Time in market – Is there a "maximum"?

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Viewing 14 posts - 1 through 14 (of 14 total)
  • 01/03/2018 at 12:02 PM #57095
    jebus89

    Hi there! Happy new year and all that.

    I have a question for you seasoned veterans out there..

    As i was making strategies for dax and dow, which are my favorites so far, volatile and mostly go up in the long run, i realised something.

    Buy & hold is actually pretty decent, in fact, so good that if you just manage to remove the drawdown it would of course be the perfect strategy.

    This might be super-obvious for most of you guys, but my mindset has been “how can i make a profitable trade” when making strategies, to “how can i just not loose money?”

    So basicly what i made was a super-easy Momentum indicator that takes trades when momentum has been very low, and is now starting to rise.

    By doing this i would remove most of the dips, because when momentum was falling/negative momentum, system would just not take any trades, as soon as momentum shifted upwards/positive momentum came back it would enter a trades and just sit on that trade until momentum is done again.

     

    I have screenshots of 2 of my strategies thats basicly doing the same thing but on different markets, both 1 h, one in wall st/dow and another in us tech/nasdaq.

     

    Before you start yelling “curve-fitted” i want you to know that the way i make systems is that i go to years: 2013 january – 2016 january and create and optimize the whole algo in that time. I then check the entire time available and if its still very nice i will do slight slight optimizing just to double check the stop loss and targets basicly.
    Also, the system is so simple that i guess it would be hard to curve-fit too much. Maybe im wrong 🙂  ive had both in demo for about 1 week and so far so good..
    Both look good on walk forward etc.

    My question: is anyone else running something similar with decent amount of time in market? Am i missing something big here? ofc the overnight costs for CFD isnt cheap but 1-3 days payment vs collecting 100 pips is fine by me…

    01/03/2018 at 12:57 PM #57102
    Vonasi

    I think that holding overnight is feared by many when it shouldn’t be. I trade using spread betting rather than CFD and short trading can be expensive on indices as you have to pay any dividends back but when long you get paid the dividends which helps considerably – even if technically the price should fall in line with dividend payments…. and I don’t short indices anyway as you are fighting an unbeatable long term trend.

    Quick question… is it your own momentum indicator that you use or a well known one?

    01/03/2018 at 1:10 PM #57106
    jebus89
    Vonasi wrote:

    I think that holding overnight is feared by many when it shouldn’t be. I trade using spread betting rather than CFD and short trading can be expensive on indices as you have to pay any dividends back but when long you get paid the dividends which helps considerably – even if technically the price should fall in line with dividend payments…. and I don’t short indices anyway as you are fighting an unbeatable long term trend. Quick question… is it your own momentum indicator that you use or a well known one?

    One is the “trader dynamic index TDI” from this forum, the other one is using a simple chande momentum indicator.

    Both strategies are long only.

    I can take both of the core of the strategies and optimize the targets/stop loss for other markets as well.. not perfect, at all. Not pretty numbers, at all, but every year = a green one (almost every year)

    Edit: The idea is from a momentum-trading prize winning guy that i cant remember the name of right now 😀 He was a guest on the “better system trader” earlier episodes. He was talking alot about the possibility to just pump out momentum strategies for every asset you cna make it profitable on.

    He also made the point about not worrying too much about winrate and gain numbers, as long as there where profits to be made it should be run, for diversification purposes.

    So both are roughly 40-50% winrate and between 1.4-1.6 in gain which according to him is just fine. I just want to hear other peoples opinions regarding “time in market” being maybe 50++% vs doing crispy small trades and being in market less than 10-20%

    01/03/2018 at 1:39 PM #57124
    Vonasi

    If you are making more profit then you are paying out in fees then it is fine to be all in all the time. You just have to be very confident in your strategy. The opposite is that every minute that you are NOT in the market is an extra minute where your risk is zero. The best way to never lose money is to never put it on the markets!

    If we think about it then every time you place a bet then it has 50% chance of winning and 50% chance of losing. We can adjust this % up and down by moving stop loss and take profit levels but the odds never change in reality. If we then have to pay fees then we can see that we have less % chance of winning and more % chance of losing. So all the time we are just looking for that one idea or one indicator or combination of indicators that will give us a few % edge to swing the odds slightly further our way so as to overcome the fees. So if you are confident that your strategy has a big enough edge to overcome the imbalance then it really does not matter how long you are in the market – what matters is the size of your ‘edge’.

    01/03/2018 at 1:50 PM #57127
    jebus89

    Wow, well said Vonasi.

    I feel like the longer im in the market the smaller my edge gets, but at the same time. if its profitable in multiple markets with little or no change i guess i should just run it and hope for the best hehe.

    Anyone running similar types of ideas?

    Ps: im not running anything live just yet, going to keep them in demo for 2-3 months, if still profitable ill go live.

