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Precap2 Nov 18, 2009 7:53am | Post# 8901

H4 and M30
 
I'm also trying out IB on M30 and H4.
I find that while H4 offers fewer opportunities,
it's always better trade than M30, which offers more
trade opportunities.
I also added 62 EMA on H1 and it's proving an amazing help.

Try especially the 62 EMA in H1 and see result ones bar reaches EMA.
The dance will alert you to possibilities.

Kennedy

razorboy Nov 18, 2009 9:29am | Post# 8902

The discpline isn't...
 
in the trading...........it's in the stinkin' back testing!!!!

takingthepip Nov 18, 2009 9:55am | Post# 8903

Backtesting is key for me.
 
1 Attachment(s)
in the trading...........it's in the stinkin' back testing!!!!
Agreed. I still class myself as a beginner in this business. I tried DIBs and did very well on demo for a couple of months then got frustrated with a lack of exit strategy.

After a couple of months away from DIBs I coded a rough EA a few weeks ago for backtesting with the focus on finding a trailing stop mechanism I could live with if I ever go live with this.

If I get a chance, (I've some personal matters going on at the moment), I'll get back to it and post results.

I was curious about the potential of trades on the EUR/USD, as it has been trending up for so long. So I coded the EA to not use ANY trailing stop and just take longs.

$10,000 dollars turned into $40,000 dollars in only 18 months.

I had a play with it again recently and managed to turn the same amount into $70,000 in short time. It's important to note that only around 6% of trades turned into the big winners. (10 big wins out of 150 trades.)

The problem for me is, how much of that potential profit to take?

Icarusfx mentioned to read the Infinite Yield PDF recently, which explains about this. What is your 'utility' and risk appetite, etc. Thanks for the reminder!

Wide stops, for example a 70 SMA on the WEEKLY chart, will catch these huge moves, but the risk is very high drawdown. A 60 SMA will catch less, with less drawdown, a 50 SMA less, and so on.

(You could use other trailing stop systems like bar stops, etc. I just like the simplicity of MAs. They're easier to code for!).

The 20 SMA that Peter uses on the DAILY seems quite a conservative approach at first glance and one that I'll be looking into next.

Will post more on this later. Initially it looks as if the 20 SMA could also be used to determine trend direction. ie. Only take longs if it's up, shorts if it's down. Though I'm sure there are other ways to determine trend.

I do think it may be important to only take trades in the direction of a strong trend, if there is one, though.

Anyway, lots of testing to do.


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Precap2 Nov 18, 2009 11:55am | Post# 8904

What's discipline
 
in the trading...........it's in the stinkin' back testing!!!!
Maybe someone's going to define discipline.
If I don't know what it means to you, I can't follow your drift.

Kennedy

jzw Nov 18, 2009 5:25pm | Post# 8905

...So I coded the EA to not use ANY trailing stop and just take longs.

... (10 big wins out of 150 trades.)

The problem for me is, how much of that potential profit to take?
I think you are making some (unfortunately) common mistakes with back testing.

1 - USD is in a bear market for structural reasons - any strategy that goes long EUR is going to look good over this time period if it just holds on. In fact the profitability of the system can probably be explained by saying it goes long EUR - DIBs is an irrelevance. You are making a macro bet and good macro traders make money.

2 - You can optimise your exit strategy for your 10 big wins but that will tell you nothing about the future since the sample size is much too small.

3 - PC mentioned this in one of his posts and it is generally true that the way you make big profits trading is by adding to winning positions. If you put a trade on with 2% risk and it moves in your favour far enough to bring your stop to break even you can now take a second position with 2% risk. Pyramiding but keeping your risk at 2%. If you are lucky enough to get into a big trend then you'll make huge profits. Strategies like this look good in backtesting but are tough to trade in real life as you can find yourself losing money for 10 months of the year while you wait for the home run trade.

I don't want to discourage you from back testing but its important to think about what is really happening before drawing conclusions and there is a limit to how much the past can tell you about the future.

takingthepip Nov 18, 2009 6:24pm | Post# 8906

I think you are making some (unfortunately) common mistakes with back testing.

1 - USD is in a bear market for structural reasons - any strategy that goes long EUR is going to look good over this time period if it just holds on. In fact the profitability of the system can probably be explained by saying it goes long EUR - DIBs is an irrelevance. You are making a macro bet and good macro traders make money.

2 - You can optimise your exit strategy for your 10 big wins but that will tell you nothing about the future since the sample size is much...
Hi jzw.

The example I showed was an extreme. I won't be trying to catch that much of a trend. The point I was trying to make is....the more of a move I try to catch, the greater the risk/drawdown and reward.

