BlueHorseshoe

Hi Logic, I'm not really sure that I'd be interested in the inner workings. All I'm interested in is making lots of money so that I can enjoy spending it. Consequently I'd be very interested in investing with the fund you mention and seeing similar returns on my money - please can you tell me the name of the fund so that I can get in contact with them? Thanks, BlueHorseshoe

Why on earth would you pay taxes? It's simple enough to trade an account operating as a company domiciled in an off-shore jurisdiction. When you finally cease trading you then have two options: 1) Move the money back into your own tax residency as capital gains, at which point the 25% is less harmful than a 25% deduction on a yearly basis. 2) Move and live in the off-shore jurisdiction (or any other country with similar tax arrangements) - which shouldn't be a problem if your real returns were anything like the hypothetical ones I listed. BlueHorseshoe

Hi Logic, The 3% figure came from the thread starter, not me. All I did was try and provide a concrete illustration of the progressive effects of compunding this level of return for those (I explicitly stated 'new traders') who are not familiar with this. I don't care whether you make 3% per month or 3,000% per day - it simply doesn't affect my life (or trading) in any way. Cheers, BlueHorseshoe

I was paying the rent with the wages from my job. Because I live in the real world. Actually my employer pays my rent and all my other bills, but that's beside the point . . . If you want to draw a wage every month then there are far easier ways to do it than by trading. I suggest you chose one of them, and then use trading as a way to build long term wealth by compounding returns. I really cannot imagine why anyone would choose to draw 3% per month return from an account rather than get a day job and turn that 3% into a serious amount of money ten years down the line. It seems totally short sighted . . . But maybe that's just me . . . BlueHorseshoe

Eqsys, there will be a lot of new traders who aren't convinced . . . Any new traders reading? Here's what happens when you are able to compound a consistent 3% monthly return over a ten year period, starting with a $20K account (month down the left, equity down the right): 1 20000 2 20600 3 21218 4 21854.54 5 22510.1762 6 23185.48149 7 23881.04593 8 24597.47731 9 25335.40163 10 26095.46368 11 26878.32759 12 27684.67741 13 28515.21774 14 29370.67427 15 30251.7945 16 31159.34833 17 32094.12878 18 33056.95265 19 34048.66122 20 35070.12106 21 36122.22469 22 37205.89143 23 38322.06818 24 39471.73022 25 40655.88213 26 41875.55859 27 43131.82535 28 44425.78011 29 45758.55351 30 47131.31012 31 48545.24942 32 50001.60691 33 51501.65511 34 53046.70477 35 54638.10591 36 56277.24909 37 57965.56656 38 59704.53356 39 61495.66956 40 63340.53965 41 65240.75584 42 67197.97852 43 69213.91787 44 71290.33541 45 73429.04547 46 75631.91683 47 77900.87434 48 80237.90057 49 82645.03759 50 85124.38871 51 87678.12037 52 90308.46399 53 93017.7179 54 95808.24944 55 98682.49693 56 101642.9718 57 104692.261 58 107833.0288 59 111068.0197 60 114400.0603 61 117832.0621 62 121367.0239 63 125008.0347 64 128758.2757 65 132621.024 66 136599.6547 67 140697.6443 68 144918.5737 69 149266.1309 70 153744.1148 71 158356.4382 72 163107.1314 73 168000.3453 74 173040.3557 75 178231.5664 76 183578.5134 77 189085.8688 78 194758.4448 79 200601.1982 80 206619.2341 81 212817.8111 82 219202.3455 83 225778.4158 84 232551.7683 85 239528.3214 86 246714.171 87 254115.5961 88 261739.064 89 269591.2359 90 277678.973 91 286009.3422 92 294589.6225 93 303427.3111 94 312530.1305 95 321906.0344 96 331563.2154 97 341510.1119 98 351755.4152 99 362308.0777 100 373177.32 101 384372.6396 102 395903.8188 103 407780.9334 104 420014.3614 105 432614.7922 106 445593.236 107 458961.0331 108 472729.864 109 486911.76 110 501519.1128 111 516564.6862 112 532061.6267 113 548023.4755 114 564464.1798 115 581398.1052 116 598840.0484 117 616805.2498 118 635309.4073 119 654368.6895 120 673999.7502 121 694219.7427 If you've got fifteen years then your figure is: 4090066.939 A cool four million, with a little bit of change left for that soft-top. There is plenty of information on this site, elsewhere on the web, and in countless books and articles, about how to use money management to make a small edge work for you. Happy trading. BlueHorseshoe

