Forum Archive Index - January 2004

[Phaedrus <Phaedrus@techemail.com>]

T100,
     I have not had any real success applying totally mechanical systems to the 
local market. I have had limited success with Aus stocks in that my systems 
only work reliably with the most heavily traded stocks there. My best results 
have been obtained with ETF's in the US. I suggest you concentrate initially on 
the QQQ and/or SPY.
 Some stocks do not seem to be suitable for this type of trading. For example, 
I have spent (wasted) an inordinate amount of time trying to create a 
reasonably reliable system for Telecom (TEL/NZ) without a glimmer of success. 
My theory is that this stock is used as a proxy for the NZ dollar by major 
traders, and this "overlay" interferes with the basic system. Maybe.
 You do not have to go too far into backtesting/optimisation routines before 
you start to run into the limitations of MetaStock and require a more powerful 
and sophisticated program such as Tradestation. OmniTrader is good for 
comparing backtesting and forward testing results, though it has nothing like 
the flexibility of MetaStock.
 It would take very powerful software indeed to recognise a trendline and 
signal a break. Some quick easy rough alternatives are to use moving average 
crossovers, moving average slope, linear regression slope and suchlike.
 Systems can be optimised for whatever you want - maximum profit, minimum 
number of trades, best hit-rate, best profit/loss ratio etc etc. One factor 
that should not be overlooked, in my opinion, is the number of consecutive 
losing trades. I have had good profitable systems that I personally found 
unuseable because of their characteristic of periodic runs of losing trades. I 
can stand 3 or 4 consecutive losses, then I begin to lose faith in the system.
 There are some good books on this subject, they include :-
Design, Testing, and Optimization of Trading Systems by Robert Pardo.
Tradings Systems That Work: Building and Evaluating Effective Trading Systems 
by Thomas Stridsman.
The Encyclopedia of Trading Strategies by Jeffrey Owen Katz, Donna L. McCormick.
The Ultimate Trading Guide by John R. Hill,George Pruitt,Lundy Hill 
 Here is an introductory article :-
http://www.snapdragon.co.uk/resource/articles/nealh.htm

 Hope this helps,
                  Regards,
                            Phaedrus.

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