I'm going to try to develop a shorter term exit strategy using, initially, the 20 SMA as a trend indicator and basis for a trailing stop loss. I'm willing to take smaller gains for less drawdown. I'll be testing many, many different conditions and various currency pairs.

I wasn't aware that Peter mentioned adding to winning positions other than further DIBs entries in the same direction. I'll have to read his posts again!

Thanks for helping me clarify some points and I welcome further input from you.


Razor_trader Nov 18, 2009 7:38pm | Post# 8907

Agreed. I still class myself as a beginner in this business. I tried DIBs and did very well on demo for a couple of months then got frustrated with a lack of exit strategy.

After a couple of months away from DIBs I coded a rough EA a few weeks ago for backtesting with the focus on finding a trailing stop mechanism I could live with if I ever go live with this.

If I get a chance, (I've some personal matters going on at the moment), I'll get back to it and post results.

I was curious about the potential of trades on the EUR/USD, as it has been...
Please dont be too impressed by the results, they are in most cases a perfect example of what has happened after the fact and in all reality you have skewed the perception because you already new that EUR had trended long and the pullbacks on some of the moves (your big 10) have allowed for the substantial gains.

I am all for backtesting but when you see results like that, ignore them. You are looking for you backtesting to fill a different void, a void that struggles to trust a concept at face value. Also 50% a year is possible if you let some of those runners go on to big rewards, but like your massive gains, dont count on it.

It is all to easy for people to backtest, especially with an EA that takes the emotion out of trading 2 + years in 5 mins. At the end you get some shiny results which depending on how good or bad they are, you go back and tweek (curve fit). This now means you are attempting to find a past optimum which in reality will more than likely not work, depending on how far that optimisation goes.

My tip for backtesters is to scroll bar by bar, or download a program like Forex Strategy Tester in which you can scroll bar by bar, max a descision to execute or not and then scroll to see how the results pan. I did it this way and it is a more thorough way of backtesting without the paper or excel. The Tester keeps results, has an equity graph that plays out bar by bar so you can see exactly where you are at and it also saves where you are at so that you can continue with testing later on without too much hassle. Trust me this is a far more accurate way to gauge HOW YOU will FEEL at a core level trading this or any other method.

Hope you find this helpful

Razor

takingthepip Nov 19, 2009 4:00am | Post# 8908

Thanks.
 
Please dont be too impressed by the results, they are in most cases a perfect example of what has happened after the fact and in all reality you have skewed the perception because you already new that EUR had trended long and the pullbacks on some of the moves (your big 10) have allowed for the substantial gains.

I am all for backtesting but when you see results like that, ignore them. You are looking for you backtesting to fill a different void, a void that struggles to trust a concept at face value. Also 50% a year is possible if you let some...
Thanks, Razor.

icarusfx Nov 19, 2009 5:20am | Post# 8909

thats good advice takingthepip!

oh just thought i'd say.... what a dirty cheating french ba$tard! i expected more from Henry.

regards

takingthepip Nov 19, 2009 11:19am | Post# 8910

thats good advice takingthepip!

oh just thought i'd say.... what a dirty cheating french ba$tard! i expected more from Henry.

regards
That reminds me, I must start to look into 'fundamentals'. I'll reply to your remark in a few months when I understand what you mean!


geoffrod Nov 19, 2009 2:35pm | Post# 8911

thats good advice takingthepip!

oh just thought i'd say.... what a dirty cheating french ba$tard! i expected more from Henry.

regards
you got to feel for the irish
it doesn't seem right, but temptation is such a powerful thing, it was just sitting there begging to be touched !!!! lol

this will put a sour note on the game for a while.

jzw Nov 19, 2009 5:30pm | Post# 8912

...
I wasn't aware that Peter mentioned adding to winning positions other than further DIBs entries in the same direction. I'll have to read his posts again!
...
ok - maybe came over as too negative.

Peter didn't talk about entries other than DIBS. I was making a more general point that adding to winning positions in a trending market is the key to large gains. The method you use to decide when to add is up to you.

takingthepip Nov 19, 2009 5:55pm | Post# 8913

thats good advice takingthepip!

oh just thought i'd say.... what a dirty cheating french ba$tard! i expected more from Henry.

regards
Oh it's a 'football' game. (Or cricket as I believe it's sometimes called). I thought you were referring to some economic announcement.

See, if everyone just relaxed and played golf there'd be none of this shenanigans.


geoffrod Nov 19, 2009 6:02pm | Post# 8914

Oh it's a 'football' game. (Or cricket as I believe it's sometimes called). I thought you were referring to some economic announcement.

