The Bat...a strategy by Team Aphid

Quoting dutdot

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Heres my spreadsheet on bat backtest. I include stoplosses in backtest to use MM for bat. Only backtest from december for now, I'll do further test later. From what I got, the Bat has around 8% max drawdown /w 1% risk on each trade. But its still vulnerable to whipsaw.

Maybe add some rules about 'dont enter fibs signal unless it bounced from swing area/lower fibs area' ?

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Quoting TeamAphid

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And some spectacular profits:

June 14th - Jul 3rd -profit = +1112 pips

Jul 14th - Jul 26th - profit = +906 pips

Sep 12th - Oct 4th - profit = +779 pips

We already know this drawdown issue, but it depends on how you look at the system and the risk profile of trader using it. We are not scalpers and most of the systems we use are medium to long term systems. Therefore, we are more interested in monthly figures.

Thank you for highlighting this issue.

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Quoting Gmak

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Clearly profitability overall is more important, and overall the system seems to work well.

It's just that this system is supposedly able to gain pips in both trending and ranging markets.

I might be misunderstanding, but surely when testing and attempting to improve a system its greatest weaknesses are the best place to start. Whether these weaknesses appear over a single week , month or aeon is somewhat irrelevant.

The greatest observable weakness of this system is that it lost 920 pips in a fortnight. This seems to me to imply room for improvement and a cluee as to where to look.

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Quoting Mr Trend

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1000 pips is great. But that's not the point.

When it comes down to it, there are VERY few people that can handle a 900 pip drawdown. Heck, there are very few people that can handle 500 pips. This is true but this is a rare occurance. It is part of the nature of a trend following system as well.....the traders that can handle drawdowns are part of the few who will end up making big money.

So let's say that you're into this system -- three months down the road. And then all of a sudden, BAM, you hit a 900 pip drawdown. The first thing you think is, "Crap, I wonder if my system is now losing it's edge!" That's how people think.
Yes....many traders will feel like this and this will happen to them when they trade ANY system out there. They will lose faith in their system and start to 'fix' it or as you said before swap systems.
The hard part is to find a system and stick to it through the good and the bad...have faith thru backtesting and trading within your risk comfort zone.
If someone manages your portfolio and earns USD54,000 per year,and produces consistent monthly or yearly results, do you withdraw your money when, during the year, a few trades go bumpy?

Furthermore, a 900 pip drawdown on a measly 1 standard lot is a whopping $9000.Or if they are amateurs as you say 95% of the FF community are then it will be a $90 DD or a $900 DD

That's not a big deal if you have a 100K account. But 95% of all of the members on this forum are amatuers.

The point is -- people can't handle that. Then this system is not for them. We are not forcing anyone to trade this. If you want this to be successful, find a way to kill that drawdown, OR risk no more than 1% per trade, OR, don't trade this kind of system.We are not here to tell everyone to trade this system or calling it the HG. We are just sharing it and hoping for some constructive improvements on a system that we beleive has some potential

Regardless, it is a good system. I actually like it and see myself using it for triggers to get in early on my longer trend setups.

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Quoting Mr Trend

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I'm sorry to sound harsh. I will go back and edit some of my post.Thanks.

But I really want to see you guys do well, and I just know not that many people will be able to handle that.Surely this is up to the individual to decide for themselves...who are we to decide what is good for them?
We are not selling this system, we are sharing it so we are not looking to be successful in that respect.
In sharing this system we are hoping for some constructive ideas to help and so far the response has been really great and we have a few more ideas on the drawing board to test and refine.


I am a trend follower. I know what kind of drawdowns you can get... and it's hard. If you're going to use this system, don't risk much.

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Quoting Mr Trend

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Furthermore, a 900 pip drawdown on a measly 1 standard lot is a whopping $9000.

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Quoting TeamAphid

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Hi Fukinagashi,
Our chief programmer Zeus, has a dislike of coding them and therefore steers clear of them...( no amount of bribery can change his mind!)

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Quoting TeamAphid

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We are aware that the proportion of total number of pips gained from trade #1 to maximum potential pips from entry is not that good and although we are trading this system live, we are still searching for a better exit method.
That's why we need ideas and help of FF community.

Regarding item #3.5, we believe the BAT system tells you what to do when trade is in development such as trailing trade #1 with BAT lines. Can you please explain more in detail what else you mean with this item.

Thanks for your contributions.

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Quoting hanover

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Generally speaking, most systems are designed to perform in either a trending, or a ranging, market. Systems incur drawdowns when market conditions become discordant with the signals that are being generated. It is impossible to design a system that is capable of anticipating every possible set of market conditions that is likely to occur, and then adjust itself accordingly to suit. If market conditions remain unfavorable for a long enough period, then large drawdowns are the inevitable result, with any system. That is a reality that all traders must somehow come to terms with.

The only way of (mathematically) increasing return is to increase risk commensurately. This not only applies to position sizing, where the proportional effect of scaling is obvious, but also to the entry/exit method. For example, if one chooses to take profit early, then that is eliminating the risk of losing that profit, but along with it the opportunity for future return on that trade. As another example, if one enters earlier, that will generally result in a higher return-to-risk profile, but a lower overall win rate. Likewise with tighter protective stops. Every trading system involves these kind of underlying compromises, whether the developer (or trader) is aware of it or not.

