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Diversified Trend Trading Approach

  • #1,981
  • Aug 27, 2017 12:32am Aug 27, 2017 12:32am
A Walk-through of the EDTT......continued


5.0 x R
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So here is a recent amendment to the strategy. What happens if it keeps going skyward another 2.5 x R? We are already at 0.5 SDC width.

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Answer.....Just rinse and repeat guys. Simply reduce the SDC by half from 0.5 to 0.25......but that's it for any further adjustments guys. Just let the trade ride out.

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...and don't forget to set your new pending entries for your next trades.

Cheers

C

Don't ya just love gold

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  • #1,982
  • Aug 27, 2017 2:56am Aug 27, 2017 2:56am
Quoting Copernicus
EDTT - Preliminary Results of Medium Range Tests - Discretionary Systems .......continued from post 1973 In this post we include the addition of USDSGD to the portfolio blend. ........with a little music. https://www.youtube.com/watch?v=NqIXNMN1hZQ Annual Results {image} Slight deterioration of risk adjusted performance metrics such as MAR.....but heh....that's the world of probabilities. We are still cooking with gas Summary {image} Portfolio...
Thank you! I see that you keep multiplier at DD level of 13%, why don't you increase multiplier to about 20% DD?
Cut short your losses. Let your profits run on. David Ricardo (1772-1823)
  • #1,983
  • Aug 27, 2017 3:02am Aug 27, 2017 3:02am
I just had experience testing USD SEK, that for half a year there was no trade on this instrument, because it traded in congestion box and then it exploded. Therefore if one is careful with drawing congestion boxes, one can have easily 30 instruments to track on 30m TF which does not take much time. I check charts every 3 hours for 15 minutes (30 charts) and use approximate buy/sell stops according to SDC, because the move can happen any time.
Cut short your losses. Let your profits run on. David Ricardo (1772-1823)
  • #1,984
  • Edited 3:20am Aug 27, 2017 3:06am | Edited 3:20am
Quoting Ramadas
{quote} Thank you! I see that you keep multiplier at DD level of 13%, why don't you increase multiplier to about 20% DD?
With that level of CAGR you would be in the $ stratosphere very quickly. When capital reaches those levels, drawdown tolerance decreases exponentially. Just adopting an even more cautious and conservative posture as we progress. At the moment the multiplier effectively operates like the 'Kelly Criterion'. It is a bit too aggressive for my liking so we are turning it down as we progress towards an optimal portfolio.

Have a look at the monthly compounding result with the levels of CAGR we are obtaining. We turned a hypothetical $200K into $11M in about 7.5 years. I blinked many times when I saw this and had to recheck the calcs to make sure there was not an error......and no.....it is not an error. It is the magic of compounding a diversified portfolio.

While the reality will have a different equity curve as these tests do not account for our psyche, SWAP or slippage, if we achieved something like these heady capital levels (which all things being valid have no reason to not be awesome)....our drawdown tolerance would be significantly different to what it is now.
  • #1,985
  • Aug 27, 2017 3:13am Aug 27, 2017 3:13am
Quoting Ramadas
I just had experience testing USD SEK, that for half a year there was no trade on this instrument, because it traded in congestion box and then it exploded. Therefore if one is careful with drawing congestion boxes, one can have easily 30 instruments to track on 30m TF which does not take much time. I check charts every 3 hours for 15 minutes (30 charts) and use approximate buy/sell stops according to SDC, because the move can happen any time.
That's exactly right R. Sometimes I don't have a trade on an instrument for > 1 year. It is not the length of time that's important...it is being able to definitively address when momentum picks up outside of everyday normal noise. Fat tailed movements are anomalies and cannot be predicted. Always prefer greater diversification with less trades than more trades with less diversification. Our intent is to find those rare events that occur on any instrument at any time......otherwise we succumb to frictional costs with no edge.

Using boxes to define zones of congestion is a good idea. At the moment my predictive entry lines define box width.....but by using box rectangles you can leave them on your chart and at the end of the run review to see how momentum tends to jump between range-bound sessions.
  • #1,986
  • Aug 27, 2017 3:16am Aug 27, 2017 3:16am
Quoting Copernicus
{quote} With that level of CAGR you would be in the $ stratosphere very quickly. When capital reaches those levels, drawdown tolerance decreases exponentially. Just adopting an even more cautious and conservative posture as we progress. At the moment the multiplier effectively operates like the 'Kelly Criterion'. It is a bit too aggressive for my liking so we are turning it down as we progress towards an optimal portfolio.
So you will decrease the DD multiplier even further as you go with broader portfolio?
Cut short your losses. Let your profits run on. David Ricardo (1772-1823)
  • #1,987
  • Aug 27, 2017 3:23am Aug 27, 2017 3:23am
Quoting Ramadas
{quote} So you will decrease the DD multiplier even further as you go with broader portfolio?
That's the plan R....but you can adopt whatever risk-weighting you like through position sizing multipliers. I am just working from the perspective of a potential investor and their letters to the Investment Manager of a fund../tic :-)

