Experiments in Technical Analysis
- Thread starter karthikmarar
- Start date
Oh! Just realized - after seeing all the congratulatory messages - that the 500th post was made by none other than Yours Faithfully. Am i glad i did! To me this is the best and most interesting thread i have come across in ANY forum.
Congratulations to Karthik & all the other great minds who have contributed.
May both the Uptrend & Momentum be with you.
Congratulations to Karthik & all the other great minds who have contributed.
May both the Uptrend & Momentum be with you.
Hi Sanjay, rpc
Congratulations to you too And also to Ananth, Murthy, Siva, Amit. It is no longer My Thread, It is Our Thread. Without yours, and of late kalyans contribution this Thread would not be where it is now.
One of the best things this Thread did was to unearth gems like Sanjay and Ananth.
When I started this Thread I never expected this kind of response.
Hope we will see much more experiments and learning Exercise from this thread.
If I have inadvertently left out any contributors name, Please pardon me. Congratulation is due to them too.
And Thanks to all the Friends who have been encouraging us on this path of learning.
Warm regards
karthik
Congratulations to you too And also to Ananth, Murthy, Siva, Amit. It is no longer My Thread, It is Our Thread. Without yours, and of late kalyans contribution this Thread would not be where it is now.
One of the best things this Thread did was to unearth gems like Sanjay and Ananth.
When I started this Thread I never expected this kind of response.
Hope we will see much more experiments and learning Exercise from this thread.
If I have inadvertently left out any contributors name, Please pardon me. Congratulation is due to them too.
And Thanks to all the Friends who have been encouraging us on this path of learning.
Warm regards
karthik
Hi Karthik,
CONGRATULATIONS AND CELEBRATIONS.
500+ and going from strength to strength. Wish to see 4-digits very soon. And it is possible with your innovative and interesting studies. Your sharing of ideas has made us share your success. Thanks for giving us an opportunity to be a part of this great thread.
The offshoot of this thread "System Implementation ...." is also nearing century mark.
Regards
-Anant
CONGRATULATIONS AND CELEBRATIONS.
500+ and going from strength to strength. Wish to see 4-digits very soon. And it is possible with your innovative and interesting studies. Your sharing of ideas has made us share your success. Thanks for giving us an opportunity to be a part of this great thread.
The offshoot of this thread "System Implementation ...." is also nearing century mark.
Regards
-Anant
dear karthik,
congratulations on achieving this milestone of number of posts in the thread.
it is not just the number posts, the knowledge content of the thread, "Experiments in Technical Analysis" is the real count by which, this thread stands out. it is a milestone in content, which can be referred all the time.
i also see in your posts a concern for the other person.
i read in some book:
"Remember that behind every letter (appeal), there is a person behind. and behind every person, there is a family behind."
the human angle touched upon in the above quote is found in your posts also.
great going, my friend, keep going! ( if you feel that you have read this phrase somewhere, yes, you are right. often, you find saint saying so. imitation is an alternate form of appreciation! )
all the best.
murthymsr
congratulations on achieving this milestone of number of posts in the thread.
it is not just the number posts, the knowledge content of the thread, "Experiments in Technical Analysis" is the real count by which, this thread stands out. it is a milestone in content, which can be referred all the time.
i also see in your posts a concern for the other person.
i read in some book:
"Remember that behind every letter (appeal), there is a person behind. and behind every person, there is a family behind."
the human angle touched upon in the above quote is found in your posts also.
great going, my friend, keep going! ( if you feel that you have read this phrase somewhere, yes, you are right. often, you find saint saying so. imitation is an alternate form of appreciation! )
all the best.
murthymsr
Last edited:
Hello Friends,
We have discussed various systems, back tested them and now we have started (mock) implementation of the systems in the market. In due course we will also get the feed back from the implementation.
Almost all the systems are trend following systems and use some form crossover as a signal (an event in the past, as someone has said
). The back testing shows that the systems work well (especially in trending markets).
One major concern with these systems is that all of them have quite deep draw downs. Now, what if the folio owner (trader/investor) has to cope with the negative string/series of trades initially?
For the average results to show up it is necessary to have a big enough sample size. The Money Management rules should ensure that the folio owner will be able to take high number of trades. To protect the folio owner from going bust before that, it is necessary for the system to have position sizing (and risk management) rules such that a single trade will not give more than 1% loss (draw down) on the entire equity. This rule is used as a primary constrain because the first objective is survival.
During a discussion in the chat room AJAY pointed out, that basing a Stop Loss only on MM rules is a sure way to disaster. The system must have a stop based on technical reasons. When the reasons you entered the trade are no more there, it is the time for you to get out of the trade. In my enthusiasm to implement the ideas presented, I glossed over this important consideration. I thank Ajay for his guidance, and request him to continue to do so.