Every trader searches endlessly for the ultimate method. It’s probably fair to say that some entry/exit methods are superior to others, but generally only under certain types of market conditions, and – in any case – one can only state this quantitatively in so far as testing delivers the necessary statistical confidence. Unlike casino-type games of chance, the markets are driven by sentiment-based response to economic forces; such intangibles mean that probabilities can’t be calculated with any degree of certainty. In other words, no matter how positive the back-testing result, there is no guarantee that the immediate future will provide a similar ‘climate’ to that which was used for the testing. Selecting a suitably sized data sample is not a trivial task: too small jeopardizes statistical validity, and too large runs the risk of losing accurate representation through obsolescence.

Many traders baulk at the possibility of a 900 pip drawdown, but the reality is that (for most of us) a $90 loss is tolerable; a $90,000 loss is not. The problem is that human nature wants to obtain the $540,000, rather than $540, each year, without having to stomach the commensurate level of risk.

When I began studying trading systems about 5 years ago, I assumed that the ‘Holy Grail’ would be a method that maximized return while minimizing risk. However, I have slowly grown to realize that to increase return one has to in some way increase risk, and that the ultimate system is one that balances return, drawdown and consistency of income, in a way that rests comfortably with a trader's temperament, financial objectives, and lifestyle schedule.

This is a harsh judgment, but those who are unable to accept this balance, and/or cope with the uncertainties innate in trading, should seriously reconsider their decision to be a trader. Trading is not for everybody.

David

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Quoting maximus

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Hi TA!
Hi FF Members!


2.I’ve started to do automatic backtesting and you are right – your system is profitable with 1 lot. But I have a lot ideas:
2.1. You told that we take off all orders if price crosses 161,8 i think we must move our SL on breakeven. And if The BAT line crosses enter point we move or stop on the BAT. It’s because sometimes we have long time range market with high volatility and our The bat line stay below enter point but we can get Profit but get Loss The downside is if price retraces to entry point and we are stopped out and then continues in original trade direction before touching the opposite BAT line, then you will miss an opportunity.
2.2.When we have longtime up or down trend we should to change The BAT parameters and move the line as close as possible. It can help us to close profit. But our Trade1 we must do on standard rules. My English is bad and because I advise to read about this technique by Lebou When you do this, you may lock down more profits but also you may miss some huge trends, such as the one in mid November. Again risk reward issue.
2.3 We should make analysis the MFE of this system and it can help it to get new ideas about exits.

It’s only 3 ideas after first backtest by Omega TS

3.About my #3.5. It’s correlation with #2.2.
I put it because here is correct English J
Regulating the position size on the basis of its risk and volatility. The risk of an open position is usually controlled by exit rules set in the system. Very true For instance, moving stop levels follow the price to increase starting risk or lock down a part of paper profits. But a much more viable idea is to limit the maximal risk and volatility of an open position in relation to the capital. All we need for this is track the values as often as needed.

We are considering that BAT line is a good tool for trailing stops. But the truth is we are leaving some valuable pips on the table if you compare max move level and exit level. Therefore, we are supporting the idea of exiting part of trade #1 units in a certain profit level and leave the other part for BAT line exit.

Excessive_risk = Num_lots * Current_risk_per_unit_of_assets – Max%risk * Capital / 100

and

Excessive_volatility = Num_lots * Current_volatility_of_assets –

Max%volatility * Capital / 100.

As soon as any of those becomes positive, we decrease the position size by a value equal to:

Excessive_num_lots = Excessive_risk / Lot_price

Or correspondingly by:

Excessive_number_lots = Excessive volatility / Lot_price

The practical rationale of this methods is closing a part of the position without waiting for the system signal, when the prices move very fast and far, too far and fast for a trailing stop or a closing point to follow. This solves two tasks at once: first, the risk and volatility are supported at set levels, second, positions frequently close at extreme prices with favourable slippage.
If my English leads astray – I’m sorry

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Quoting jest1081

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This system is a good trend following system, but it kills when trend turns 180 degrees, so how do we negate this?

These are my shumble suggestions, i am not here to change anything if i do or am actually changing the system schematics i duly apologise. Here goes.

Usually cycle of a trend is:
up---consolidate---down

I will suggest these two steps:

Trend Identification+Confirmation
I would highly recommend the use of a long term MA those who trades the hourly bar would proly wanna look at 3 day trend which would be the 72EMA. wherever the price belies on the MA could help confirming the trend.

Rule for trades when bat signals long trade :
- Make sure price is above the 72EMA vise versa for a downtrend

Once Trend is noted, Keep tabs of "Winner Trades" that goes against the trend.
Note that you could get winners when trading against the trend. It is not wrong but its not advisable esp with this system, your drawdown could be huge.

Note the trend and if a short trade becomes a winner in an uptrending market whilst failing to secure a higher high is a signal that trend is changing...
- the agrresive trader can start waiting for short bat signal, ignore all longs signals unless it becomes a winner.
- the passive should wait for one confirmation of a winner trade before coming in for the second round.

*I declare a trade as a winner when price hits 161 retracement mark.

On Money Management and Price action on fib lines
We proly will need to sit down and relook this. Infact if we could somehow reduce the risk exposure for the average trader. All my suggestions above could all together be negated.

What i have added is basically a filter which will reduce trade signals.

regards,
jest

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Quoting fukinagashi

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He is MUCH more sane then me

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Quoting emeric33

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any idea about total results for the system in 2005?

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Quoting TeamAphid

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Hi Everyone,

The main posters in Team Aphid will be me...Athena ( Hi! ) and Zeus and Hermes.

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Quoting The Wizard of Oz

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Without trying to be offensive. I really think the best answer is to grab a chart and spreadsheet and manually backtest it for yourself. I know this is time consuming but I also know that's it's worth a lot more than just reading someone elses results.

Wiz.

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Quoting emeric33

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i agree ...but why spending time doing it if information is already available in soembody else computer....

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