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Dially Daily

  • #1
  • First Post: Edited Mar 5, 2007 10:18pm Dec 29, 2006 11:16pm | Edited Mar 5, 2007 10:18pm
Attention: The following thread was originally posted in the James16 Group private forum as a training exercise for PF subscribers. Because so much is going on in the PF, the thread has not received the attention expected.

FF member "Ruminate" wants to see this concept exposed to a larger group of traders. Therefore, this public copy of the thread will belong to Ruminate, so please treat him/her as the owner of this thread.

Thanks, and enjoy!

Dial


Dially Daily



Back in the 80's my Father did volunteer work for the local Boy's Club. To share his love of woodworking, my Father made some kits for simple wood projects suitable for 10-13 year old boys. The parts in the kit were rough cut so the boys had to use wood rasps, files and sandpaper to get the parts to fit together properly. It was a great hit with the boys as the effort required to get the kit assembled left them with a sense of "I made this!" instead of "I just stuck together some pieces that were already cut out."

So, in response to many requests from my fellow working stiffs, who hold down a job, I've come up with an idea for a daily trading system.

It is rough cut, and requires work on your part to make it into a full system. I've been forward testing it on Cable with good results, and Athena of Team Aphid was kind enough to backtest the rough system on EUR/USD from Jan 2006.

I check the daily charts once a day at the close of the daily bar, so it takes very little time.

Attached are Athena's backtest results based on the preliminary and very rough (get out your wood rasps!) image that is also attached.

Learning to trade is a very hands on and personal endeavor, so in keeping with the PF's mission of not spoon feeding, I present this idea and encourage all PF members to work as a team to make this into a finished system.

Dial,

P.S. I'm leaving this thread open so you can post your replies here.
Attached File(s)
File Type: zip Dially Daily Concept.zip   60 KB | 1,386 downloads
File Type: zip Dially Daily Backtest.zip   20 KB | 902 downloads
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  • #2
  • Dec 30, 2006 12:03am Dec 30, 2006 12:03am
As Athena pointed out, while the win/loss ratio is great, the risk/reward ratio sucks. I believe this is caused by the overly large initial stop.

I think one solution would be use the MAE (Maximum Adverse Excursion) of the winning trades to set the maximum size of the intitial stop.

For those of you not familiar with MAE, the idea is simply that winning trades don't move very far against you. A backtest of winning trades to determine the maximum move against winning trades would provide useful data for setting the size of the preliminary stop.

By having a smaller stop, the risk/reward ratio would be improved. However, there would most likely be a reduction in the win/loss ratio.

Even with a reduced win/loss ratio, the use of a smaller stop, and therefore a better risk/reward ratio may result in an overall increase in profits over time as well as a smoother equity curve and smaller drawdowns.

Anyone care to volunteer to do an MAE study? Perhaps several of you could do one, each on a different currency.

Dial
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  • #3
  • Dec 30, 2006 2:03am Dec 30, 2006 2:03am
Dial,

Thanks for bringing this in, a while ago I follow Mouteki method for TD Level 2 TL, but now you suggest only TD Level 2 Point (not Trend Line).

Below is my chart that put 2 MACD indicators, the bottom is what I attach which is not from built-in Indicators, I also attach the template files (just rename to .tpl, because the extention is not allowed for uploading).

In your chart where you highlight the price bar, are you using custom indicator ? if yes, could you share with us. It makes easier, since I use Fractals to note TDL2 points.

Thanks for your sharing.

chart

http://www.forexfactory.com/forexfor...chmentid=17855
Attached Image
Attached File(s)
File Type: zip diallydaily.tpl.zip   1 KB | 538 downloads
File Type: mq4 MACD.mq4   3 KB | 411 downloads
  • #4
  • Dec 30, 2006 1:08pm Dec 30, 2006 1:08pm
This looks interesting. I will try to take a closer look at it during this long weekend.
  • #5
  • Dec 30, 2006 6:22pm Dec 30, 2006 6:22pm
Hi Dial,

Thanks for interesting strategy. Regarding exits: I think we can exit when MACD stop increasing (for LONG trades) or decreasing (for SHORT trades).

Regards,

Den

  • #6
  • Dec 30, 2006 11:51pm Dec 30, 2006 11:51pm
In your testing did you consider the Sunday bars as seperate bars? From the chart it looks like it.

Wiz.
  • #7
  • Dec 31, 2006 5:19am Dec 31, 2006 5:19am
Quoting mason
Dial,

Thanks for bringing this in, a while ago I follow Mouteki method for TD Level 2 TL, but now you suggest only TD Level 2 Point (not Trend Line).

Below is my chart that put 2 MACD indicators, the bottom is what I attach which is not from built-in Indicators, I also attach the template files (just rename to .tpl, because the extention is not allowed for uploading).

In your chart where you highlight the price bar, are you using custom indicator ? if yes, could you share with us. It makes easier, since I use Fractals to note TDL2 points.