See, if everyone just relaxed and played golf there'd be none of this shanannigans.


this is funny
roflmao

takingthepip Nov 19, 2009 6:04pm | Post# 8915

ok - maybe came over as too negative.

Peter didn't talk about entries other than DIBS. I was making a more general point that adding to winning positions in a trending market is the key to large gains. The method you use to decide when to add is up to you.
I didn't see your post as negative jzw, it brought up some points that made me think. Thanks again.


blunderbuss Nov 20, 2009 4:06am | Post# 8916

I haven't read the whole thread but...
 
Peter didn't talk about entries other than DIBS. I was making a more general point that adding to winning positions in a trending market is the key to large gains. The method you use to decide when to add is up to you.

There's also the general point that Peter made -- he knew the difference between
an IB that was likely to fizzle out and an IB that would lead to a substantial
breakout. Could it be that a down close on the IB (when you're going long)
signals an impressive breakout about to occur
? I seem to recall reading
that from an article on Tom DeMark's trendlines...

icarusfx Nov 20, 2009 5:14am | Post# 8917

Oh it's a 'football' game. (Or cricket as I believe it's sometimes called). I thought you were referring to some economic announcement.

See, if everyone just relaxed and played golf there'd be none of this shenanigans.


lol yes i quite agree.... i'm well past my footballing prime (i like to think i could have made it lol) I took up the "relaxing" game of golf last year! patience is a virtue as they say.... i'm down to 15hc now but my god i used to feel like a sadist walking onto the 1st

jzw Nov 20, 2009 7:56am | Post# 8918


... Could it be that a down close on the IB (when you're going long)
signals an impressive breakout about to occur
? I seem to recall reading
that from an article on Tom DeMark's trendlines...
I doubt it. An IB indicates some kind of sideways price action. I doubt the hourly close has any predicitive power. Occasionally the price action on an H1 IB, when viewed on an M5 chart, might suggest what is going to happen but most of the time its just random noise. That's why you wait for the break-out before taking action.

I am cautious with candle patterns on intraday charts. On a daily chart of a stock, the closing price has a meaning. But on an H1 chart the closing price is arbitrary. What's the difference between aggregating the price action between 1:00 - 2:00 into a bar and using 1:13 - 2:13 ? Is there something magical about the price at 2:00 vs 2:13?

I posted a chart on this thread earlier which showed an H1 IB and the same action but viewed on M5. If you look at that you'll see what I mean.
http://www.forexfactory.com/showpost...postcount=8874

razorboy Nov 21, 2009 6:40am | Post# 8919

I hear that if you only take....
 
Inside bars when the moon is in the seventh house and Jupiter aligns with Mars you will never lose.


It is really amazing how much people are focusing on co-incidental and possibly meaningless variable such as an upclose or downclose or upside down zig zig triple Fibonacci close of an inside bar..

you take every inside bar on the right side of the moving average you are using for a trail and you trail it.- that is it

I just finished a backtest (bar by bar) of 10 years of daily data on the GU - I used hourly data to drill down to determine the movement of price when I needed to determine if an entry point got hit before or after a SL got hit.

Summary
originally about 2900 days of data - about 300 to 325 positions taken over the course
No entries using IB's that were formed on Sundays
1/2 off @1:1
Two trails were tested - one relatively short, the other 2.5 times as long.
Both produced postive results. one better than the other. Both seemed to exceed the performance of First Strike (as reported by joel)

The majority of profits came on big moves - one move in 08 scored me about 8500 pips
Also had a few days where 1000 pips were lost when there was an IB sitting on the moving averages I used as trails....

The reason I picked daily data is that the truth of the matter is that I can't be at a computer 24 hours a day and I found that when doing some primary testing on 1 hour charts, that is really what you need to extract the most out of this approach - not saying that you can't do it well on the one hour, just that I cant - I found that I missed additional entry points and exit points. In the future I may start my own 24 hour trading desk.......

I am pretty convinced that IB's are the holy grail of trading. You just have to have an accurate understanding of what the holy grail of trading is

...After further review of the data, and not closing a 1/2 position at 1:1, the end result was an increase in overall pips by about 62% over the previous best results - not for the weak of heart though. You essentially have a break the bank win every 2 years

Please dont be too impressed by the results, they are in most cases a perfect example of what has happened after the fact and in all reality you have skewed the perception because you already new that EUR had trended long and the pullbacks on some of the moves (your big 10) have allowed for the substantial gains.

I am all for backtesting but when you see results like that, ignore them. You are looking for you backtesting to fill a different void, a void that struggles to trust a concept at face value. Also 50% a year is possible if you let some...

Sauron Nov 22, 2009 6:48am | Post# 8920

What moving average did you use? And what is the "right side" of a moving average?


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