You're obviously not very good at TA, Mitsubishi, as your example shows - there is clearly a bearish double top forming here - you can tell from the slope of the 483rd line.

I had a message request for a picture of the strategy above on a chart. Not sure how that could possibly help anyone, but it's attached (in the ludicrously small size that TL allow!) for anyone who's interested (its the last few months, in which the market trended way above the optimal 'cloud'). BlueHorseshoe Ichimoku.bmp

I thought I would test Obsidian's suggestion, as the 'cloud' is fairly simple in construction, and the results may be interesting to others here (although I'm only going to test it for a particular type of strategy, so the results will by no means be conclusive for everyone). I'll test a simple strategy of buying pullbacks in trends on a daily chart, not too far removed from how I trade. I don't believe that numbers have any kind of special value or that there are magical, timeless numbers, so the numbers that are used as inputs for lookback periods and projection periods within Ichimoku are in no way sacred to me. Ichimoku uses three inputs. I would never optimise this many inputs - I would be reluctant to have this many within an entire strategy, let alone just the trend determination element of it - there would be too high a risk of curve fitting. However I do want to optimise one parameter to facilitate a fair comparisson with the optimal SMA value. As the projection period input is processed after the lookback period inputs, it is the latter that I will optimise. This then creates a situation not too dissimilar to a neural network or markov model, with the projection period acting almost like a weighting measure with which to modify the output from the functions with fixed lookback periods. With dollar optimisation of the projection period (typically a value of 26 is used by Ichimoku followers), the optimal value tested was 97, and the 10 year ES results were as follows: All Trades Long Trades Short Trades Total Net Profit $89,637.50 $39,125.00 $50,512.50 Profit Factor 2.29 2.04 2.6 Percent Profitable 70.30% 73.05% 65.66% Avg. Trade Net Profit $336.98 $234.28 $510.23 Avg. Winning Trade $849.80 $629.82 $1,262.69 Avg. Losing Trade ($899.68) ($857.10) ($956.44) Max. Consecutive Winning Trades 12 9 12 Max. Consecutive Losing Trades 4 3 5 Max. Drawdown (Trade Close to Trade Close) Value ($4,612.50) ($4,612.50) ($5,825.00) Incidentally, the Ichimoku strategy has been written in such a way as to treat the zone within the 'cloud' as neutral, or trendless, and allows both long or short positions to be initiated within this space. Here's how this compares to using the directional slope of a Simple Moving Average to determine the trend, once again with the optimal value, which would have been 124: All Trades Long Trades Short Trades Total Net Profit $90,347.50 $41,775.00 $48,572.50 Profit Factor 2.24 2.17 2.31 Total Number of Trades 270 164 106 Percent Profitable 70.74% 74.39% 65.09% Avg. Trade Net Profit $334.62 $254.73 $458.23 Avg. Winning Trade $854.83 $635.25 $1,243.08 Avg. Losing Trade ($959.54) ($893.13) ($1,033.33) Max. Consecutive Winning Trades 12 9 12 Max. Consecutive Losing Trades 3 3 5 Max. Drawdown (Trade Close to Trade Close) Value ($5,200.00) ($3,875.00) ($8,000.00) The differences between the two approaches, with each operating at its optimal value, is in most respects negligble. I would always therefore choose the latter (SMA), as it is a much simpler function and the results are more likely to be robust. Hope that's useful/interesting to someone. BlueHorseshoe

