Mystery Is The Final Product Of Ignorance.
Hey! What's ma chart doin' 
The DIBS Method... No Free Lunch continues
- #8,903
- Nov 18, 2009 8:55am Nov 18, 2009 8:55am
- | Joined Mar 2009 | Status: Forex curious. | 216 Posts
in the trading...........it's in the stinkin' back testing!!!!
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.
- #8,906
- Nov 18, 2009 5:24pm Nov 18, 2009 5:24pm
- | Joined Mar 2009 | Status: Forex curious. | 216 Posts
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...
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.
- #8,907
- Nov 18, 2009 6:38pm Nov 18, 2009 6:38pm
- Joined Mar 2009 | Status: Getting closer to ...... | 1,787 Posts
- #8,910
- Nov 19, 2009 10:19am Nov 19, 2009 10:19am
- | Joined Mar 2009 | Status: Forex curious. | 216 Posts
thats good advice takingthepip!
oh just thought i'd say.... what a dirty cheating french ba$tard! i expected more from Henry.
regards
- #8,913
- Edited 5:10pm Nov 19, 2009 4:55pm | Edited 5:10pm
- | Joined Mar 2009 | Status: Forex curious. | 216 Posts
thats good advice takingthepip!
oh just thought i'd say.... what a dirty cheating french ba$tard! i expected more from Henry.
regards
See, if everyone just relaxed and played golf there'd be none of this shenanigans.
- #8,914
- Nov 19, 2009 5:02pm Nov 19, 2009 5:02pm
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
- #8,915
- Nov 19, 2009 5:04pm Nov 19, 2009 5:04pm
- | Joined Mar 2009 | Status: Forex curious. | 216 Posts
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.
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...
HELL IS EMPTY, ALL THE DEVILS ARE HERE. -- Shakespeare
- #8,917
- Nov 20, 2009 4:14am Nov 20, 2009 4:14am
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
... 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 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
- #8,919
- Edited 1:49pm Nov 21, 2009 5:40am | Edited 1:49pm
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
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...
