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Trend following system results

  • #41
  • Sep 6, 2012 5:30am Sep 6, 2012 5:30am
Hmm, 25% up after just over a month. I could shut everything down now and still have a good year!

The only thing that concerns me with this is that if it makes gains this well how does it do when it does draw down? Generally the higher the gain the more potential for drawdown. From my testing I wouldn't expect more of a drawdown than about 30% but we will have to see. These are not closed trades yet so everything could change but if this spell of good fortune continues I will put it down to just that, good fortune. I'm sure when the losing spell comes it will even out the returns for the year to something more reasonable.
  • #42
  • Sep 6, 2012 9:05am Sep 6, 2012 9:05am
Quoting Hugh Briss
Hmm, 25% up after just over a month. I could shut everything down now and still have a good year!

The only thing that concerns me with this is that if it makes gains this well how does it do when it does draw down? Generally the higher the gain the more potential for drawdown. From my testing I wouldn't expect more of a drawdown than about 30% but we will have to see. These are not closed trades yet so everything could change but if this spell of good fortune continues I will put it down to just that, good fortune. I'm sure when the losing spell...
No it won't. That's the beauty of it. As long as you stick with the winning trades and get quickly out of the losing ones the equity will grow. Granted it will spend most of the time in draw down but the new highs will be much higher than the previous.
  • #43
  • Sep 6, 2012 11:06am Sep 6, 2012 11:06am
Quoting KMidas
No it won't. That's the beauty of it. As long as you stick with the winning trades and get quickly out of the losing ones the equity will grow. Granted it will spend most of the time in draw down but the new highs will be much higher than the previous.
Fair enough, I'll keep going then.
  • #44
  • Sep 6, 2012 11:07am Sep 6, 2012 11:07am
Euraud stopped out for a small loss, not much of a surprise there. Everything else blazing a trail still. Looks like s and p 500 may even add on again tonight if it doesn't pullback.
  • #45
  • Sep 6, 2012 11:37am Sep 6, 2012 11:37am
Quoting Hugh Briss
Euraud stopped out for a small loss, not much of a surprise there. Everything else blazing a trail still. Looks like s and p 500 may even add on again tonight if it doesn't pullback.
HB, EurAud actually stopped out on 8/21..where you have a dot on the chart...not sure, maybe you have reentered again...
  • #46
  • Sep 6, 2012 11:50am Sep 6, 2012 11:50am
Quoting Hugh Briss
Euraud stopped out for a small loss, not much of a surprise there. Everything else blazing a trail still. Looks like s and p 500 may even add on again tonight if it doesn't pullback.
Another point, entry for SP500 was on 8/17. It never closed below 20 channel and bounced back today nicely.

HB, I guess you take your losses earllier then per Donchian rules...

I am just brainstorming here with myself...
  • #47
  • Sep 6, 2012 12:31pm Sep 6, 2012 12:31pm
Quoting driven18
HB, EurAud actually stopped out on 8/21..where you have a dot on the chart...not sure, maybe you have reentered again...
That's the exit for the short trade that was in place before I started trading the system. The system entered last night on a break of the upper 55 channel.
  • #48
  • Sep 6, 2012 12:32pm Sep 6, 2012 12:32pm
Quoting driven18
Another point, entry for SP500 was on 8/17. It never closed below 20 channel and bounced back today nicely.

HB, I guess you take your losses earllier then per Donchian rules...

I am just brainstorming here with myself...
I use an inital stop loss to keep the losses small if the breakout fails. Once the trend is established I exit per the normal rules with a slight twist.
  • #49
  • Sep 6, 2012 12:41pm Sep 6, 2012 12:41pm
Quoting Hugh Briss
That's the exit for the short trade that was in place before I started trading the system. The system entered last night on a break of the upper 55 channel.
My 55 is still far away...hmmmm
Attached Image (click to enlarge)
Click to Enlarge Name: EURAUD.jpg Size: 79 KB
  • #50
  • Sep 6, 2012 1:42pm Sep 6, 2012 1:42pm
Quoting driven18
My 55 is still far away...hmmmm
I'm guessing that's because my broker has a Sunday candle. Do plenty of back testing to find out the best parameters before you trade anything.
  • #51
  • Sep 6, 2012 2:08pm Sep 6, 2012 2:08pm
Quoting Hugh Briss
I'm guessing that's because my broker has a Sunday candle. Do plenty of back testing to find out the best parameters before you trade anything.
HB,

I am a daytrader...just looking onto long term trades techniques..not to worry...
  • #52
  • Sep 6, 2012 2:44pm Sep 6, 2012 2:44pm
Quoting driven18
HB,

I am a daytrader...just looking onto long term trades techniques..not to worry...
No worries, at least when you're ready to join the professionals you know where to come
  • #53
  • Sep 6, 2012 3:42pm Sep 6, 2012 3:42pm
Quoting Hugh Briss
No worries, at least when you're ready to join the professionals you know where to come

