader that understands the system could not ride out. I am not starting from scratch anyway since the portfolio is already close to fully in the market.
regards
stevo
2 comments:
Stevo,
Would you be able to comment on your system switch, very interested in any general ideas you have about when to be out of the market, etc.
Cheers,
Andrew
Andrew
The system switch that I use in some systems tends to reduce drawdown, but but does not necessarily mean that a system is more profitable. I find that a system is more tradeable if I am avoiding a series of losses. But index filters may not respond to a market change quickly and so some early trades may be missed.
For me a good long term system will not trigger much when the market is bearish. An index filter switches a system off altogether so that any trades that may have triggered don't. Sitting on the sidelines is not a bad place to be, contemplating life etc.
The hard part is determining how to define a bear market. I don't use moving averages because I feel that they move too slow. With a weekly system I use a very short term rate of change on the index. If ROC is above a certain percent then the system is on, if it falls a certain percent it's off.
I am still using a filter that I developed in 2003, and so far I haven't found one that is any better. But drawdown can't be avoided, and it can be substantial.
stevo
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