Not all trading strategies are working all the time. One way to decide what strategy to use is to use them all in virtual accounts, and selecting those that are most promising, based on the curves of their assets.
Be honest. You are a reliance on your current trading strategy, which would you adhere to, regardless of the results? Tell me if you have four or five transactions Losing a row, you continue to trade exactly the same as before, or you start to change their rules, or perhaps even the decline of a certain approach entirely?
The truth is that most traders refused to strategy after three or four consecutive Losing deals, thinking that this strategy does not work anymore. In reality, however, no method will not work well all the time. The strategy of following the trend just will not work in a changing market, just as the strategy of trade from the top and from the base, is unlikely to be engaged on the market trend. This is not a bug strategy, not just the market behaves in such a way that the most suitable for the core logic, rooted in a strategy.
Questions you should ask yourself - «when I must cease to trade on the strategy or refine it, if it is obviously not« play in unison »with current market conditions?», «I know where to begin trading on the same strategy again ? »On the contrary, if you sell on the same markets, using multiple strategies, how do you know what strategies are currently the best?
On the other hand, when you return to the old strategy, which you once refused, because she, as you seemed to have not worked, only to discover some time later that it will work, is just be patient and give it for a while. But there are tools that can help you determine which method of trade is in sync with the market, and when you would be better not to trade on it.
The control system
Trader who lost more than $ 1 million, selling futures on pork, asked why he continued to trade the same strategy in the same market, despite the obvious fact that it did not work. He said: «it is the only thing I know how to do». Trader truly believed that he was just not missing a bit of luck recently, and that the only way to return it was to continue to trade in the same market, using the same strategy, which he always used until his luck not turned away from him.
This trader has never raised the question as to which markets it trades, or what strategy he uses as he makes money. He had to cut their losses, altering or market on which it is sold, or its strategy, or both, and did not return to the original combination of market and strategy, yet the elements are not shown would be a solid proof that they are again in sync with each other.
To avoid making the same mistake this as a trader, you should use the technique of the filter, which will oversee the work of your strategy from the inside, so to speak, and tell you when to sell or not to trade on a particular technique on a particular market.
Indicators «Differential Joe» (JKD) and «Measurement Joe» (JKM) are tools that allow you to control (but not trade) system during periods of recession, so that you can start selling it as soon as it re - shows signs of the beginning of a good performance. United with any type of trading strategy, these two indicators can improve the overall effectiveness of your trade.
Indicator JKM is a 30-day moving average of the curve of the assets of your strategy. The idea is to trade on the strategy only when the indicator when trading on the virtual account is continuously increasing. For a fast and easy interpretation, JKD indicator measures the difference in the indicator JKM from one day to the next. When the value of the indicator JKD negative, then the indicator JKM decreases and, hence, the strategy should not be used to trade a live account.
Basic Strategy
To illustrate how this tool works, we must show how the trading system under the name of JK-Call works with him and without him. The strategy, which we will assess, has been tested on the full history of futures NYSE, futures S & P 500 futures and E-Mini without any change of rules or logic. So far, it has been in more than 75% successful in all three markets.
The strategy of working with data at the end of the day and gives all the trading signals in the form of market orders on the night before the execution. In this case, it is illustrated in Futures S & P 500, but it can also be used for individual stocks and the currency market. Out of this strategy comes from all transactions within 10 days, regardless of any other factors.
The rules are:
When you have no current position, is next in the market in the long side if:
• Today's five-day Relative Strength Index (RSI) more than yesterday's five-day RSI
• Today's closure follows the closure of five days ago and
• Today's closing is less than or equal to the average number of closures of the past five days.
Get out of the market tomorrow, if:
• Today's closing is higher than the average number of closures of the past five days, or
• Your position has been open 10 days ago
Figure 1 shows the trade signals are received when using this strategy for Futures S & P 500 since April 1999. to June 2000. Table 1 shows the statistics of this strategy.
