Bakwaas Trading

[RISK_REWARD]

Thanks to riskyman for mentioning this Man vs. Monkey article...

How Well Do Blindfolded Monkeys Play the Stock Market?

riskyman is very knowledgeable man ,where is he?

 

[augubhai]

riskyman is very knowledgeable man ,where is he?

I have no idea.... but at the moment, I do not know whether I should look for knowledgeable persons or monkeys :rofl::rofl::rofl:

 

[Nifty2830]

I have no idea.... but at the moment, I do not know whether I should look for knowledgeable persons or monkeys :rofl::rofl::rofl:

Seriously he is genius.I am his big fan but nowadays he is not active

 

[augubhai]

The importance of the win rate

I am treating this thread more like a scratchpad... So, I am putting out another of my half-baked thoughts here.

For the purpose of this post, I am ignoring Risk-Reward Ratio, which everyone knows is a very important factor in determining a trader's happiness.

Let's say that there are 2 systems - the first has a win rate of 49% and the second has a win rate of 51%. A 2% difference in win rate is not much.

But if you think about it, the first system will win 0.961 times for every loss. The second system will win 1.041 times for every loss. The values calculated as win%/loss% = win%/(100%-win%). So, the second system has a (1.041/0.961) = 1.083 better chance of producing a winner than the first system.....

Restating, a system with a 51% win rate is 8.3% better at producing winners that a system with a 49% win rate. Just a 2% difference in win rate gives me a 8.3% better chance at happiness

Take a system with a 45% win rate, and another with 50% win rate. The 50% win rate gives me a 22.2% better chance at happiness than the 45% win rate.

Similarly....

50% win rate --> gives 50% more happiness than --> 40% win rate
60% win rate --> gives 50% more happiness than --> 50% win rate
50% win rate --> gives 125% more happiness than --> 40% win rate
50% win rate --> gives 133.3% more happiness than --> 30% win rate
50% win rate --> gives 200% more happiness than --> 25% win rate
50% win rate --> gives 300% more happiness than --> 20% win rate
10% win rate --> gives 111.1% more happiness than --> 5% win rate
99% win rate --> gives 102% more happiness than --> 98% win rate

and finally,

100% win rate --> gives infinite times more happiness than --> 99% win rate

See... we have scientifically proven that trader's nirvana can be achieved by 100% win rate.

With a higher win rate, the chances of prolonged drawdowns reduces, and so does your blood pressure. With a 100% win rate, you could practically be dead.

 

[augubhai]

Perception

Continuing my blabber from my previous post.... a casual look at win rate of 49% or 51% does not indicate that the impact between the 2 win rates could be more than 2%, like it actually is. Instead, would it have been better to state that the wins-to-loss ratio are 0.961 and 1.041 respectively?

Nowadays, for my trading systems - whether live or backtesting, I use the terms "plus" and "minus", instead of "win" and "loss". Even, when I use the terms "win' and "loss", like in the previous posts, internally I am translating them to mean "plus" and "minus". A "minus" does not give me the same feeling as a loss. It's not a defeat, it is just something that is expected in this business of trading, well anticipated after backtests and simulation. Similarly, a "plus" is not a win, a triumph. Unlike a "win", a "plus" is not going to give me a heady rush of adrenaline that wrecks my psychology. "plus/minus" keeps me calmer emotionally than "win/loss".

I am not very satisfied with the terms "plus" and "minus", but for now they will do - until I am able to expand my vocabulary, or ideate better. In George Orwell's book "1984", Big Brother's party invents Newspeak - a version of English with reduced vocabulary, concepts and rigid structure - just to prevent people from thinking anti-party thoughts. If you don't have the vocabulary to think thoughts, how will you think, communicate and take ideas forward?

So, here, I am trying my own Newspeak, just to get my thoughts and ideas in the right direction (though I am never sure about the direction being right). For now, I can think of viewing "win" rates differently, and "plus/minus"...

 

[VJAY]

Dear augubhai,

Please help.

How to face this data mismatch problem?

Same strategy, same symbol list, same date, same timeframe.
Different results for different datafeeds.

serious problem for auto traders

 

[augubhai]

Dear augubhai,

Please help.

How to face this data mismatch problem?

Same strategy, same symbol list, same date, same timeframe.
Different results for different datafeeds.

Hi Veera,

Data feed mismatches are a serious issue, and my experience is that none of the data feeds are accurate. For my trading and backtesting, I find GDFL data satisfactory, though with some issues every now and them. If GDFL is down, I directly read the Nest data feed in the VWAP Ststistics window (Ctrl+Shift+H in Nest). Very rarely, I use the Nest Plus chart... whenever I keep Nest Plus open for a long time, my Nest crashes. None of the feeds are totally accurate, and each one of them misses not only ticks but also a few major spikes.

Given this scenario, I don't think that we should be spending too much time designing systems that are too dependent on historical/accurate data feeds.

I am not sure if I am answering your question at all.... but here's what I would suggest. Focus on the robustness of the system. Try to avoid systems whose overall performance that could be affected by a missing ticks.