To take the discussion further I would request all the members to contribute and give inputs on related issues. Lets focus on Trade Management for the current set of systems being used.
Happy Experimenting
Regards
Sanjay
We have discussed various systems, back tested them and now we have started (mock) implementation of the systems in the market. In due course we will also get the feed back from the implementation.
Almost all the systems are trend following systems and use some form crossover as a signal (an event in the past, as someone has said
). The back testing shows that the systems work well (especially in trending markets). One major concern with these systems is that all of them have quite deep draw downs. Now, what if the folio owner (trader/investor) has to cope with the negative string/series of trades initially?
For the average results to show up it is necessary to have a big enough sample size. The Money Management rules should ensure that the folio owner will be able to take high number of trades. To protect the folio owner from going bust before that, it is necessary for the system to have position sizing (and risk management) rules such that a single trade will not give more than 1% loss (draw down) on the entire equity. This rule is used as a primary constrain because the first objective is survival.
During a discussion in the chat room AJAY pointed out, that basing a Stop Loss only on MM rules is a sure way to disaster. The system must have a stop based on technical reasons. When the reasons you entered the trade are no more there, it is the time for you to get out of the trade. In my enthusiasm to implement the ideas presented, I glossed over this important consideration. I thank Ajay for his guidance, and request him to continue to do so.
To take the discussion further I would request all the members to contribute and give inputs on related issues. Lets focus on Trade Management for the current set of systems being used.
Happy Experimenting
Regards
Sanjay
Hi Kalyan, you have put it in a short and simple way. That is correct.
However for Uma, I will explain it in detail:
If we restrict to the bands we are restricting our gains. If we try to widen the bands to 2 SD level, 95% of time we protect ourselves but it leaves only 5% of opportunity to make profits or cut losses. It is true that within the Bands you are with the trend and safe. But we gain from the breakouts which go out of these ranges. When the bars move above the upper band it means that the prices are rising sharply and faster than the average. When the bars return to the zone between the bands it means the price rise has a reached a maximum and we are on the other side of the peak. So, we sell at this re-entry point which gives us a price near to the peak. When the prices fall further, the bars eventually penetrate below the lower band and the fall is shrper than the average. Since we had exited when the bars came below the upper band, this sharp fall will not affect our position. When the prices recover they start rising and crossover above the lower band. This signals the end of fall and we buy. This ensure that our buying price is as close to the lowest price as possible. By making the bands at 1 SD level we have a sfety of 65% along with the 35% chances of making extra profits. In a way the upper band acts like a support line, when it is broken down we exit. The lower band acts like a resistance line, when it is surpassed we enter.
It is true that TREND IS OUR FRIEND and we should follow the rule by restricting ourselves to the trend. But we should remember:
One who breaks the rules is a fool.
One who follows the rules is a wiseman.
But ONE WHO KNOWS WHEN AND HOW TO BREAK THE RULES IS A GENIUS
I hope I have cleared your doubt. If you still have doubts please free to ask.
The MABIUTS-H(B) which I posted is not yet foolproof. It has some limitations and drawbacks. But for the present excercise it is adequate. I will list out the shortcomings later. I am working on how to improve upon them.
Regards.
-Anant
However for Uma, I will explain it in detail:
If we restrict to the bands we are restricting our gains. If we try to widen the bands to 2 SD level, 95% of time we protect ourselves but it leaves only 5% of opportunity to make profits or cut losses. It is true that within the Bands you are with the trend and safe. But we gain from the breakouts which go out of these ranges. When the bars move above the upper band it means that the prices are rising sharply and faster than the average. When the bars return to the zone between the bands it means the price rise has a reached a maximum and we are on the other side of the peak. So, we sell at this re-entry point which gives us a price near to the peak. When the prices fall further, the bars eventually penetrate below the lower band and the fall is shrper than the average. Since we had exited when the bars came below the upper band, this sharp fall will not affect our position. When the prices recover they start rising and crossover above the lower band. This signals the end of fall and we buy. This ensure that our buying price is as close to the lowest price as possible. By making the bands at 1 SD level we have a sfety of 65% along with the 35% chances of making extra profits. In a way the upper band acts like a support line, when it is broken down we exit. The lower band acts like a resistance line, when it is surpassed we enter.
It is true that TREND IS OUR FRIEND and we should follow the rule by restricting ourselves to the trend. But we should remember:
One who breaks the rules is a fool.
One who follows the rules is a wiseman.
But ONE WHO KNOWS WHEN AND HOW TO BREAK THE RULES IS A GENIUS
I hope I have cleared your doubt. If you still have doubts please free to ask.
The MABIUTS-H(B) which I posted is not yet foolproof. It has some limitations and drawbacks. But for the present excercise it is adequate. I will list out the shortcomings later. I am working on how to improve upon them.
Regards.
-Anant
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