As you can see, most of this period, there was no trend - long-term strategy following the trend is likely to lead to the loss. However, our strategy has been more than 70% of the winning transaction for more than $ 75,000 of net profit and a maximum of two consecutive losing the deal.
But this strategy, like any other, will have setbacks from time to time. The next step is to see how the indicators JKM and JKD can improve the performance of the base system.
Combining strategy and filters
Applying filters JKD and JKM, described earlier, you can avoid trade policies, when it does not meet the current market activity.
Figure 2 shows the same strategy and the market, as well as a schedule 1, but with the addition indicator JKM (green line in the middle of the schedule) and an indicator JKD (red line at the base of the schedule). Not changing the rules of the system, do the following: when the green line in the middle of the schedule increases, trading strategy, where the green line drops, out of all transactions on a real account, but continue to trade on a virtual account of the strategy and track the assets of the hypothetical curve, until it begins again to move up when you can trade for this strategy on a real account.
For easier interpretation, you can look at the red line at the base of the schedule, which will move to the negative territory as soon as your strategy begins to falter, and JKM indicator will begin to decline. In this case, you can see that over the past two and a half years there were three main periods of recession - one that began immediately at the beginning of the testing period, the other, which began when the assets reached a total of $ 17,560 and the third, which began, when total assets amounted to $ 42.145.
The number at the base of each value of assets shown on a hypothetical level of assets you would have resumed their trade a live account. Avoid these three recessions, you have improved your assets at $ 10,161. So instead of making $ 75,550, you would make $ 85,711, reducing in this case, many of Losing the series only to a losing deal. It is generally recognized that covered the period of time and number of deals made is insufficient to demonstrate statistically significant results, but the simplicity of the strategy should serve as insurance against catastrophic losses in the application in the future.
If you use several different trading strategies in the same market and at the same time scale, you could just look at the JKD indicator for each strategy and trade on the one that has the highest rates of assets and hence one in which the market and the strategy is most synchronized with each other.
Be honest. You are a reliance on your current trading strategy, which would you adhere to, regardless of the results? Tell me if you have four or five transactions Losing a row, you continue to trade exactly the same as before, or you start to change their rules, or perhaps even the decline of a certain approach entirely?
The truth is that most traders refused to strategy after three or four consecutive Losing deals, thinking that this strategy does not work anymore. In reality, however, no method will not work well all the time. The strategy of following the trend just will not work in a changing market, just as the strategy of trade from the top and from the base, is unlikely to be engaged on the market trend. This is not a bug strategy, not just the market behaves in such a way that the most suitable for the core logic, rooted in a strategy.
Questions you should ask yourself - «when I must cease to trade on the strategy or refine it, if it is obviously not« play in unison »with current market conditions?», «I know where to begin trading on the same strategy again ? »On the contrary, if you sell on the same markets, using multiple strategies, how do you know what strategies are currently the best?
On the other hand, when you return to the old strategy, which you once refused, because she, as you seemed to have not worked, only to discover some time later that it will work, is just be patient and give it for a while. But there are tools that can help you determine which method of trade is in sync with the market, and when you would be better not to trade on it.
The control system
Trader who lost more than $ 1 million, selling futures on pork, asked why he continued to trade the same strategy in the same market, despite the obvious fact that it did not work. He said: «it is the only thing I know how to do». Trader truly believed that he was just not missing a bit of luck recently, and that the only way to return it was to continue to trade in the same market, using the same strategy, which he always used until his luck not turned away from him.
This trader has never raised the question as to which markets it trades, or what strategy he uses as he makes money. He had to cut their losses, altering or market on which it is sold, or its strategy, or both, and did not return to the original combination of market and strategy, yet the elements are not shown would be a solid proof that they are again in sync with each other.
To avoid making the same mistake this as a trader, you should use the technique of the filter, which will oversee the work of your strategy from the inside, so to speak, and tell you when to sell or not to trade on a particular technique on a particular market.
