Traps in Testing

Testing is a very critical thing for both discretionary and algo trading. As usual, the problems come from what you don't know that you don't know. As with most endeavors, if you don't even know what questions to ask then you will find it difficult to succeed.

One of the many traps in back testing is which combination of platform and data feed you are using, as well as both the latency between you and the data feed and you and your broker. Then add in the bandwidth of your internet connection and finally the load on your PC and the actual combination of these that any one trader has, is pretty unique. That means getting identical results from testing using the same trading rules is therefore pretty impossible.

The two tables below represent the results of a new algo we are developing. Both are EXACTLY the same easylanguage text testing the ES on the same PC located in the cloud, with the first running on MultiCharts and eSignal data and the second running on TradeStation and TradeStation data.

My first conclusion is that after I have finalised a configuration for Flo for a particular market, if anything changes then I have to re-configure. If I am in London it's different to the config I use in France. If I am running out of the cloud I must do a new config for different PCs.

Discretionary Trading and Flo

The hardest thing for me in both hybrid and fully automated trading is to leave Flo alone when I really should. I'm a trader by DNA and find it hard not to mess with Flo. However, there is a one huge benefit to discretionary trading in going down the algo route; you are doing testing, testing and more testing.

One of the things I teach my students is the importance of testing. Otherwise how do you know ahead of time what you should be doing? It's hard to put on a trade or hold a position without the confidence of knowing that is has a statistical success rate. Trading a new idea is risky- most often it doesn't work as you want. You certainly won't know until you have tested it.

Looking at the DAX on a bigger range bar using some of the pictures I teach, I get these stats and a lot fewer trades. As you can see, the 6 tick range bar I used today makes less profit per contract than the 2 tick chart of yesterday but the advantages of having the time to manually override and to be able to use limit orders, are something to consider. One of the considerations is the latency you have from price. I'm in the cloud and there was a sharp move in the ES where I was getting trades filled through my broker that had not yet appeared on my chart. This chart was powered by eSignal. Using broker's data may be something important if you have latency.

I know Flo shows a lower win rate than I advocate, but I can cure that with Hybrid Trading - getting out of obvious losers before they become losers and taking smaller profits early when order flow is slow. Or I can just leave it to Flo and be content with her "average" performance. This is a choice to be considered.

In the afternoon (London), it was ES time. The market range extended upwards and shortly afterwards extended to the south side. Neutral day. Of course I bought it as I should at what could have been support yesterday's VAL. It wasn't and the market hit an air pocket and I got stopped out of a Neutral day buy trade for the first time in probably a couple of years. My only saving grace was that Flo was short into the downdraft. That's discretionary trading. BTW, had I been able to hold on, the Neutral day fulfilled it's duties and went back into the middle of the range, but of course, I wasn't there. In retrospect, hindsight is easy, I should have bought the buying tail of yesterday's Profile. C'est la vie as they say around here.

Flo goes HFT

My trading the DAX yesterday gave me an idea. I set Flo up to trade 1 point range bars fully automatically. I had spent a few hours last night running tests and it looked really promising, but there's nothing like putting real money on the line to really find out if something works for me. I learn by doing unfortunately, much to Mrs EL's chagrin.


Happily, this was one of my better "suck it and see" efforts. I did only trade 1 DAX contract. I got tired just watching.


I can report that no human could have traded like Flo did. There was no question of overriding her, as the trades were so quick I couldn't even have found where to click before she had done two more trades.


The key, I think, was the small targets and tight stops. The result was LOTS of trades. But lots of GREEN. The stats below are the London morning pre RTH 6 hours of trading. The interesting thing is to compare the last few days to today.

 

Veteran Finally Receives War Medals

By Regina Lakus
Chartiers Valley Patch
March 14, 2011

BRIDGEVILLE, Pa. - After 65 years of waiting, one local veteran finally received proper acknowledgment for his service to the nation.

Ed Schneider, 87 of Bridgeville, is now able to hold the nine Bronze Star medals he earned for his service in World War II.

