[TerryDunne]

Hi Anthony,

Thanks for the post. The first thing I should say is that I got lucky and started at a great time, so I immediately had some momentum.

I usually do my initial back testing from 1/1/2010 to 1/1/2020. I may choose to optimise some parameter or other, but I really want whatever optimised value I choose to be in the middle of some range of good values (i.e. all of them work).

I also want the draft system to be at least OK on the 2000-2010 and 2020+ timeframes and to also work on both the Russell 1000 and the Russell 2000 (this is the MOC systems than the MR systems, where I haven’t been able to crack one on the Russell 1000).

When I think I have something that might be tradeable, I run a Monte Carlo simulation, again on the 1/1/2010 to 1/1/2020 period. I do two things with the output:
1. I check whether the average of the MCS runs makes my minimum benchmark, which is that the CAGR is greater than 20% and that the CAGR is greater than the max draw down. I no longer use Sharpe Ratio as I have been won over by the Ulcer Performance Index, which has a denominator based on the depth, frequency and duration of draw downs (although I should confess that I’m not over the maths on this).
2.I also use the MCS output to allocate capital to different systems. Right now, if the systems wouldn’t be allocated more than 4% of my capital, I won’t trade it. Context here is that I have 15 systems, I had a higher % allocation requirement when I had fewer systems.

As I mentioned, I started at a really helpful time, so I’ve been lucky – I hope you are lucky too!

Terry

[TerryDunne]

September 2022

MOC 1000 4.54%
MOC 2000 5.06%
MR 2000 0.00%

Total 3.43%

[TerryDunne]

Hi Steven,

I have this same issue frequently…I have an idea, but it doesn’t really work as I’d hoped, so I add some other criteria (or 2 or more) and it gets better, maybe even good every once in a while.

One of the things I have now built into my process is to run back tests with each of these lines of entry code removed, one at a time. Often enough I discover that some or all of the criteria don’t actually help. However, I end up with a ‘cleaner’ system, ideally with a rank, stretch and 1 selection criterion. On some of my systems I have 2, but these extra ones usually are only to apply a governor to individual stock volatility.

Good luck with the systems development, the fun part!

Terry

[TerryDunne]

Hi Ben,

First let me say that I can’t help but be impressed by your enormous rock hard testicles. I know (from painful experience) that my pain threshold is much less than where you are at right now, so I think your tenacity is both admirable and extraordinary. From what I’ve read and my personal experience, those attributes will be very handy for your trading future.

I’d also like to give a slightly different perspective to that of Kate and Glen…for God’s sake stop trading! Not forever, but at least until you get to the bottom of what has gone wrong. While the market is difficult, I’d be surprised if there are others here who have had that level of drawdown. If nothing has really gone wrong apart from the results, maybe the system isn’t right? Imagine having started in, say, 2010. You’d have made something in the region of 25-30% pa and now your drawdown would be mega $$$$$.

Having said that, I suppose it depends on whether this is something you want to do to generate a living, or to augment your day job, or whether it’s just a bit of fun. If it’s for entertainment, then please ignore this post.

Best wishes mate. Just remember all of those stories you’ve read of gun traders who blew up before they became raging successes.

Terry

[TerryDunne]

Nice stats Nick!

Given this system (I guess) will have average trade length of roughly 3 days and buy when ‘oversold’, does it have much correlation with your MR systems?

No doubt you’ll solve the order processing technology issues, but even if you had to do it manually, you’re just cancelling some orders and entering some MOC sales each Friday?

I recall you telling me once that you weren’t creative…I’m not sure I believe you after seeing this!

Terry

[TerryDunne]

Hi Nick,

Does the fact that you’re looking at mechanics mean that this approach has met all of your requirements in back testing?
Interesting idea…

[TerryDunne]

August 2022

MOC 1000 -0.96%
MOC 2000 -3.88%
MR 2000 0.00%

Total -1.67%

I suppose I can’t be too unhappy but I certainly can be bored and frustrated. That won’t stop me placing orders though.

I launched my final two MOC systems (same system, just run on R1000 and also R2000 as separate systems) some weeks ago. I’m now close to finishing my last MR system, hopefully for October start, but it depends on how I go in ironing out a kink that exists.
This doesn’t mean that I won’t continue to research MOC/MR systems, just that if I add a new one, a current one must go.
I still have a pile of administrative/risk management things to do, so that will be my focus moving forward so that they are in place before the end of the year.

Good luck to all for September!

[TerryDunne]

Hi Ben,

Really interesting post, thanks for taking the time to make it.

I’ve also struggled with the general concept of diversification V Return/drawdown. I trade 2/3 MOC (10 systems) and 1/3 MR (4 systems) and for ages have wanted to add trend following and/or momentum systems for the benefit of diversification. As you say, the problem is that return and drawdown deteriorate.

In the end it turned out I didn’t have to bother. The MOC systems in particular tend to make $$$ in all market phases and I have managed to add some diversification just by adding more of them. I know this sounds counter intuitive, but my live systems right now have drawdowns from 14% to 32% but across the portfolio the MDD is 13%.

Having said that, if I can find a system that back tests with CAGR in the 20% – 30% range and with a MDD of under 20%, I’ll be all over it.

As for shorting though, I’ve decided it’s not for me. The metrics aren’t as good, presumably due to the upward bias of the market and conceptually I can’t cope with the idea that my loss on a trade is unlimited. I see this as much more serious than the idea of duplicating (or not) trades in different systems.

Best wishes,

Terry

[TerryDunne]

July 2022

MOC 1000 0.03%
MOC 2000 7.59%
MR 2000 0.00%

Total 2.45%

[TerryDunne]

Thanks for that Glen, that’s really interesting. I expect that I’m going to one of those people chained to my computer for the next few days…

Best wishes,

Terry

[TerryDunne]

Hi Glen,

That’s a really interesting idea that I will fool around with for sure

For the sake of completeness (and my fixation with large stretches), would you mind posting the performance where you use the increased stretch all the time?

Thanks in advance,

Terry

[TerryDunne]

[TerryDunne]

Hi Nick,

Just so I don’t misunderstand…you’ve adjusted your stretch from .75 of ATR to 2 times ATR?

Regards,

Terry

[TerryDunne]

Wow, that’s a great example Nick. While every trade taken on 27/10 was a loss, for the month the profit was HUGE.

This is my biggest concern about choosing not to trade…am I about to miss one of the few days that make an entire year? We’re never going to miss the big down days because the other factors in our life aren’t going to get in the way when we are making bank.

[TerryDunne]

June 2022

MOC 1000 -7.96%
MOC 2000 -1.24%
MR 2000 0.00%

Total -3.96%

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