Indicators «Differential Joe» (JKD) and «Measurement Joe» (JKM) are tools that allow you to control (but not trade) system during periods of recession, so that you can start selling it as soon as it re - shows signs of the beginning of a good performance. United with any type of trading strategy, these two indicators can improve the overall effectiveness of your trade.
Indicator JKM is a 30-day moving average of the curve of the assets of your strategy. The idea is to trade on the strategy only when the indicator when trading on the virtual account is continuously increasing. For a fast and easy interpretation, JKD indicator measures the difference in the indicator JKM from one day to the next. When the value of the indicator JKD negative, then the indicator JKM decreases and, hence, the strategy should not be used to trade a live account.
Basic Strategy
To illustrate how this tool works, we must show how the trading system under the name of JK-Call works with him and without him. The strategy, which we will assess, has been tested on the full history of futures NYSE, futures S & P 500 futures and E-Mini without any change of rules or logic. So far, it has been in more than 75% successful in all three markets.
The strategy of working with data at the end of the day and gives all the trading signals in the form of market orders on the night before the execution. In this case, it is illustrated in Futures S & P 500, but it can also be used for individual stocks and the currency market. Out of this strategy comes from all transactions within 10 days, regardless of any other factors.
The rules are:
When you have no current position, is next in the market in the long side if:
• Today's five-day Relative Strength Index (RSI) more than yesterday's five-day RSI
• Today's closure follows the closure of five days ago and
• Today's closing is less than or equal to the average number of closures of the past five days.
Get out of the market tomorrow, if:
• Today's closing is higher than the average number of closures of the past five days, or
• Your position has been open 10 days ago
Figure 1 shows the trade signals are received when using this strategy for Futures S & P 500 since April 1999. to June 2000. Table 1 shows the statistics of this strategy.
As you can see, most of this period, there was no trend - long-term strategy following the trend is likely to lead to the loss. However, our strategy has been more than 70% of the winning transaction for more than $ 75,000 of net profit and a maximum of two consecutive losing the deal.
But this strategy, like any other, will have setbacks from time to time. The next step is to see how the indicators JKM and JKD can improve the performance of the base system.
Combining strategy and filters
Applying filters JKD and JKM, described earlier, you can avoid trade policies, when it does not meet the current market activity.
Figure 2 shows the same strategy and the market, as well as a schedule 1, but with the addition indicator JKM (green line in the middle of the schedule) and an indicator JKD (red line at the base of the schedule). Not changing the rules of the system, do the following: when the green line in the middle of the schedule increases, trading strategy, where the green line drops, out of all transactions on a real account, but continue to trade on a virtual account of the strategy and track the assets of the hypothetical curve, until it begins again to move up when you can trade for this strategy on a real account.
For easier interpretation, you can look at the red line at the base of the schedule, which will move to the negative territory as soon as your strategy begins to falter, and JKM indicator will begin to decline. In this case, you can see that over the past two and a half years there were three main periods of recession - one that began immediately at the beginning of the testing period, the other, which began when the assets reached a total of $ 17,560 and the third, which began, when total assets amounted to $ 42.145.The number at the base of each value of assets shown on a hypothetical level of assets you would have resumed their trade a live account. Avoid these three recessions, you have improved your assets at $ 10,161. So instead of making $ 75,550, you would make $ 85,711, reducing in this case, many of Losing the series only to a losing deal. It is generally recognized that covered the period of time and number of deals made is insufficient to demonstrate statistically significant results, but the simplicity of the strategy should serve as insurance against catastrophic losses in the application in the future.
If you use several different trading strategies in the same market and at the same time scale, you could just look at the JKD indicator for each strategy and trade on the one that has the highest rates of assets and hence one in which the market and the strategy is most synchronized with each other.
Joe Krutsinger
www.esignal.com
www.esignal.com
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