Thanks for your sharing.
Thanks mason.

Here is an image of how my chart is set up. Like you, I use the built in fractal indicator to mark the middle bar of the Tom DeMark Level 2 pivot.

For the histogram, I use one that dispenses with the signal line (not needed) and colors the bars blue if higher than the previous bar, and colors them read if lower than the previous bar.

I'll attache the red/blue indicator I use in the next post.

The colored bars on my concept chart are not from an indicator. I colored them by hand in Paint for teaching purposes.

Dial
Attached Image
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  • #8
  • Dec 31, 2006 5:21am Dec 31, 2006 5:21am
Here's the indicator I use to get the red and blue histogram bars. The bars are the same as for a standard MACD. I don't use the signal line, so it is left out.

Dial
Attached File(s)
File Type: mq4 Dially Daily MACD.mq4   2 KB | 696 downloads
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  • #9
  • Dec 31, 2006 5:25am Dec 31, 2006 5:25am
Quoting denonline
Hi Dial,

Thanks for interesting strategy. Regarding exits: I think we can exit when MACD stop increasing (for LONG trades) or decreasing (for SHORT trades).

Regards,

Den
Thanks denonline, I agree this is worthwhile idea. Perhaps a general rule would be to enter if both the fractal and the
Dially Daily are pointing in the same direction, and exit if either reverses.

Beware: the above is just a thought and has not been backtested.

Dial
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  • #10
  • Dec 31, 2006 5:27am Dec 31, 2006 5:27am
Quoting The Wizard of Oz
In your testing did you consider the Sunday bars as seperate bars? From the chart it looks like it.

Wiz.
For the backtesting, I don't know if Athena took the Sunday bar into consideration.

For my forward testing, I exit if either indicator reverses. We'll have to see how that plays out over time.

Dial
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  • #11
  • Dec 31, 2006 1:01pm Dec 31, 2006 1:01pm
Hi All
I'm new to this thread, and this is my first post ...
First of all, I must say that I'm fascinated from the material here in this forum. It's like reading a good book, you just cannot leave it until you finish it.

Recently, I read the VWB system by Vegas, a great system, however it need some complementary rules to point out the extremes more clearly.
So, here come my idea: Let us wait for the daily price bars be close to the fib level defined by the VWB system and then use the dailly daily to point the extreme.
we could also integrate some of Jim price action patterns (as pin bar, confluences ...) to make a better choice.
the drawback of that Idea is that it will narrow down our possibilities to trade but ...
  • #12
  • Jan 2, 2007 8:47am Jan 2, 2007 8:47am
just strolled by the forum and to my surprise (though it shouldn't be anymore) Dial has once again given us at the PF another system to play with! hahaha

You can't help but love those people who keeps comming up with great ways to make more money! thanks Dial!

I'm digging into the files right now so i'll post more when i understand it a bit more.
  • #13
  • Jan 3, 2007 3:25am Jan 3, 2007 3:25am
Quoting arinba
Hi All
I'm new to this thread, and this is my first post ...
First of all, I must say that I'm fascinated from the material here in this forum. It's like reading a good book, you just cannot leave it until you finish it.

Recently, I read the VWB system by Vegas, a great system, however it need some complementary rules to point out the extremes more clearly.
So, here come my idea: Let us wait for the daily price bars be close to the fib level defined by the VWB system and then use the dailly daily to point the extreme.
we could also integrate some of Jim price action patterns (as pin bar, confluences ...) to make a better choice.
the drawback of that Idea is that it will narrow down our possibilities to trade but ...
Hi Arinba!

Sure, that is a viable idea, and if that is what you are more comfortable with, then by all means pursue the idea in this thread. As you say, it will reduce the number of trades, but you should catch longer running trades.

For myself, I like the entry strategy as it is because I personally like the smaller, but more frequent wins. It is more satisfying for me emotionally and psychologically. Either way is fine. The important thing is to find, develop or assemble a methodology that makes sense to you.

Integrating Jim's price action into any method is always a good idea.

Once one has an entry technique with a positive expectancy, then, in my opinion, any fine tuning to increase profits should be found in manipulation of stops, exits and money management. That is what I want to focus on here. But that is just me. Please don't let that disuade anyone from developing thier own ideas. Just remember to manually backtest, and compare your own results.

While I currently like the entry technique, I'm still working on better initial stops and exits strategies to apply to the Dially Daily. For example, I've already mentioned doing a MAE analysis to determine a fixed initial stop. Another idea would be to use a multiple of ATR to set the initial stop.

BTW, the 40 pip TP level was pulled out of a hat, just to give Athena something to backtest. It may or may not be the best TP level. It takes time to manually perform multiple backtests on several variables. That is why it takes good traders so long to develop a viable trading system. It is also how one develops confidence in the method they develop.

Most of you are smarter than me (hard to imagine, huh? : ) So don't be shy about jumping in here and adding your thoughts and ideas. Let's make this a PFamily affair, and help each other attain the goal of being able to think for yourselves, and to have confidence in developing your own ideas.

