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judgetrade
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Is stuff like this tradeable? Reply to this Post  Reply with Quote 

Hi,

http://www.portfolio123.com/port_summary.jsp?portid=897105

Is a strategy like the above tradable with a small account (10.000 Dollars)? It has 0% Slippage!

I am pretty sure this question has been asked quite some times, but I would like to discuss it in context of the above simulation.

Lets say it is not tradable like this, would there be a good intraday setup (like a drawdown of 1% or so) to trade it successfully?

Thank you

Andreas
Apr 7, 2012 4:06:24 PM Show Printable Version of Post     Link   Report threatening or abusive post: please login first   Go to top 
synhawk
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Re: Is stuff like this tradeable? Reply to this Post  Reply with Quote 

This particular result is unlikely to be achieved due slippage (the spread alone on a stock that trades 50,000/shares a day could be a nasty surprise, and you would move the stock with opening orders).

That said: I have a private screen that runs against S&P 500 members (nice and liquid) that is of a somewhat similar nature to this system, and after (real life determined) slippage and .01/share round trip commissions, you are looking at ~.25%/trade average gain. Some good years, some bad years. Usually you are trying to get better risk metrics and smoother equity curves by going short-term in a trading strategy, but from what I've seen so far this hasn't been the result.

So for say ~40% CAGR over 10 years, it is possible. I trade that system more for entertainment than anything else though. It isn't very scalable, and you are getting similar returns and risk profiles compared to a longer term system that trades a lot less, and is likely more robust.

Also these open to open systems are benefitting from what is currently a phenomenon of positive price movement over night. This won't always be the case and you can figure it is worth probably .05%/trade of gain at the very least.
Apr 7, 2012 9:28:10 PM Show Printable Version of Post     Link   Report threatening or abusive post: please login first   Go to top 
dwpeters
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Re: Is stuff like this tradeable? Reply to this Post  Reply with Quote 

Hi,
The short answer is no. The avg gain of .64% is not enough to overcome real life slippage which should be at least .5% for such small stocks. You need a higher avg gain. I traded something like this for a couple years and achieved .50% gain/stock/day by holding a few days on average and entering on a limit order below the prior close. I stopped trading it last year due to concerns with liquidity and the edge which was always strongest with the smallest stocks but seems to me to be fading. I considered trading this approach with higher liquidity stocks but the edge is smaller and so I chose another, easier to trade strategy instead. Maybe Denny will weigh in. I have seen in the leaderboards his pullback strategy has held up better than mine.

If you are interested in this approach I suggest you read the research by Larry Connors (Trading Strategies that Work) and test limit entries in Excel (XLQ can make this easier).

Don

PS. I tested, and used limit exit orders as well with this approach.
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Edit 1 times, last edit by dwpeters at Apr 8, 2012 11:40:45 AM
Apr 8, 2012 3:07:19 AM Show Printable Version of Post     Link   Report threatening or abusive post: please login first   Go to top 
olikea
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Re: Is stuff like this tradeable? Reply to this Post  Reply with Quote 

I see that you are using a ranking system based on something I created.

I have to give a big warning about those, be extremely careful with those sorts of ones, because I introduced a factor such as close(0)/sma(10) or something similiar in a hope to find something that has had a large drop.

However, there is a phenomenan in backtesting called "bid/asked bounce", something you have to be exceptionally careful about. This is where the *simulated* purchase of a stock happens on the bid price and the *simulated* sale of a stock happens on the ask price. Now, if you frequently look to trades stocks that have had a price drop recently, what that may actually mean is that it has traded on the bid rather than the ask, especially if you look at some of the spreads typical on such stocks, and compare them to the profit per trade that is recieved.

Have a look at my thread about my real time trading platform. I think if you want to trade like this you cannot do it using end of day systems as you need to more finely control the execution, and also understand market microstructure better.

Oliver
Apr 8, 2012 8:28:45 AM Show Printable Version of Post     Link   Report threatening or abusive post: please login first   Go to top 
martinfierro
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Re: Is stuff like this tradeable? Reply to this Post  Reply with Quote 

The short answer is no, it is not tradeable.
Just to give a little bit more of flavor : a couple of weeks ago, I was closing the account of my father in law and I had to sell his small position on LUK ( 200 shares ).
LUK is an apparently liquid stock, with about $ 20 MM per day. Liquid enough, right ?
Well, shortly after the Open, I placed a sell order at one or two pennies below the bid. I watched with amazement how the order stayed there, below the bid, for several hours until late in the afternoon finally it got hit.
I am deeply skeptical about all the screens that are trading anything but SP500 stocks ( and even so ) with just a few days/weeks holding time. The average trade is not nearly enough to survive the bid ask spread and other shennanigans in real life.
Best luck.
Martin
Apr 8, 2012 8:49:39 AM Show Printable Version of Post     Link   Report threatening or abusive post: please login first   Go to top 
judgetrade
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Re: Is stuff like this tradeable? Reply to this Post  Reply with Quote 

Ok, great, thank you all for your response!
Apr 10, 2012 3:35:34 PM Show Printable Version of Post     Link   Report threatening or abusive post: please login first   Go to top 
Sterling
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Re: Is stuff like this tradeable? Reply to this Post  Reply with Quote 

I've had similar experiences to the one martinfierro describes where apparently liquid stocks turn out to be far less liquid than expected. Place an ask and then all the trading that was going on suddenly grinds to a halt? Something afoot. Too many trading programs creating phantom liquidity if you ask me.
Apr 11, 2012 8:57:42 AM Show Printable Version of Post     Link   Report threatening or abusive post: please login first   Go to top 
judgetrade
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Re: Is stuff like this tradeable? Reply to this Post  Reply with Quote 

Hi,

I got another question.

P123 sends out an e-Mail every saturday with the performance of all kinds of systems.

Therea are systems that are not public, but have stellar returns.
Are those for real or do they not calculate commisions and slippage.
If they do not, would it not be great if P123 would only show systems that do calculate commisions and slippage?

Best Regards and have a great trading week.

Andreas
Apr 15, 2012 4:23:31 PM Show Printable Version of Post     Link   Report threatening or abusive post: please login first   Go to top 
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