I hope and prey so....
  • #54
  • Sep 7, 2012 12:13am Sep 7, 2012 12:13am
S and p 500 added on. Oil seems to be finding support at the same level as before so may come back.
  • #55
  • Sep 7, 2012 3:11am Sep 7, 2012 3:11am
Quoting Hugh Briss
I would like everyone who reads this to watch this video from start to finish and then think really hard about their trading goals
Cheers Edward, seriously considering risking only 1 or 1.5% instead of 2% of capital per trade now as I'm going to overestimate the potential worst case scenario losing streak by about 10% so probably better off protecting the capital to a greater extent. It'll come around in the long term. That losing streak table in the video is a very stark reminder that even the best systems can have a streak. Thanks again for the link.
  • #56
  • Sep 7, 2012 4:48am Sep 7, 2012 4:48am
Quoting Sober_Colm
Cheers Edward, seriously considering risking only 1 or 1.5% instead of 2% of capital per trade now as I'm going to overestimate the potential worst case scenario losing streak by about 10% so probably better off protecting the capital to a greater extent. It'll come around in the long term. That losing streak table in the video is a very stark reminder that even the best systems can have a streak. Thanks again for the link.
No worries. I think you need to look at the expected drawdown and whether or not you are comfortable with it. I'm expecting a 30% drawdown at some stage and that is my worst case scenario. If you are happy with a 20 to 30% drawdown and your system has an expected worst case drawdown of only 10% then you could probably risk a little more percent per trade. I'm happy with 1% per trade at the moment. I'll have to wait and see how the system performs in the long term as to whether I adjust that figure or not.
  • #57
  • Sep 7, 2012 6:49am Sep 7, 2012 6:49am
Quoting Hugh Briss
I use an inital stop loss to keep the losses small if the breakout fails. Once the trend is established I exit per the normal rules with a slight twist.
Interesting, am very curious what are the changes you made to Courtney's channel breakout. Will be waiting for you to reveal it :-D . I'm also following CB technic from his book.
  • #58
  • Sep 7, 2012 8:56am Sep 7, 2012 8:56am
Quoting Hugh Briss
No worries. I think you need to look at the expected drawdown and whether or not you are comfortable with it. I'm expecting a 30% drawdown at some stage and that is my worst case scenario. If you are happy with a 20 to 30% drawdown and your system has an expected worst case drawdown of only 10% then you could probably risk a little more percent per trade. I'm happy with 1% per trade at the moment. I'll have to wait and see how the system performs in the long term as to whether I adjust that figure or not.

HB, how much of the sample data, i e, how many trades you have in your testing for this technique?

If large enough, what are the stats?
  • #59
  • Sep 7, 2012 10:44am Sep 7, 2012 10:44am
Hi HB,

Thanks for your great threads and the very nice video.

I have a few questions regarding the backtesting that you did:
- how much data did you use, i.e. how many years did you backtest on?
- did you use tick data, 1 min timeframe data,etc..?
- did you use the data from the broker you currently use for live trading?
- as you're trading a portfolio of a few instruments, do you know how many times there was an open profit like today that ended up being closed for a very small profit in the end? It seems that most positions currently opened could end up being closed for a small profit (or even a loss) if price retraced. Only asking that because it's always nice to have some expectation of what could happen.

Also, are you planning on doing further backtesting in a few months time to compare the performance of the backtest vs live trading to confirm that your live trading is producing results that are close enough to the backtest results? I backtested an EA once that showed X% per annum over a few years. I then traded it and after 6 months compared a backtest of those 6 months with the live trading and it was seriously underperforming the backtest results.

Thanks
Guiom
  • #60
  • Sep 7, 2012 11:58am Sep 7, 2012 11:58am
Quoting Guiom
Hi HB,

Thanks for your great threads and the very nice video.

I have a few questions regarding the backtesting that you did:
- how much data did you use, i.e. how many years did you backtest on?
- did you use tick data, 1 min timeframe data,etc..?
- did you use the data from the broker you currently use for live trading?
- as you're trading a portfolio of a few instruments, do you know how many times there was an open profit like today that ended up being closed for a very small profit in the end? It seems that most positions currently opened...
Hi Guiom, very good questions.

I backtested on about 20 years of data and split it into sample and out of sample to test different periods with the same settings.

Yes, I tested using 'every tick' setting. I had to use multiple computers to run all the back tests at the same time for speeds sake.

I have tested using a few different brokers with similar results.

I haven't looked at the trade by trade portfolio performance which I realise is a negative. It's not easy to do with mt4 and tradestation doesn't suit me right now, I believe they can run portfolio backtests?

I am testing this with the attitude that anything could happen. Trends can and do reverse at any time so there's no point being thrilled with the headline equity figure because that's never what you take home once the trades are closed.

I will do further backtests to check that the EA works in real trading as it does in backtest and if not try and work out why.

I hope that answers your questions?
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