Every one of you has it in you!

Dial
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  • #14
  • Jan 3, 2007 3:27am Jan 3, 2007 3:27am
Quoting Kayoubi
just strolled by the forum and to my surprise (though it shouldn't be anymore) Dial has once again given us at the PF another system to play with! hahaha

You can't help but love those people who keeps comming up with great ways to make more money! thanks Dial!

I'm digging into the files right now so i'll post more when i understand it a bit more.
Hi Kayoubi! After you've digested the concept, please do jump right in and offer your ideas for polishing the rough edges of this concept.

BTW, just what the heck is your avatar anyway? How come it has a balloon head?

Dial
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  • #15
  • Jan 3, 2007 12:38pm Jan 3, 2007 12:38pm
Quoting diallist
As Athena pointed out, while the win/loss ratio is great, the risk/reward ratio sucks. I believe this is caused by the overly large initial stop.

I think one solution would be use the MAE (Maximum Adverse Excursion) of the winning trades to set the maximum size of the intitial stop.

For those of you not familiar with MAE, the idea is simply that winning trades don't move very far against you. A backtest of winning trades to determine the maximum move against winning trades would provide useful data for setting the size of the preliminary stop.

By having a smaller stop, the risk/reward ratio would be improved. However, there would most likely be a reduction in the win/loss ratio.

Even with a reduced win/loss ratio, the use of a smaller stop, and therefore a better risk/reward ratio may result in an overall increase in profits over time as well as a smoother equity curve and smaller drawdowns.

Anyone care to volunteer to do an MAE study? Perhaps several of you could do one, each on a different currency.

Dial

2nd day on the PF - would like to thank developers and every1 else that contributed - will do a backtest+MAE study on USDCHF for 2006.
will post in next 2 days.
  • #16
  • Jan 3, 2007 2:34pm Jan 3, 2007 2:34pm
Quoting diallist
For myself, I like the entry strategy as it is because I personally like the smaller, but more frequent wins. It is more satisfying for me emotionally and psychologically. Either way is fine. The important thing is to find, develop or assemble a methodology that makes sense to you.
Dial
Dial, once again, another good strategy. I am so very very successful with the Knife, that I almost fearful to add something else to my toolbox. But every successful trader needs to have an array of tools available to build his/her "house". Just toying with your comment above about preferring the "smaller, but more frequent wins"...it appears to me that this strategy can really only give one or two signals in any given week. Am I correct in thinking that a 2-period fractal needs at least 3 or 4 days to appear? So really how frequent are the trades? Once per week?

Sorry for my ignorance....LOL!!!
  • #17
  • Jan 3, 2007 10:25pm Jan 3, 2007 10:25pm
initial results:
please find attached file.
first sheet has trades where i got out on MACD bar color change.
22 wins (+113 pips on avg), 9 losses (-234 pips on avg), total of 378 pips.
second has trades where i waited for SL to get hit.
23 wins (+105 pips on avg), 5 losses (-348(!) pips on avg), total of 678 pips.

MAE showed most winning trades went less than 100 pips against us.
I used 75 percentile to get 71 pips SL for the 2nd method to get 418 pips (W:L=17:11)
using a stop of 70 (85 percentile, seems obvious from the data) for the 1st method yielded 848 pips ((W:L=20:11)
obviously playing with the TP will give better results too ,as some trades went much higher. will look into this more.
eliminating trades based on where the close is in relation to the trend might be a filter, too. too late for me to check this now though.
good luck all!
Attached File(s)
File Type: zip TDdailybacktest.zip   8 KB | 391 downloads
  • #18
  • Jan 4, 2007 3:38am Jan 4, 2007 3:38am
I'm sure I have read about MAE in one of my books. Perhaps Tharp's. I would also be willing to be involved once I know how to do it.

Wiz.
  • #19
  • Jan 4, 2007 5:28pm Jan 4, 2007 5:28pm
From the backtesting spreadsheet in the first post by Dial:

If you just take one exit of 100 pips you will increase your profits by 42% 1418 pips verse 2018 pips for the year 2006. More variance though.

Do the math. All the 40 pip gains become 0 all the 140 pip gains become 200. Losses remain the same.
  • #20
  • Jan 4, 2007 10:51pm Jan 4, 2007 10:51pm
Quoting baddison
Dial, once again, another good strategy. I am so very very successful with the Knife, that I almost fearful to add something else to my toolbox. But every successful trader needs to have an array of tools available to build his/her "house". Just toying with your comment above about preferring the "smaller, but more frequent wins"...it appears to me that this strategy can really only give one or two signals in any given week. Am I correct in thinking that a 2-period fractal needs at least 3 or 4 days to appear? So really how frequent are the trades? Once per week?

Sorry for my ignorance....LOL!!!
About 2 to 3 signals per month. You can see this in Athena's backtest.

"Very, very successful with the Knife" ? Why am I not surprised?
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