the best algos are an amalgam of several algos bolted together with a set of filters to switch em on and of as different conditions prevail . A high volatility , a fearful volatility , a low volatility grindy up trend , etc etc styles combined
@Brisvegas made useful and valid points above and I was going to reply, but I thought it may make a useful separate topic for a discussion / reference.
So what are your favourite / preferred Filters and / or Indicators or even ones that you are trying out currently?
- Filters to use as switches, set ups, to identify particular market conditions?
- Indicators to set a line in the sand, act as a trigger to execute a trade in particular market conditions?
Filters and / or Indicators that work well to identify (or more as you think fit?) …
- Volatility
- Momentum
- Trend
- Ranging
- Basing
It will be interesting to see what answers you get. Personally I find the idea of trying to identify a market structure almost impossible due to our favourite enemy – lag. By the time you have identified a market change you have already lost a lot of money then just as you change your style of algo the market changes to a different structure and you spend a while losing even more money waiting for your indicator to tell you what sort of market you are now in.
My indicator here:
Trending and Mean Reversal Simulation
was an attempt to identify market structure but it ultimately just proves the point that the lag of needing x simulated trades to tell you what has just happened puts you already x trades behind the curve.
Generally I find that sudden big things that have not happened before or don’t happen often are a good signal that the market structure is changing or has changed. For example massive ranges or volatility or the number of 52 week lows etc.
I have written my own momentum and volatility filters and they adjust to differing market regimes pretty good and sure there is a day or 2 lag but nevertheless acheives what i desire . Defining slow grindy easy , defining fear factor chaos easy , defining middle of the road easy . Do i have algos for each condition ? Sure . If you cant do it maybe you are not looking hard enough , i dunno . Isolate each condition , define the problems to identify conditions , work on solutions . I just break it down and look at it logically .
This is not a theory i’m suggesting , i am actually doing it
I am just a pile of nonsense so dont listen to me , just another clueless pleb with NFI . Whether anyone listens to me is no skin of my nose , maybe i help one person with the tenacity and intellect to break through the barriers , thats enough to make me happy . It aint easy and thats the way i like it , not much competition is a good thing .. rock on good luck . I am certainly not going to try and convince the unconvincable . I already know the wall of negativity is coming my way and i dont give a damn , i tried
It makes people feel better to declare that it cant be done , its a defence mechanism , if i cant do it no-one can sort of thing . Well let me tell you . All you are doing is expressing your limitations !! Not mine ..
A couple days of lag with a couple failed trades beats 4 months of total disaster trading when ignoring obvious regime changes , I am chasing regimes that last weeks not hours and my WR is still above the bar of 65% i set myself and profit factors > 2 are common , these are exceptional stats with all that ‘ lag ‘ . Some of these regimes last almost 12 months with 2017 a prime example which had only 2 regimes in entire year . 4 days lag tops in 252 trading days , i will settle for that all day anyday . Ok i better exit stage left here . Interesting to see where this goes , not expecting a lot . Rock on
I already know the wall of negativity is coming my way
Just one last quote! 🙂
By far the majority of us welcome what you have to say; I and many others agree with what you are saying re Filters etc.
As you say, it is inevitable that a few trades will be losers before the strategy code identifies and exits current regime and waits for the set up of the next regime etc. Better lose a few trades and exit (then be stress free) than remain onmarket with a strategy that does not fit the current / ongoing / changed regime.
If a strategy can’t stand a few losers while identifying regime changeover then one or more of the following may apply …
- Strategy is not robust enough to be a success as an in / out of the market type System.
- Stakes / Lot Size are too high relative to funds available
- Timeframe is too long and so the swings / losers cause unacceptable stress to the trader.