    01/03/2018 at 2:21 PM #57133
    Vonasi

    The dream we all have:

    One holy grail strategy that opens positions often that all win and that return 1000 pips every time for a £1 bet.

    The reality:

    Many diversified systems running on many different markets and different time frames that all together combined hopefully make slightly more than they lose once trading fees have been taken off.

    We need to forget the dream and concentrate on the reality as un-sexy as it is.

    I am a big fan of momentum based strategies and have few of my own under test at the moment. If you fancy sharing your strategy then maybe someone on here might be able to add an even better edge to it. The results you show look very positive for such a long time period but it sounds like your method of construction is spot on (in sample then out of sample) but maybe another set of eyes will spot some over-fitting that might lead to future failure.

    01/03/2018 at 3:05 PM #57138
    jebus89
    Vonasi wrote:

    The dream we all have: One holy grail strategy that opens positions often that all win and that return 1000 pips every time for a £1 bet. The reality: Many diversified systems running on many different markets and different time frames that all together combined hopefully make slightly more than they lose once trading fees have been taken off. We need to forget the dream and concentrate on the reality as un-sexy as it is. I am a big fan of momentum based strategies and have few of my own under test at the moment. If you fancy sharing your strategy then maybe someone on here might be able to add an even better edge to it. The results you show look very positive for such a long time period but it sounds like your method of construction is spot on (in sample then out of sample) but maybe another set of eyes will spot some over-fitting that might lead to future failure.

    100% agree on the “holy grail” theory. The reason im asking is because i have this and 3 others on 3 different markets on different timeframes. Would diversify much for me. Although they are all “Long” and all in Stock indicies… So it wouldnt be too much diversification hehe, but at least it would be a good start.

    and yes, in the long run it looks like its banking in some profits.

    The systems i have for now are very much “rough”, basicly 1-2 indicators saying “momentum is moving up” / “positive momentum is coming”. No stop loss no targets… yet 🙂

    Just wanted to hear some thoughts.

    01/03/2018 at 4:07 PM #57142
    Vonasi

    Personally I have so far found that the simpler a strategy is the better it is. If you pile indicator on top of indicator and have variable after variable then at each step you adding more and more curve fitting. KISS is best. If you have to throw everything at a strategy to make it work then it is best to put it in the bin and start again. All you want to be doing is to look for a market condition to be occurring, check that you are not going against trend and use sound money management and then all should be fine. If you have to check that you meet 1ooo different conditions then not only will you find few trades but they are likely to be based on a curve fitted idea.

    I find it best to write a seemingly working strategy and then start taking things out to see what true value they add. If it adds little value then leave it out. It is also a good idea to run an optimization with one variable changing and then plot a graph in excel of the result to check out the working optimized range and if all looks OK then select a mid table number for the variable to reduce the effect of curve fitting.

    Sorry if I’ve gone on a bit – but sometimes the discussion of theory can be more fun and educational for me than the sitting down and testing code!

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    avatar manel
    01/04/2018 at 11:01 AM #57226
    Despair

    If your strategies hold many days it might be worth trying to run them on futures instead. This way you have no overnight fees.

    01/04/2018 at 11:09 AM #57227
    Vonasi
    Despair wrote:

    If your strategies hold many days it might be worth trying to run them on futures instead. This way you have no overnight fees.

    But as I have found there is no historical data if using spread betting futures (on my IG account at least) so you are restricted to CFD and all the tax implications (for UK) users that that involves. I’ve always found it pretty difficult to work out which is best DFB’s or Futures and normally find that if I open a trade on a DFB contract expecting that it will close within the day that it defies me and runs for several days and that if I open a bet on a futures contract it closes within the same day – I think they call it sod’s law. I also think that I read somewhere that if you expect to hold a position for over five days then normally Future contracts are better than DFB’s but then if I knew how long a position was going to be open for in advance I’d be a millionaire!

    01/04/2018 at 1:51 PM #57240
    Despair

    I run most strategies that go on a daily timeframe on futures with good results.

    01/04/2018 at 9:19 PM #57295
    jebus89

    Average hold time is 1,5 day so not too worried about overnight fee’s, at least yet.. 🙂

    Thanks for some insight, ive never actually considered trading futures and not CFD. But mainly this is because of my low account for now.. Would love to transission to stocks, it seems to be alot slower and more gentle. The dax and other indicies are effing brutal some times. Been good today tho

    01/04/2018 at 10:03 PM #57306
    Vonasi

    The trouble with stocks is that you are placing all your eggs in one basket. One bit of bad news can wipe out a company value – and it can go to zero and never come back. That i unlikely to happen with a diversified index, forex or commodities.

    01/05/2018 at 11:12 AM #57336
    jebus89

    Thats a very valid point Vonasi, in fact i couldnt sleep yesterday because of that exact thought..

    I guess if you create a system that doesnt actually take the stock-trades, but rather gives you an alarm and you have to manually take the order, maybe you could then use a guaranteed stop (or is this not a thing in stocks on IG.com?)

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