I do not know your trading systems, but here are a few points that can be used to build robustness....
- Higher time frame
- Fewer trades
- Consistent logical setups - for example opening range breakouts, pivot points.
- More data points
- Higher win rate, so that the performance is not dependent on rare wins

Off course, none of the above points may be applicable or relevant to your specific system.

Another reason to be not dependent on tick data, is that ticks are very fickle. Check the charts of the Nifty Index and the Futures - November, December, January and even the Puts and Calls. There is a definite correlation between all of them, but you will see a breakdown in the correlation in some ticks. You will frequently see a spike in one of the futures or index or options, that is not visible on the others. Your test might succeed on one of them, but fail on others.

Live trading results will always differ from paper trading, especially in scrips with low volume, due to slippages, not getting fills, or just errors in execution. In live trading, our orders and trades, are data that was missing in the backtest data, right?

I have written a long story, but am not sure if it has answered your question, or is even helpful to you

 

[sumosanammain]

Dear augubhai,

Please help.

How to face this data mismatch problem?

Same strategy, same symbol list, same date, same timeframe.
Different results for different datafeeds.

What timeframe were these trades on. And the difference in feed, was it a few paise here and there ?

Was it Nifty or some Company?

If this is some company, then you have no option but to shift to higher timeframe, with a redefined system where missing a few ticks would make no difference. If his is happening in Nifty, which I doubt its not, because of the wide variation in no of trades triggered, then you are in trouble.

 

[TradeOptions]

Hi Veera,

Data feed mismatches are a serious issue, and my experience is that none of the data feeds are accurate. For my trading and backtesting, I find GDFL data satisfactory, though with some issues every now and them. If GDFL is down, I directly read the Nest data feed in the VWAP Ststistics window (Ctrl+Shift+H in Nest). Very rarely, I use the Nest Plus chart... whenever I keep Nest Plus open for a long time, my Nest crashes. None of the feeds are totally accurate, and each one of them misses not only ticks but also a few major spikes.

Given this scenario, I don't think that we should be spending too much time designing systems that are too dependent on historical/accurate data feeds.

I am not sure if I am answering your question at all.... but here's what I would suggest. Focus on the robustness of the system. Try to avoid systems whose overall performance that could be affected by a missing ticks.

I do not know your trading systems, but here are a few points that can be used to build robustness....
- Higher time frame
- Fewer trades
- Consistent logical setups - for example opening range breakouts, pivot points.
- More data points
- Higher win rate, so that the performance is not dependent on rare wins

Off course, none of the above points may be applicable or relevant to your specific system.

Another reason to be not dependent on tick data, is that ticks are very fickle. Check the charts of the Nifty Index and the Futures - November, December, January and even the Puts and Calls. There is a definite correlation between all of them, but you will see a breakdown in the correlation in some ticks. You will frequently see a spike in one of the futures or index or options, that is not visible on the others. Your test might succeed on one of them, but fail on others.

Live trading results will always differ from paper trading, especially in scrips with low volume, due to slippages, not getting fills, or just errors in execution. In live trading, our orders and trades, are data that was missing in the backtest data, right?

I have written a long story, but am not sure if it has answered your question, or is even helpful to you

Thank you augubhai. Very Important Points. :thumb:

 

[sumosanammain]

Hi,

Timeframe: 5 minute

different datafeeds have different closing prices.

Symbol list(53): KOTAKBANK-I, AUROPHARMA-I, HINDPETRO-I, TATASTEEL-I, RELIANCE-I, TVSMOTOR-I, UNIONBANK-I, HCLTECH-I, MCDOWELL-N-I, INFRATEL-I, BANKNIFTY-I, AXISBANK-I, SUNTV-I, GRASIM-I, JUSTDIAL-I, RECLTD-I, TATAMOTORS-I, LT-I, ONGC-I, BIOCON-I, LUPIN-I, DHFL-I, RELINFRA-I, CENTURYTEX-I, SUNPHARMA-I, MOTHERSUMI-I, INFY-I, BANKBARODA-I, IRB-I, BHARATFORG-I, TATAELXSI-I, COALINDIA-I, BHEL-I, LICHSGFIN-I, ASHOKLEY-I, DISHTV-I, APOLLOTYRE-I, M&M-I, MARUTI-I, YESBANK-I, HDFCBANK-I, RELCAPITAL-I, BAJAJ-AUTO-I, DRREDDY-I, ASIANPAINT-I, HDFC-I, TATAMTRDVR-I, SBIN-I, WOCKPHARMA-I, RPOWER-I, EICHERMOT-I, IOC-I, HEROMOTOCO-I

Then I suggest you try running this system on Nifty and see if there is such a big variation in the number of trades triggered.

A Trading system that gives out such extreme trades based on a few ticks here and there is considered to be flawed, as spikes and ticks are almost always missed even in official data feeds. Its an evil you have to tune your system to learn to live with.

The system should be robust enough to digest a few missing ticks.

See if the same ration of variation in trades is witnessed in 15 minute time frame. Dont check for profitability in those time frames, just see if there is still such a big difference in the trades triggered. If it still exists, then your system may need to be either changed, or at worst even discarded, as spikes of data and a few missing ticks should not make much of an impact on the number of trades triggered in 15 minute time frame. I am not discussing profitability here, just the variation in the number of trades triggered.

If you still find a big variation, you have to let the system go.......