So far with the portfolio we are risking 2.8% of available equity per trade. By the end of this exercise I would like that to be at least half of that.....or more. It's far better to have many small bites at the cherry statistically speaking than a few large chunks.
  • #1,988
  • Aug 27, 2017 3:32am Aug 27, 2017 3:32am
Quoting Copernicus
{quote} That's the plan R....but you can adopt whatever risk-weighting you like through position sizing multipliers. I am just working from the perspective of a potential investor and their letters to the Investment Manager of a fund../tic :-) So far with the portfolio we are risking 2.8% of available equity per trade. By the end of this exercise I would like that to be at least half of that.....or more. It's far better to have many small bites at the cherry statistically speaking than a few large chunks.
This is what Tom Basso recommends, less DD, less volatility in equity curve. For investors expecting steady gains, but nothing crazy.
Cut short your losses. Let your profits run on. David Ricardo (1772-1823)
  • #1,989
  • Aug 27, 2017 3:43am Aug 27, 2017 3:43am
Interestingly as we progress with the EDTT the technique of trading swing moves under momentum is starting to have the hallmarks of a very successful FM in the CTA space.....namely Dreiss Research.....but on a far shorter timeframe scale.

Bill however has been able to fully automate his....*sctratches head*.....but how is the question?


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  • #1,990
  • Aug 27, 2017 3:49am Aug 27, 2017 3:49am
Quoting Copernicus
Interestingly as we progress with the EDTT the technique of trading swing moves under momentum is starting to have the hallmarks of a very successful FM in the CTA space.....namely Dreiss Research.....but on a far shorter timeframe scale. Bill however has been able to fully automate his....*sctratches head*.....but how is the question? {image} {image}
You are better than him, C. Look at these DD levels in 2012. Forget about calculators....
Cut short your losses. Let your profits run on. David Ricardo (1772-1823)
  • #1,991
  • Aug 27, 2017 3:58am Aug 27, 2017 3:58am
Quoting Ramadas
{quote} You are better than him, C. Look at these DD levels in 2012. Forget about calculators....
Cheers R.....don't swell my head any further otherwise I will need a bigger room to trade from :-)

BTW this is interesting. Note how we are short term in nature and trading the M30 chart with an average duration of 10.66 days per trade.....BUT we only have 621 trades under our belt for the past 7.62 years with our current 9 instruments. That translates to about 0.2 trades per day (or 1.5 trades per calendar week) or for a single instrument about 8 TRADES PER YEAR and about 80% of them are losses or barely about breakeven. That just drums in the principle that we are intensely selective WHEN WE TRADE and are looking for the rare anomalies of persistent significant momentum.

Increased trade frequency for the sake of it is our enemy. These simple 8 trades per year per instrument are bringing us ALPHA. We do not want to be victims of mere Beta.
  • #1,992
  • Aug 27, 2017 8:23am Aug 27, 2017 8:23am
EDTT - Preliminary Results of Medium Range Tests - Discretionary Systems

.......continued from post 1987

In this post we bow to BRENT.....and up goes the MAR ratio again. Yippeeee!!!!

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It's time to celebrate ........with a little music.

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Annual Results
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Summary
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Portfolio Composition Return Profiles
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Stay tuned......but now it's time to hit the sack :-)

10 instruments down now only 14 to go.


C
  • #1,993
  • Aug 27, 2017 8:38am Aug 27, 2017 8:38am
The final bash before the 9-5 grind.

Have a great week guys :-)

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....and now to wind it back and stack the chairs....Last drinks :-)

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  • #1,994
  • Aug 27, 2017 8:59am Aug 27, 2017 8:59am
OMG....I just realised.....we are at 100 pages of the thread.

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What an effort that's been. Almost 3 years in the making.

Now I dare you all to read it all. Night guys.