Back on the subject of trend . . . And in answer to my own question, my strategy now considers the ES to be down-trending. Assuming the market holds above about 1316 into the close, then I will short it. If it holds above 1320 I'll be happier. The low volume today is also encouraging, as I interpret this as lack of buying interest as we drift higher, although this doesn't form any part of an actual decision making process for me. Not that I intend to make a habit of posting live trades . . . BlueHorseshoe

Thanks - some very useful ideas there. Unfortunately my entries aren't especially great - most of the time I will sit through several days of adverse excursion. I have a list as long as my arm of ways that this can be avoided and my entries improved; unfortunately every one of them significantly reduces opportunity and net profit. I decided that I'd prefer regular opportunity and greater net profit to good entries, and that I could control the effects of adverse excursions through position sizing. I'm just playing around with code to try and determine what happens if I increase the number of contracts traded with successive losing trades (as with a martingale position sizing method), but simultaneously decrease the stop loss per contract to limit risk to the same percentage of equity (so as to avoid an actual 'doubling down' scenario). For example: Losing Trade 1: 1 contract, SL $200 per contract (total risk $200). Losing Trade 2: 2 contracts, SL $100 per contract (total risk $200). Losing Trade 3: 3 contracts, SL $66 per contract (total risk $200). So with the fourth trade, assuming it was exited for a profit, and assuming a stop loss of $50 per contract was not hit, then the position size would be four contracts. If the profit target remains constant at $200 for each trade, then the above scenario yields a $200 profit, as opposed to a $400 trading a fixed 1 contract with a fixed $200 stop. Of course, the more the stop is reduced (assuming the outcome of each trade is independent of those before it), the greater the probability that it will be hit before the target is elected. The markets tend to be very efficient in this way. What I am really interested in is whether strings of sequential losing trades within the same market analysis structure are indeed independent, and whether they are dependent to such an extent that an edge can be gained, whereby the probabilty of a stop-out does not actually increase as the stop-loss per contract is reduced. Not that any of that has anything to do with determining trend!!! BlueHorseshoe

As I'm sure you're aware, the markets have a habit of evening things out. So the fact that I have more winning trades than losing trades is simply a function of the fact that I have small wins and large losses. In other words, nothing for me to brag about . . . One of the advantages of how you trade, I imagine, is that with every successive entry signal following a losing one the market will have moved further in the direction you anticipate, therefore further confirming the trend you wish to enter. BlueHorseshoe

And all trends, even those correctly identified must eventually reverse. As things currently stand, I'm only usually wrong once at the end of the trend for this reason. Add in a few losses caused by premature entries during the trend, and I'm correct (profitable) about 7-8 times out of 10 within the typical S&P trend as I define it. I have now become quite accustomed to sustaining a significant loss after a string of smaller winning trades. So all this is fine, as things go, but problems occur when my determination of trend is incorrect, as then the inevitable losses associated with trend change often become sequential. EVEnly spread they aren't an issue at all, but clustered together I fear that sooner or later they may un-nerve me. BlueHorseshoe

It's very easy to test a zone, as long as you are prepared to define its boundaries precisely (though the boundaries can obviously change from bar to bar. So you could say 'if price is greater than X and less than Y and Z happens, then do P'. Is this what you meant? BlueHorseshoe

Hi Obsidian, I have never really looked at Ichimoku. I seem to remember deciding it was very complicated at some stage, and I prefer simple, but if what SIUYA is saying and it is just the middle of a Donchian channel then that's straightforward enough. Thanks for the suggestion - definitely something I'll investigate further! BlueHorseshoe

Thanks for your reply Tams, with your trademark eloquent brevity! An SMA is what I currently use, as I have found absolutely nothiong that betters this in testing (I look at the slope rather than whether price is above or below the MA, however - an idea I took from the Stridsman book and also mentioned by Kaufmann). Incidentally, I recently tested a trend indicator you posted on here which compared the value of an MA with its value N bars prior. Though effective, this still was not superior to an SMA. So would you not be tempted to optimise the MA lookback at all? In the S&Ps, for instance, 200 periods was far from optimal over the last 10 years for most of the approaches I have tested. BlueHorseshoe

