[RobGiles]

This “black swan” event has highlighted to me how important start date dependency is when testing / assessing trend following / momentum systems. If you’d piled into the market with your new MOM system at the recent highs, I would imagine that its going to take a while to recoup those losses.

[RobGiles]

Yep it’s been a tough month. My biggest concern is not the drawdown, but the fact that I’ll be going to 100% cash tonight, with no way of recouping the losses for a month should we have a bounce out of an oversold market condition. Of course, the market could keep tanking, which would be easier to stomach.

[RobGiles]

Interesting. So you will take the hedge off as per Tom Basso’s rules?

[RobGiles]

Just out of interest Nick, did you place a hedge on any of your portfolios?

[RobGiles]

THanks Scott

Does this code look OK?

//

---

//ROC Momentum Entry Rules
//

---

ROCLB = Param(“ROC Lookback”,110,10,500,1);
ROCStock = ROC(Close,ROCLB);

SetForeign(“$XAO”,True);
ROCIndex = ROC(C,ROCLB);
RestorePriceArrays();

RelROC = ROCStock/ROCIndex;

Using this, along with a few other bits & pieces I got the following metrics testing from 1/6/99 to 1/6/09:
CAR 19.06%
MaxDD -10.47%
MAR 1.86
Profit Factor 2.56

however when I ran the system with unchanged variable values from 1/6/09 to 1/6/18 it returned a negative CAR and a maxDD of over -30%.

Very, very frustrating. I have no idea how a system can test so well, through a period that includes a massive market drop like the GFC and then it falls apart in a bull market. If anyone offer some guidance / insight as to why that would be appreciated.

[RobGiles]

In my experience Zach, not really. IV is a market unto its self. Its obviously correlated with historical Vol, but will expand and contract much quicker than historical vol, especially in times like last week, and it is forward looking in nature. IV is a function of the price of the actual option which in turn is driven by the supply/demand for each option strike. IV also gets skewed, so you’d probably find IV (hence the price) of puts is higher than calls when a bearish shock hits the underlying market, and vice versa.

[RobGiles]

In my experience trading physical wheat, if you’re long the underlying but want to reduce the negative effects if a material downside move occurs, then you have no choice but to a) reduce your position size, b) place a stop under the market to get yourself delta neutral (hedged) if the proverbial hits the fan or c) a bit of both. So if you’re want to be hedged on a large down move, you have to accept the fact that you could be stopped into the hedge and then the market could bounce. The whiplash could occur regardless where you put the stop.

Can someone explain what he means by the “faster moving Keltner band” and the “slower”? Is he saying he runs a stop at -1 x ATR and the balance at -2 x ATR?

[RobGiles]

wanting to develop a momentum rankng method thatranks ROC of the stock vs the Index. Am I on the right track code wise?

ROCLB = Param(“ROC Lookback”,120,10,500,1);

ROCStock = ROC(Close,ROCLB);

ROCIndex = ROC(HDBFilter,ROCLB);

RelROC = ROCStock/ROCIndex;

[RobGiles]

I can’t for the life of me understand why adding liquidity filters to a momentum system that trades the $XAO universe actually worsens max DD. FWIW I’ve used the average volume and turnover filters that were used in Unholy Grails.

If anyone could shed any light on this it would be appreciated.

[RobGiles]

LOL

[RobGiles]

Agree its a great read, but left me thinking, where do small scale systems / algo traders like us fit in the ecosystem when we are competing with a room full of PHD’s? Is our primary edge the fact that we are trading relatively small accounts, so we can action systems that, for liquidity reasons, guys like AQR Capital Management can’t?

[RobGiles]

Len Zir wrote:

On a personal note here is how I am dealing with the correction in the US market.
1. I retested all my strategies and all are performing within my expectation.
2. Most of my money is in rotational strategies and I’ve elected not to check the portfolio values until the end of the month when I make my trading decisions.
3. I’ve added some money to my MOC
4. i went out and bought my wife an expensive diamond bracelet.

Trying my hardest to trust the process.

but Len, have you backtested the effect of buying said ‘expensive diamond bracelet’ on your various strategies? It may not do what you expect.

[RobGiles]

Glen the last time this happened to me I had an API issue so I didn’t ‘swing the bat’ the following session….and I regret it. it cost me about the same as I lost the night before. So I won’t make the same mistake tonight.

[RobGiles]

Glen Peake wrote:

Hi Said,

If you’re scratching your head wondering what happened and why the market is down approx 3%…..?? One explanation might be, I went live with my MOC and got my first fills in this Volatility today!!!! 😆

Next 1000 trades :cheer:

Tough way to start but probably a good one to get behind you.

What % were people’s MOC systems down (if down) last night? mine -5.8%. I’ve had a (insert chosen expletive) of a time trading this system FWIW!

[RobGiles]

remember to put a calendar alert to remind you when the US East Coast goes into day light saving as this will effect the cancellation time of your orders (you need to make a change in the API). Think its the 4th Nov…correct me if I’m wrong.

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