[ScottMcNab]

June +0.6
US MOC 1.0
XAO MOC -0.4

2 mistakes for the month that hadn’t done this year
1: forgot to place US entries one Friday night …would have been a positive night
2: last week managed to use csv file from previous day for entries on XAO…lost again

[ScottMcNab]

Anyone using Monte Carlo with rotational systems ? Assuming not trading these on margin ..I was getting pretty pleased with my systems until I looked at the MC…had to reduce the postionsize with corresponding moderation of CAGR

[ScottMcNab]

Is the 50% increase from Mar-Jul higher than average for most 4-5 months periods in backtesting Trent ? I have seen in back tests that in cases of extreme, rapid gains (high ROC) that this is often followed by a more severe (%) drawdown or a longer time in drawdown simply because the equity high itself was an extreme….ie the equity curve reverts to the mean…

[ScottMcNab]

If the statistics I have heard are correct (regarding the % of time systems are below equity high) then we should perhaps expect this to happen we we launch a new system ?…divergence of reality and expectations can cause dissatisfaction when the problems may lies with the expectations themselves?

What has me thinking hard about this is the rotational systems I am designing at the moment…they appear very robust and have solid metrics but the only hiccup I have found is the long wait time between equity peaks…how would I go waiting a year to more for a positive return? (which is possible depending on market conditions)…I want to say I would be fine with it but in reality I have my doubts…might start with a smaller allocation and ease my way in to it..prob not the best from a returns perspective but it may at least allow me to trade the system and stick with it while my confidence grows in it

It sure is easier to be calm in a drawdown when the system is in profit

[ScottMcNab]

Len Zir wrote:

Nick,
I am really glad you started this topic. I find the hardest part of trading is staying in the game when your system is flat or in drawdown. Last month I only had a 3 1/2% drawdown in my MOC system which has been flat this month and I am already wondering whether I made a mistake in designing the system, or whether it was broken. I started to look at tweaks in the system. All of this because prior to mentoring I’d always lose money trading.
Most of the mental hurdles to staying with a system I suspect are tied up with what money and its loss mean to your psyche.
Len

I have found myself thinking about this in regard to future systems Len….how would I go with a brand new system that went into drawdown straight away and then had its worst year in the 20 year backtest ?…there is no reason a perfectly good system may not do this purely by chance..(1/20 or 5% possibility)..I suspect I would struggle

[ScottMcNab]

After some pretty confusing conversations with my accountant I have found that if I think of the “Sole Purpose Test” to mean anything that “minimizes the chances that the government will have to pay me a pension or contribute to my retirement” then everything starts to make much more sense

[ScottMcNab]

Have you listed to the Jack Schwager interview in Better System Trader Trent ? Episode 100….he is part of one of these funding companies that tries to match aspiring traders with sources of capital…maybe a long term goal could be to keep designing/developing systems but with the potential for large capital injection…maybe with futures and/or fx….and then try and develop a track record using these systems …Norgate may have the data for these ? …just a thought

[ScottMcNab]

Thanks Julian…drifted away from this idea temporarily as I’ve become engrossed testing momentum (roc) with rotational trading systems..they seem incredibly robust (and no friggin selection bias!)…..would still be nice to trade a limit on open system (for want of a better name) as discussed above for the additional diversity …will add it to the list for further research !

[ScottMcNab]

Interesting. The reason for the tweak may be the key in determining whether we have done this perhaps ? If it was done to reduce selection bias or to address slippage or to reduce correlation with existing systems then I would suspect it is not beginners cycle..i.e. a shortcoming in the system was identified and corrected…..if the changes were done because they were found to increase CAR 1-2% or reduce maxDD 1-2 % in the backtest then maybe it is ?

[ScottMcNab]

Thanks Julian and Said..

Said..just to confirm I understood this please …in your answer when you state “…then the worst rank held will be the maximum number of open positions allowed…” does “allowed” refer to the number of positions filled based on the available equity and it will therefore changes for each rotation ?

Thanks again

[ScottMcNab]

I am also struggling to understand the setpositionsize….depending on the atr this could results in variations between 5 and 20% of equity (or higher) ? Does the rotational system automatically account for this variation by just selecting the top stocks based on score until the equity is depleted ?