In a twist of fate shortly after he left the military in 1946, the St. Louis warehouse that stored his service records burned to the ground. It wasn't until last November that he found the help he needed to acquire his honors.

Read more...

It's All About The Vision

Well today wasn't hard to pick direction- not with all the bad news coming from Japan. The ripples impact everyone everywhere somehow. It was a pretty sad weekend seeing people separated from their loved ones and not knowing whether they were alive or not.

No one could be bullish today. So it was all a matter of timing, as usual. The chart below looks so easy after the fact and with the risk of sounding full of myself, it was easy to trade. I wanted a bit more micro visability. I had been trading the DAX in the morning - the DAX is like the Russell2k on speed. I was trading it on a 2 tick range bar chart for about an hour and a half until I couldn't click my mouse any more (that's a bit of an exaggeration). 

So I thought I'd micro the ES in my afternoon. I split Friday's ES Profile at the single print and at the split's VAL there were just sellers. It wasn't hard to find the entries below after that. The change in the time difference between Europe and the U.S. was a pain as usual.

Going Google across the 50 States: Arizona partners make their dream business a reality with help from Google Apps

[Cross-posted from the Google Enterprise Blog]

Editor's note: Over 3 million businesses have adopted Google Apps. Today we’ll hear from David Marsh, co-Founder of The Standard Agency, a talent management and creative agency in Arizona. To learn more about other organizations that have gone Google and share your story, visit our community map or test drive life in the cloud with the Go Google Cloud Calculator.

Our dream business started at the kitchen counter, literally. My partner and I had been involved in the music industry for a decade and knew the framework for managing talent was broken – people are at extremes either bringing in tons of money or making close to nothing. So, we took a business idea that we developed at the kitchen counter and founded The Standard Agency to manage musicians, models, actors, athletes and other talent who need representation. We offer a one-stop shop that includes everything from design and online promotion to booking gigs. In working and collaborating on so many different projects we also found there was a demand to provide a deeper understanding and appreciation of how design and social media impact businesses. This caused us to expand to offer related marketing services to small businesses who need help establishing themselves online and offline.

Our business quickly went from an idea to a reality and to be able to immediately have professional email and other business tools through Google Apps was key. Knowing Gmail was part of Google Apps was a huge selling point for me as I consider it the best solution to keep email organized. Set up of Google Apps was quick and flawless and all the applications are easy to access from any device. I’ve worked with other companies that have had to jump through hoops to get email on their mobile phones. For me, Gmail automatically worked on my phone and it’s the primary way I access email. Plus, we don’t have constant downtime and servers to maintain as I’ve experienced elsewhere.

Google Calendar has been essential for scheduling and tracking timelines for various marketing projects. I don’t think my partner would have been able to use any other calendar out there. He’s far more efficient and productive because his calendar is easy to use and it syncs across his phone, laptop, and tablet.

When it comes to our extensive network of contractors and employees, most of whom live out-of-state, Google Docs is the cornerstone of how we work. We use Google forms extensively for everything from fan surveys to elicit feedback after events, to online resumes to collect information from new job applicants. We also create Google docs for almost everything including legal contracts which are common in our business. Contracts often go through multiple rounds of revisions and with a Google doc, the right people can access and collaborate on the most up to date version, no matter where they are.

If it wasn’t for the ease of use and low cost of Google Apps, I don’t think my partner and I would have taken off running as fast as we did. It created a strong sense of confidence and familiarity that we needed to start up our business. Two years later, we all use Google Apps daily and wouldn’t have it any other way.

Posted by David Marsh, co-Founder, The Standard Agency

How to Trade the Trend

There are a number of ways to trade a trend - Trough to peak and Peak to trough or to catch a larger swing that encompasses a few peaks and troughs with the market moving along the trend. It's a matter of style and personal preference. Moving along a trend and reloading on pullbacks is another way.

Today's Euro futures chart shows trading the trend and ignoring the pullbacks. I trade this way and can set Flo up with this configuration when I'm trading a few markets at once and don't want to focus on any one to a large degree, intervening only when really necessary. The pic below shows one small loser, a scratch and one big winner.