Thanks for your reply, SIUYA. While I don't really know what the institutions do well enough to debate it, I would argue that, based upon the data, the equity indices do not behave in a symmetrical fashion. I can only imagine that this is because there are more participants (of whatever type) interested in buying them than in shorting them. BlueHorseshoe

You're right - I got sidetracked into discussing reversals with MightyMouse's response. My timeframe is daily. Rather than look for support or resistance on a chart, however, I look for tension between short term price movement and long term price movement (the prevalent trend), and trade on the assumption that more often than not price will revert to the former trend. I look at nothing more than the speed and intensity of movement counter to the trend - the more violent and extreme these appear to be, the more interested I am in taking the other side of them. Therefore how I determine trend will, in theory, play a crucial role in whether I am successful over the long run. General is fine, thanks - I was just hoping for a general discussion of how others approach the idea of determining trend, rather than a discussion of my own strategies, which I am sure would be very boring and not beneficial to anyone else. Thanks, BlueHorseshoe

Doh! - so that's why other programmers name entries . . . That should be all the info I need to make this work - thanks OneSmith. BlueHorseshoe

Thanks for your reply. The language is EasyLanguage and the amalgamated strategy would only need to establish new positions from flat (nor would longs and shorts be held simultaneously). The goal is to ensure that a position established under one entry condition is not then exited according to the exit condition attached to a different entry. Oh and I'm not US-based - I'm in the UK, though in Rainy Snowdonia rather than Sunny London Cheers, BlueHorseshoe

In that case I had misunderstood you - I think that you would in fact be taking the other side of trades made by a system such as the one MysticForex describes! When you enter short at support in an uptrend, are you not concerned that, although the weak longs may be forced out (I will, after a contract has moved a few thousand dollars against me), the stronger hands who are controlling the long term state of the market will be eager to continue accumulating and pushing the market higher? This would theoretically put you on the other side of not only weak traders but also massively capitalised institutions who, regrettably, we have to consider to be 'strong hands'. Thanks, BlueHorseshoe

Thanks for replying. I think that you mentioned the fact that markets rarely form 'V' reversals in response to a question I asked previously - a remark that I investigated and found to be very helpful. I would, if forced to make prognostications, agree with you that we are currently seeing nothing more than a more significant pullback in an uptrend. One clue for me (although this is not information I incorporate into my mechanical strategy or act upon) is that each day the market moves significantly lower we see significant volume. My very simple interpretation of volume in the equity indices (which is based upon my own quantitative analysis of market data and isn't really something I want to debate with anyone) is that volume is significantly biased to the long side. Hence I expect significant volume as price falls before reversing to the upside, as buyers step in and start accumulating at 'bargain' prices, and diminishing volume as price rises prior to reversing to the downside, as buyers lose interest when prices have moved to unreasonably high levels. I completely ignore sellers in this equation - I think that the indices are driven by buyers, many of whom will hold long positions for decades (now when did you ever hear of anyone holding a short position for decades?). I realise many will disagree with this interpretation of volume - I can only point out that the data supports what I am saying. Having said all this, my last attempt to get long was not profitable! Your post raises another question: is it possible to determine the trend in higher timeframes effectively without considering some sort of fundamental information? Cheers, BlueHorseshoe

Thanks for your reply. In terms of timeframe, I personally hold positions for between 1 and seldom more than 5 days. I rely on both the directional slope of a moving average and price relative to a moving average as a trend filter, and was wondering what others do (including those who trade intraday). I've tested pretty much every technical concept of trend I've come across, and failed to find anything that is more effective as a mechanical measure than what I'm using (although I have found that a moving average of OBV can be pretty much equally effective). So am I correct in thinking you're suggesting a fixed anchor price against which to measure whether the market is bullish or bearish? How would this anchor price be determined? And how often would it be revised? Thanks for your thoughts. BlueHorseshoe

Thanks for your reply. I realise there's no definitive answer and just wanted to get an idea about how other traders think about this and try and challenge my own mindset. Your post is thought provoking and very helpful, so it's certainly not waffle! Thanks BlueHorseshoe