Thursday, January 29, 2009

Qs 7&7 system

This is part of my continuing upgrading to the BZB Dirty Dozen systems that I mentioned earlier in the week. I've decided for now to focus on improving the Qs' systems, as the IWM based systems are chugging along just fine with their original default settings. The Qs, of course, are a bit more problematic that the IWM, due to volatility, only 100 stocks in lieu of the IWM's 2000 and a number of other issues. After years of trading both these ETFs, the IWM is the much easier road to hoe for systems traders, but HEY!, I'm a glutton for punishment, so like Curious George, I'm digging in.

This particular study was inspired by a simple system developed by Larry Connors known as the Double 7s. Rules are to buy the SPY if the close is a 7 day low, and then exit the position when SPY gets to a 7 day high. Needless to say the results of this system with the Qs are pretty awful. That's because the Qs have a totally different support/resistance cycle and reflect different trader biases.
So, I've tweaked the original concept a bit and used fixed bar exits to help define the Qs cycle.
these adjustments yield a fairly reliable trading model.
The system only trades 71 times, about once a week, with an equal number of long and short trades. Drawdown is kept fairly well in check (no stops). The only thing I don't like is the max consecutive losers on the short side. 4 is pushing my comfort level, as I prefer to see a number of 2 or less.
Nevertheless, keep in mind the intent of these single system studies is to build a more robust Kit of Parts of non-correlated systems that will yield high probability EOD (at close) signals

Now I need to back up a bit and mention that for the new KOP Qs (Son of KOP Qs) I'm only going to use the backtest period of 9/14/08 to the present. That's because there's obviously been a shift in market momentum during that period and I want the systems in this version of the KOP Qs to fully reflect that. While the market dump didn't really begin until 11/08, going back to 9/14 let's me use a 50 day MA lookback without cutting into my target 11/1 start date.
TS2000i code shown below:

Inputs: Len1(9), Len2(3), Len3(5), Len4(10);
If Close = LowestFC(Close, Len1)

Then BUY This Bar at Close;
If BarsSinceEntry= Len3
Then ExitLong This Bar at Close;
If Close = HighestFC(Close, Len2)
Then SELL This Bar at Close;
If BarsSinceEntry= Len4
Then ExitShort This Bar at Close;

7 comments:

williamt said...

HI BZB,

I really enjoy the blog.

I'm a newbie trying to evaluate TradeStation versus other platforms. Can I throw a number of newbie level questions about the platform at you? Which is best: email or blog comments?
Thanks, Bill

bzbtrader said...

William,
Post as comment. That way other TS users might be able to chime in with suggestions.

williamt said...

Excellent.
Thanks in advance, BZB.

1) Have you compared TS to other platforms?

2) What aspects of TS stand out for you? Any features you feel are especially lacking?

3) Did you take any of the TS training courses? Would you recommend them to newbies?

4) It appears you use the TS brokerage options. Happy with that?

Thanks for your help!
Bill

bzbtrader said...

William,
I'll try to deal with a few of your questions, although I think you've avoided the most important ones like, are you a systems trader or a discretionary trader? Are you a day trader or swing trader? How long have you been trading? What platforms have you used? Are you comfortable programming code? Are you constantly scanning for hot stocks or do you trade a select basket? These are just a few that come to mind.
Now, to your immediate concerns:
1. Yes. Over the past couple decades of trading I've tried a lot of them, spent $thousands on software and thousands of hours learning TS easylanguage and coding. TS is pretty much the gold standard for systems traders, but the learning curve can be a bit steep if you're not hardwired as a programmer or systems developer (IMHO).
2. TS pretty much has it all, either out of the box, through their extensive knowledge base/user group forum or as add-ons through second party vendors.
3. I've never taken the fee based training courses, althoug I frequently attend their free sessions just to network with other traders and bit up an occasional nugget. I had a programming background in college and just studied the Easylanguage manuals, read Joe Krutsinger's books like the Trader's Toolkit,(see Amazon) and spent a few thousand hours fiddling with the thing, because I think mathematically and in patterns and coding is something I can easily relate to. The TS Fee based courses are probably a good deal for new traders. Depending on the size of the account you open, they may waive the training fees, but you've got to ask for it(little known fact).
4. I use TS2000i which is not the brokerage version (8.4). I execute all my trades via Schwab StreetSmart Pro because I like the look and feel better than TS for daytrading. I use TS with a Telechart data feed for EOD system development and testing. If you've got the time go back and read some of my posts for May 2008 forward that explain my long term project to develop the Kit of Parts for trading multiple systems with a small basket of ETFs... it will help you understand the focus of my posts and perhaps put my approach in a better perspective.
Hope that helps.
Any readers who want to jump in with comments or suggestions for William are always encouraged.

williamt said...

Thanks so much, Bob. I greatly appreciate your time and response.

I'm a programmer by trade as well, so the programming part I am certainly looking forward to. I am learning small with stops and trading ETF's right now, multi-day, not intra-day... sectors, countries, bonds. So, your "trading multiple systems with a small basket of ETFs" comment hits home for sure.

Great advice re. the book, your blog, Schwab account, TS, etc. I'll probably hit a TS class or two. Of the things I read about being necessary to succeed, a mentor is one thing I lack... well, that and your thousands of hours, but I'm working on that.

Thank you again, and I hope to contribute something (feedback or new idea) to your blog... some day.
Bill

bzbtrader said...

William,
FYI, I do have a one-on-one mentoring program, depending on your needs, but you need to come to Oceanside and plan on spending a couple days for a brain-dump. Contact me via e-mail if interested at some point.

Cucca said...

I second every thing the BZ said about TS, and being the cheap bastard I yam, the charting platform is the magic word, FREE!!!!