C
  • #1,995
  • Aug 27, 2017 2:25pm Aug 27, 2017 2:25pm
Quoting Copernicus
{quote} Hi i :-) Thanks for the kind words of support. The logic surrounding the the breakout techniques (DTTR and EDTT) and variants has been very consistent apart from a few simplifications and the need to strictly monitor the tendency to over-trade. DTTR is a new kid on the block described in more recent posts that looks hopeful as a worthy additional to the system arsenal. I have been inspired with recent back-testing to further commit to these approaches given their eye bulging performance metrics over the medium term. What we are really trading...
Wow! Thank you for taking time to explain the basics of this refined stratedy, am overwhelmed by your intelligent and scientific approach to trend trading. I had to read your post over and over again for hours to absolve the juice from this system. I observed that dochain breakout is left out in the current approach. Standard Deviation Channel is the key tool of the system. A trend must be in place. If you ask me i would classify you as a professional trader and am just a noob. What a privilege to start my trading career under your tutelage.
Copernicus the great.

Regards
Ifophia
John 3:16. Repent Jesus Loves you
  • #1,996
  • Aug 27, 2017 6:09pm Aug 27, 2017 6:09pm
Quoting ifophia
{quote} Wow! Thank you for taking time to explain the basics of this refined stratedy, am overwhelmed by your intelligent and scientific approach to trend trading. I had to read your post over and over again for hours to absolve the juice from this system. I observed that dochain breakout is left out in the current approach. Standard Deviation Channel is the key tool of the system. A trend must be in place. If you ask me i would classify you as a professional trader and am just a noob. What a privilege to start my trading career under your tutelage....
Flattery will get you everywhere i but I think you are being too kind ifo. I am just a very good bell-ringer that in his spare time has a chance to do some research on his hobby. Not much else to do in this cathedral.

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Great to have you on board ifo. :-) C
  • #1,997
  • Aug 27, 2017 6:24pm Aug 27, 2017 6:24pm
Quoting Copernicus
{quote} Flattery will get you everywhere i but I think you are being too kind ifo. I am just a very good bell-ringer that in his spare time has a chance to do some research on his hobby. Not much else to do in this cathedral. {image} Great to have you on board ifo. :-) C
Oh! you are so humble too. Thanks for putting me through. Pls look at Cadjpy 30mins it looks like our system is about to trigger. Aiming for the blue sky with this one.
John 3:16. Repent Jesus Loves you
  • #1,998
  • Aug 27, 2017 7:06pm Aug 27, 2017 7:06pm
Monkey see monkey do
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John 3:16. Repent Jesus Loves you
  • #1,999
  • Aug 27, 2017 7:08pm Aug 27, 2017 7:08pm
Am hoping i got it right.
John 3:16. Repent Jesus Loves you
  • #2,000
  • Edited 9:35pm Aug 27, 2017 7:36pm | Edited 9:35pm
Quoting ifophia
Monkey see monkey do {image}
I tend to stretch things out much further after doing this recent back-test work to avoid the propensity to overtrade. You are after SIGNIFICANT momentum moves so to be able to identify them you need to set very wide pending orders away from the obvious swing highs and swing lows on your M30 chart.

Here is where my pending order entries are for CADJPY and where price is now.

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It is showing sings of a long momentum bias but it is far to early for me. When things stretch to the desired level..most traders on the wrong side are getting into stress mode (capitulation) and you find you get good breakout momentum moves in your favour as the flock start to bale. Watch what happens to the length of each price bar when you get a significant breach of these key reversal points. That's when we want to be trading with the momentum drives.

Scroll back through your charts to observe price history on breaching these key pivot points.

I hope that makes sense :-)

C

PS....I am at work at the moment so better get back to the grind. Stay safe :-)

PPS When thinking in terms of momentum, think like this. Price is in a continuous state of flux (or pressure) between the competing agenda of buyers and sellers. Momentum truly starts to rear it's head when one side gives way to the other. This occurs in times of stress where one side is bleeding in relation to the other or when there is euphoria in the market.

Imagine you are a seller now thinking that CADJPY is going to go short and you place your stop at a nearby reversal point. Now imagine the pain when the key reversal that they are relying on to get them out of a large loss goes awry and price continues to overshoot and go long. That's when a mass exodus occurs in the short sellers where they close their positions at any price (by buying or a short squeeze). Add that to the euphoria of the previously long camp....and now you can see why momentum might truly be on your side as the pressure of competing sellers dissipates.

You will notice in the bigger trends that price plummets or overshoots fast towards the tail end of a trend. This is symptomatic of participant capitulation where all hell breaks loose. These are the moments we want to be in for the ride on a big surge of unidirectional momentum.

In these very efficient markets it is very hard to distinguish between noise and a trend of substance that will be enduring. Mostly what appears to be a trend on a small timeframe is simply an expression of a form of randomness. It is only during extreme times where randomness turns into true directional behaviour of participants.
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