Designing a System from scratch

SGM · #51 27th November 2006, 11:55 AM

Quote:

Originally Posted by CreditViolet

Also perhaps a few words on a 'premise' focussed trading system development vs a 'if it works it must be good' system development.

Now whats that?? A few more months of reading ???

May be trying brain surgery, would be easier option

Regards
Sanjay

CreditViolet · #52 27th November 2006, 05:34 PM

Quote:

Originally Posted by SGM

May be trying brain surgery, would be easier option

Yup..its an easier option, however difficult to find willing volunteers

CV

CreditViolet · #53 27th November 2006, 05:59 PM

Quote:

Originally Posted by SGM

So basically, here a trader would want to identify exhaustion of a trend (in his chosen timeframe) and bet on reversal/pullback. In other words he is trying to identify intermediate tops and/or bottoms. Please give me some pointers on how one goes about it. Even links to some resources will be appreciated.

LBR's Turtle Soup is a good eg of a counter trend system.
Identifying market exhaustion is a tricky area.Intraday its actually much easier identifying exhaustion than looking for breakouts.I will PM you some interesting stuff on that.

Quote:

Originally Posted by SGM

From whatever I have studied/tested the trend following systems have not been symmetric. Do they have to be so to be successful? Or maybe the dataset i am using is not diverse enough?

Not sure about that.Even the basic Turtle Methodology has no directional bias.When dealing with systems, the long-short thing takes a backseat..its all about pattern matching and proper betsizing around that opportunity.

About the dataset, I have seen some of the systems on other threads.The problem is people are backtesting EOD systems on last 3-4 Years data where the primary trend has been upward and basically even a buy if 'my wife wakes up on the left side' will work.That is in my opinion a very newbie approach, systematic trading is hard work like any other form of trading and if people want it simpler perhaps they should try applying for IPOs, a simpler and far better solution.

Anyways, let me know if you have any other doubts

Rgds
CV

CreditViolet · #54 28th November 2006, 08:27 PM

Quote:

Originally Posted by karthikmarar

Ahhh.. CV that would be really great... looking forward to it

warm regards

Karthik

Hello karthik

Actually I touched on that part in the setup part of the system at the start of the thread few years ago

Quote:

The natural market cycle is to go from low volatility to high volatility and back again.

That was the premise

And in order to exploit that premise, the inside bar setup was designed.

There can be a host of different premise, Earnings Play for e.g and one can create systems to exploit it methodically. Elliott Wave and Gann can be good 'premise' as well for systems..

Regards

CV

swagat86 · #55 4th December 2006, 01:02 AM

check smash day setup

swagat86 · #56 30th January 2007, 10:23 PM

Quote:

Originally Posted by CreditViolet

Ok a simple setup first

Inside Bar
Inside bar - current bar's range is within the previous bar's range ie an inside bar has a low greater than the previous bar's low and a high less than the previous bar's high.

See the attached pic for various inside bar setups.These can also be done on OHLC bars as well.

After you see inside bar setup, a filter need to be added .Can be a momentum indicator like a stochastic.The thing for look will be a stochastic crossover as the insidebar unfolds.It can act as a confirmation to your entry signal.

Its a very good pattern to trade.Many reasons.For one, an inside bar means that there was just not enough interest in the stock to move it decisively one way or another. As sure as day follows night, so does an increase in volatility follow the restricted trading of an inside day.Whenever you have an IB the market is consolidating into a tight range of low volatility.A market will always explode out of a tight range. A market will not explode out of a market that has already run up. The natural market cycle is to go from low volatility to high volatility and back again.

Ok to sum it up one by one
Buy Setup
1.Wait for an IB to form
2.One you have identified the IB then you need to have a stochastic cross confirmation to the upside before you can enter.
3.To find confirmation look at the stochastic in the chart that you look for IB’s.
4.If upward cross present than you can enter in the indicated direciton.

Sell Setup is exact opposite of this.

Will get back with couple more setups before proceeding to other parts
Will do tomorrow

CV

a question CV, lets say 4 example An inside day bar is formed today, 2moro it breaks on the upside, then day after 2moro again an inside bar is formed. Next day it breaks on the downside.
wat must be the strategy in that case???

CreditViolet · #57 2nd February 2007, 12:13 AM

Quote:

Originally Posted by swagat86

a question CV, lets say 4 example An inside day bar is formed today, 2moro it breaks on the upside, then day after 2moro again an inside bar is formed. Next day it breaks on the downside.
wat must be the strategy in that case???

Good Questions Swagat

The part you describe comes under the Exit Strategy Module.

When designing a trading system its wise to distribute the various functions like Entry, Exit, MM etc into different modules.Helps you in backtesting and to pinpoint the system efficiency.
Different modules could be--
Position Sizing Module
Filter Module (based on diff crieteria)
Entry Module
Trade Management Module (scaling in and out for eg)
Exit Module

Two or more modules can be combined together for eg the Trade Mgmt and Exit Modules.

So coming back to the system described earlier, entry on breakout of ID obviously comes under the Entry Module.Whether to hold it the next day or reverse is independent of the entry factor. To answer that question you will have to backtest on your chosen instrument.Options could be - End of Day Exit, Trailing stops, SAR ( stop and reverse ) etc

Hope that helps
CV

PS: More interesting observations are welcome

swagat86 · #58 2nd February 2007, 12:16 AM

Quote:

Originally Posted by CreditViolet

Good Questions Swagat

The part you describe comes under the Exit Strategy Module.

When designing a trading system its wise to distribute the various functions like Entry, Exit, MM etc into different modules.Helps you in backtesting and to pinpoint the system efficiency.
Different modules could be--
Position Sizing Module
Filter Module (based on diff crieteria)
Entry Module
Trade Management Module (scaling in and out for eg)
Exit Module

Two or more modules can be combined together for eg the Trade Mgmt and Exit Modules.

So coming back to the system described earlier, entry on breakout of ID obviously comes under the Entry Module.Whether to hold it the next day or reverse is independent of the entry factor. To answer that question you will have to backtest on your chosen instrument.Options could be - End of Day Exit, Trailing stops, SAR ( stop and reverse ) etc

Hope that helps
CV

PS: More interesting observations are welcome

Thanks buddy

oxusmorouz · #59 2nd February 2007, 05:57 PM

Great thread CV.

Metastock codes for the specified trading system:
http://www.************/file/9915101/...nside_bar.html

Oxy

CreditViolet · #60 4th February 2007, 08:32 PM

Quote:

Originally Posted by oxusmorouz

Great thread CV.

Metastock codes for the specified trading system:
http://www.************/file/9915101/...nside_bar.html

Oxy

Thanks for the code Oxy

Regards
CV

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