[ScottMcNab]

Julian Cohen wrote:

Maurice Petterlin wrote:

Looking for a discarded rotational system.

here’s One for you maurice. I ran it for a few months but it went into hard drawdown so I stopped it. Fairly basic. I haven’t found a rotational system that I want to run yet. I feel better using WTT variants instead.

_SECTION_BEGIN (“System Parameters”);
//=================================================================================
//Parameters
//=================================================================================
Duration = Param(“Length of ROC”,252,10,504,10);
MADuration = Param(“MA Length”,200,150,250,25);

LMA = WMA(C,MADuration);
HV = 100 * StDev(log(C/Ref(C,-1)),20) * sqrt(252);

//=================================================================================
//Entry & Exit
//=================================================================================
OnLastTwoBarsOfDelistedSecurity = BarIndex() >= (LastValue(BarIndex()) -1) AND !IsNull(GetFnData(“DelistingDate”));

Cond1 = HV > 5 AND HV < 20;
Cond2 = ROC(C,Duration) > 0;
Cond3 = C > LMA;
Cond4 = IndexUp AND OptFilt AND HDBFilter AND gapFilterOn;

LESetup = Cond1 AND Cond2 AND Cond3 AND Cond4; //Any additional buy rules apart from the rotational criteria – e.g index, price filters etc
LE = Ref(LESetUp,-1) AND NOT OnLastTwoBarsOfDelistedSecurity;

//=================================================================================
_SECTION_END();

_SECTION_BEGIN (“Backtesting Options”);
//=================================================================================
//Backtesting Parameters
//=================================================================================
posqty = Param(“# Positions”,30,1,100,1);
Eq = Param(“Initial Equity”,100000,1,10000000,1);
SetOption(“InitialEquity”,Eq);
SetOption(“MaxOpenPositions”,posqty);
SetOption(“UsePrevBarEquityForPosSizing”,True);
SetOption(“AccountMargin”,100);
SetOption(“AllowPositionShrinking”,True);
//SetOption(“WorstRankHeld”,100);
SetTradeDelays(0,0,0,0);

SetBacktestMode(backtestRotational);
EOM = Month() != Ref(Month(),-1);
score = Ref(ROC(C, Duration),-1);//score is the rotational criteria
Score = IIf(LE,score,0);
PositionScore = IIf(Year()>=1985 AND EOM,score,scoreNoRotate);
//

---

PortfRisk = Param(“% daily Portfolio Risk”, 0.2, 0, 2, 0.05);
SetPositionSize( Ref(C,-1) * PortfRisk /Ref(ATR(20),-1), spsPercentOfEquity);

[/code]

Can I ask about the line of code containing worstrankheld please Julian? I am trying to read through the info on rotational and I thought that this was the setting that forced the exit of securities…i.e. when the stock falls below the worst rank held….did you find it was not needed ?

[ScottMcNab]

I have been inspired by the posts regarding rotational systems. I am hoping to learn more regarding monthly rotational type systems.

Are backtests on monthly rotational systems done using just 12 time points a year ? This would mean that 20 years of backtesting still only equates to about a year of backtesting data points used with a daily system ? My daily systems can look great for 5 years and then go to hell in the 6th !

I changed my rotational system to weekly to look into this further and was surprised to find that there was not very much change..they seemed very robust….for example on NDX (from 2000 to present) one system had CAR/MDD of 14/18 for monthly rotation and 12/14 for weekly (I am constructing something for smsf so not swinging for the fence). So my next question is whether trading maybe a weekly version on the NDX and a monthly version on SPX and/or XAO seemed crazy ? Combined with a MOC system, this would provide a nice diversity. Is there something I am unaware of regarding the tendency for these systems to be monthly or is it that they are just looking to capture longer type trends?

Thanks in advance

[ScottMcNab]

I have missed a few trades recently where my buylimit was the exact low of the day…que sera…..so I went back and tested my MOC systems and changed LE line:

AND (Low<=(Ref(buylimit,-1)-tick) etc It had almost no impact on US system but had significant impact on AUS…may just be chance that the AUS system was picking lows but I use exactly the same systems for both (except AUS has lower price/vol filters) Interested to hear if anyone else sees similar changes

[ScottMcNab]

Interesting…IB response below

[Author]

Posts