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Strategies & Market Trends : Befriend the Trend Trading -- Ignore unavailable to you. Want to Upgrade?

To: Ken Adams who wrote (8183)	6/10/2000 1:51:00 PM
From: CatLady	Respond to of 39683

Hi Ken, My short answer ( I may come up with more ideas later ) is the backtests can't reflect reality, but that doesn't diminish the value in comparing systems or stocks. If the backtest shows MAX on BVSN made 10% and with DIGL made 20% I think I might have better results trading DIGL, assuming similar spreads and liquidity - and assuming volatility on each remains constant ( HAH ! ) When I run backtests comparing systems, I often change the commission to 1% in and out because I want to "punish" systems that overtrade and favor those that trade less. Maybe silly, but I 'd go nuts trading in and out of a stock 5 times in a day.

To: Ken Adams who wrote (8183)	6/10/2000 1:54:00 PM
From: smchan	Read Replies (1) \| Respond to of 39683

Ken, I think you're taking too much advantage of your hindsight. Consider the same Timely chart: 207.61.23.99 On Tue, May 30, the 6th bar at one time was well below the moving averages and would've likely given a false MAX signal. Looking at the hard right edge at that time, the stochastics were toppy and OBV had level off. Would you have shorted? The same thing could've easily happened on your May 31st example. The price might've dipped only to return, although the OBV and stochastics were dropping at that point. These and other examples look very different when staring at that chart in real time. Others on the same chart: The 7th bar on Monday, June 5, may have presented a long signal that didn't confirm. Same with the 6th bar on Thursday and 1st bar on Friday. This week, if any, would've been the week to mechanically trade the system rather than anticipating the signals. (My scanner was going nuts this week finding signals that never confirmed.) The problem with backtesting, as I see it, has to do with order execution and fill price. In my particular test, the machine assumes a fill at the closing price for the period which is not always possible. What if the bid ask spread were a point and the closing price reflecting a seller at the bid? What if the price was running hard when the signal came? A fill at the ask would've been tough. All I want to see is relative performance among stocks, I don't realisitically expect my results to be the same as the backtests assuming I had actually played the signals I'm testing. BTW, I'd still really like to try MAX with fibonacci retracements for stop points but have a lot to learn first. Sam

To: Ken Adams who wrote (8183)	6/10/2000 4:43:00 PM
From: jesso	Read Replies (3) \| Respond to of 39683

My thoughts on Ken's comments about backtesting ... >My point is that the backtesting software doesn't take >into account the way I might FEEL about the trade. Exactly - but then again it shouldn't take into account the way you might FEEL about the trade. Don't get me wrong, but backtesting software is developed for and used primarily by systems traders ... not discretionary traders. Sure you can use backtesting as a discretionary trader to judge relative performance of your trading methods on a basket of stocks, but that's about it. As a discretionary trader who is always trying to "beat the system" (and there's nothing wrong with that as long as you recognize the fact that you're a discretionary trader and that's what you want to do) you won't reap the main benefits of backtesting. The primary benefits of backtesting a system are that it will give you important statistics about how your system performed in the past, such as reliability, size of the largest winning trade, size of the largest losing trade, size of average winners vs. losers, maximum intraday drawdown, etc. These are all things that a system trader must know about their system in order to have the confidence to actually trade it, as opposed to always trying to "beat the system" by adding in own's own emotion and feelings about what the market is going to do next. While the future will never repeat the past exactly, if you determine these and other statistics for a system after backtesting the past 10 years of data which generated thousands of trades, there's a good chance the results will be somewhat similar in the future as long as the market you're testing hasn't changed dramatically. (Backtesting the past 2 or 3 months doesn't yield accurate statistics about a system, but can be helpful to the discretionary trader who is only trying to compare the characteristics of one market vs. another on a short-term basis.) There are fundamental differences between discretionary traders and systems traders, and backtesting software is made for systems traders, so if you are a discretionary trader it only makes sense that you will have some "issues" with the way backtesting works and the results it generates. I think for the average person on this thread, the discretionary trader who uses some technical analysis, your method of just looking at recent charts to decide which market(s) to trade the MAX system on is as useful and less of a hassle then trying to do serious backtesting.

To: Ken Adams who wrote (8183)	6/10/2000 9:04:00 PM
From: Triffin	Read Replies (1) \| Respond to of 39683

Ken Adams .. Here's a daily rank by 'weighted alpha' All momos and volatile issues .. www2.barchart.com I follow the same approach to BTTT-MAX as you do .. Couldn't have said it better .. especially the comments on back-testing .. I am perfectly happy with the MAX idea for an aid to better trading. I'm just not sure of the value of backtesting. For my own "backtesting", I like to look at what might have been if I'd acted on the last 2 or 3 signals the chart shows. I don't ever go much farther back than that. Bottom line! I think the idea of scanning for these volatile issues is very worthwhile. After that, I think it's best to eyeball each chart. Throw out the least volatile immediately. Anything that had nice moves last week will probably do so again this week. At least that's an assumption I make. With a big enough stable, you can throw away anything that stops producing for you. A new scan next week will turn up a whole bunch of new candidates. As can be seen on the results of yesterday's scan, many old favorites keep showing up. Jim in CT ..